ICAI’S COMMENTS ON DRAFT REGULATIONS FOR SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVER REGULATIONS), 2010

AUGUST 31, 2010

Part I – Observations on Fundamental Issues

Takeover Regulations Advisory Committee (TRAC) of SEBI was set up to improve upon the existing regulations for Takeover of listed companies. Before providing the regulation wise detailed comments, following are some of our observations on the fundamental issues:

1. CONSTITUTION OF TRAC

It is suggested that constitution of such committees are broad based with due participation of professional bodies, professionals, other interested stakeholders and industry.

2. CONTROL

The aim of any “Takeover” is the Acquisition of “Control” and acquisition of shares is only one of the means by which the objective of Acquisition of Control can be achieved. Control can be acquired without acquiring shares. This fact has been recognised by both the SAST 1997 (Regulation 12) and SAST 2010 (Regulation 4) which covers cases of takeover of companies without acquisition of shares.

In spite of such regulations being in place, many takeovers as given below have taken place without triggering an open offer by acquiring substantial or almost entire operations of the company:

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