Road Map for Open Offer Procedure (OOP) under SEBI Takeover Regulation 2011
A takeover Offer is a type of action in which a an offer is being made to acquire another Listed Company. It could be made by an Individual or a Group or Any Legal Entity, which is known as the acquirer, while the subject matter of the bid is referred to as the target company. The takeover Offer could be a Friendly offer or could be a Hostile Offer.
Securities and Exchange Board of India (substantial acquisition of shares and Takeovers) Regulations, 2011 is the primary piece of Law which regulates Takeovers of Listed Companies in India
An Open Offer is made to the Public shareholders of Target Company pursuant to a Trigger event as prescribed in regulations to provide them an Exit Opportunity in case the Public shareholders are not willing to continue with the Company and/or upcoming Management pursuant to Takeover Offer.
A Merchant Banker called as Manager to the Offer is a Registered Intermediary who make sure that SEBI (SAST) Regulations are well complied in the Offer and in addition act to prevent any loss to any Public shareholder.
Takeover is acquisition of substantial shares and control over the Target Company to expand or to diversify the business in an inorganic manner.
Following tasks to be involved in take over of listed entity: i.e. open offer process under regulation 3-27 of takeover code 2011
|
Sr. No. |
Provisions/ Regulations | Requirements / Tasks involved | Documents required | Responsibility | Remarks |
| Step 1 | Appointment of Merchant Banker (Regulation 12) | Board Resolution at Board Meeting | Pass BR and filing of MGT-14 to ROC | Acquirer | Intimation to Stock exchange under regulation 29 and 30 of SEBI LODR 2015. |
| Step 2 | Trigger Event (Regulation 3/4/5) | Share purchase agreement Resolution for allotment of securities Acquisition of shares beyond threshold limit |
Basic document for entering into agreement | Acquirer with PAC & Target Company |
Here Legal department comes into picture to execute the agreement |
| Step 3 | Public Announcement (Regulation 13) |
Short Public Announcement to Stock Exchange, SEBI and TC | Manner specified in regulation 13 |
Merchant Banker | – |
| Step 4 | Escrow Account For takeover transaction (Regulation 17 and read with regulation 21) | Entering into Escrow Agreement | – | Merchant Banker & Acquirer & Escrow Banker | – |
| Step 5 | Escrow Account (Regulation 17) |
Opening of Bank Escrow & Special Rupee account |
checklist provided by the banker ( Escrow agreement is mandatory and PAN of corporate) | Merchant Banker & Acquirer & Escrow Banker |
Not later than 2 WDs prior to DPS
DPS = Detailed public statements WD = working days |
| Step 6 | Escrow Amount (Regulation 17) |
Deposit of Escrow Amount in Escrow account | – | Acquirer Not later than two working | days prior to the date of the detailed public statement |
| Step 7 | Publication of Detailed Public Statement in newspapers (Regulation 14) |
Simultaneously with publication of such detailed public statement in the newspapers, a copy of the same shall be sent to – Board, Stock exchange and Target company |
Contents of Public announce-ments as per regulation 15 |
Merchant Banker | Within five working days from the date of the detailed public statement |
| Step 8 | Fees to Stock exchange (Regulation 16) |
Provide Demand Draft for SEBI to Merchant Banker |
NEFT/ RTGS/ DD /any other mode specified by RBI |
Acquirer
Within five working days |
from the date of the detailed public statement |
| Step 9 | Filing of Letter of Offer with the SEBI (Regulation 16/18) | Dispatch of Draft Letter of Offer to SEBI, Stock Exchange and TC | In the manner prescribed under regulation |
Merchant Banker | Post submission of Draft Letter of Offer with SEBI, Merchant Banker will co-ordinate with SEBI and would discuss all the queries. Basis upon which, SEBI will issue its observation letter for the Open Offer. |
| Step 10 | Draft Letter of offer (Regulation 18) | Receipt of Draft Letter of Offer by SEBI, Stock Exchange and sent to TC |
– | Merchant Banker | – |
| Step 11 | Competing offer, if any (Regulation 20) | Last date for competing Offer u/r 20(1) | – | Any person other than Acquirer | – |
| Step 12 | Comment by SEBI (Regulation 16(4)) |
Receipt of comments from SEBI on draft letter of offer |
– | Merchant Banker | The Board shall give its comments on the draft letter of offer as expeditiously as possible but not later than fifteen working days of the receipt of the draft letter of offer |
| Step 13 | Incorporating the observation in letter of offer (Regulation 161 |
Board may call for a revised letter of offer in case of inadequacy of disclosure. |
Merchant Banker | The period for issuance of comments shall be extended to the fifth working day from the date of receipt of satisfactory reply to the clarification or additional information sought | |
| Step 14 | As per the definition under regulation 2(1)(k) |
Identified date for determining name of shareholders to whom the letter of offer should be sent | – | Merchant Banker | “identified date” means the date falling on the tenth working day prior to the commencement of the tendering period, for the purposes of determining the shareholders to whom the letter of offer shall be sent |
| Step 15 | Draft letter of offer to be sent to NSDL/ CDSL (Regulation 18(3)) |
Draft khan of offer to be sent to NSDL/ CDSL (depository) of the target company | Draft letter of offer | Acquirer | – |
| Step 16 | Letter of offer to shareholders (Regulation 18(2)) |
Dispatch of the Letter of Offer to shareholders | The letter of offer shall be dispatched to the shareholders whose names appear on the register of members of the target company as of the identified date |
Merchant Banker | Not later than seven working days from the receipt of comments from the Board or where no comments are offered by the Board, within seven working days from the expiry of the period stipulated in sub-regulation (4) of regulation 16. |
| Step 17 | Last date for Upward revision in offer (Regulation 18(4)) | Last date for Upward revision in offer Cum case of competing offer) | – | Merchant Banker & Acquirer |
One working day before the commencement of the tendering period. |
| Step 18 | Recommen-dations on the open offer by Independent directors (Regulation 26(7)) |
Last date for Comments on the offer by independent directors of TC. simultaneously, a copy of the same shall be sent to SEBI, Stock exchange and manager |
– | Merchant Banker & TC | committee of independent directors shall provide its written reasoned recommen-dations on the open offer to the shareholders of the target company |
| Step 19 | Advertisement announcement (Regulation 18(7)) | Issue of advertisement announcing the schedule of activities for open offer |
– | Merchant Banker & Acquirer | One working day before the commence-ment of the tendering period. |
| Step 20 | Opening of offer (Regulation 18(8)) | Date of Opening of offer (Tendering period) |
– | Merchant Banker & Acquirer |
Permissible tendering period shall be 10 to 12 days |
| Step 21 | Closing of offer (Regulation 18(10)) | Date of Closing of offer | – | Merchant Banker & Acquirer |
Within ten working days from the last date of the tendering period, complete all requirements |
| Step 22 | Post offer advertisement (Regulation 18(12)) |
Post offer advertisement, simultaneously sent to the SEBI, stock exchange and target company |
Details including aggregate number of shares tendered, accepted, date of payment of consideration |
Merchant Banker & Acquirer |
Within five working days after the offer period |
| Step 23 | Payment of Consideration (Regulation 21(2)) | Payment of consideration whether in the form of cash, or as the case may to all shareholders who have tendered shares in acceptance of the open offer. |
– | Merchant Banker & Acquirer |
Within ten working days of the expiry of the tendering period |
| Step 24 | Filing of report and execution of agreement (Regulation 27(7)) | Filing of report to SEBI by Merchant Banker | Report – confirming status of completion of various open offer requirements | Merchant Banker, Seller & Acquirer | Within fifteen working days from the expiry of the tendering period |
| Other aspects to be considered under takeover code and LODR and PIT regulations | |||||
| 1 | Regulation 37(1) of Listing Regulations Filing of scheme with stock exchanges | Any listed company undertaking or involved in a scheme of arrangement must file the daft scheme with the relevant stock exchange, to seek an observation letter or no-objection letter from the relevant stock exchange. |
Draft Scheme | Acquirer | – |
| 2 | Regulation 11 of the Listing Regulations Compliance with securities law |
The listed companies shall ensure that the scheme does not violate, limit or override any of the provisions of the applicable securities law or requirements of the stock exchanges. |
– | Acquirer | – |
| 3 | Regulation 69(2) of Listing Regulations Change in shareholding pattern |
The listed companies are required to file the pre and post arrangement shareholding pattern and the capital structure with the stock exchanges |
Shareholding Pattern | Acquirer | – |
| 4 | Regulation 51 of Listing Regulations Corporate actions pursuant to merger |
The listed company needs to disclose to the stock exchanges all information having a bearing on the performance / operation of the listed entity and / or price sensitive information. |
Information and price sensitive information | Acquirer | – |
| 5 | Regulation 3(3) of the PIT Regulation |
The PIT Regulations contain a specific carveout for communication and procurement of information (conduct of due-diligence) in connection with transactions involving mergers and acquisitions |
UPSI | Acquirer | UPSI means Unpublished price sensitive information |
| 6 | Trading windows | The trading window shall be closed when the compliance officer determines that a designated person or class of designated persons can reasonably be expected to have possession of unpublished price sensitive information. | UPSI | Acquirer | – |
| 7 | Obligations of the manager to the open offer (Regulation 27(3)) |
The manager to the open offer shall furnish to the Board a due diligence certificate along with the draft letter of offer filed under regulation 16. | DD certificate | Merchant Banker |
DD – Due Diligence |
Reference: htips://www.sebi.gov.in/sebiweb/home/HomeAction.do?doListinryes8csid=18cssid=38csmid=0 hnps://www.corporateprofessionals.com/
https://www.sebi.govintlegal/master-circulars/feb-2023/master-circular-for-substantiala uisition-of-shares-and-takeovers_68091.html
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