Takeover or Acquisition of a Listed Company
Disclosure and mandatory bid obligations for listed Indian companies under Indian law are governed by the Takeover Code. Since the company is an Indian listed company, the provisions of the Takeover Code will apply to acquisition of its shares.
- Shares under this takeover code means equity share or any other security which entitles a person to acquire shares with voting rights but shall not include preference shares.
- Any acquirer who holds more than 15% of the shares or voting rights in any company is required to make annual disclosure of his holdings as at march 31 to that company within 21 days of financial year ending Mar 31.
- A person who holds 15% or more but less than 55% of shares in any company is required to disclose any purchase or sale of shares exceeding 2% of share capital of the company to stock exchange & to company within 2 days.
- A person who acquires 15% or more of the shares would be required to make a public announcement to acquire a further minimum 20% of shares of the company at a price not lower than the price determined in accordance with the Takeover Code. Such offer has to be made to all public shareholders of the company.
- An acquirer who holds 15% or more but less than 55% of the shares or voting rights in a company cannot acquire additional shares or voting rights that would entitle him to exercise more than 5% of the voting rights in any financial year ending on March 31 unless such acquirer makes a public announcement offering to acquire a further minimum 20% of the shares or voting right at a price not lower than the price determined in accordance with the takeover code.
- Any acquisition of additional voting shares by an acquirer who holds 55% or more but less than 75% of the shares in a company would require such an acquirer to make an open offer to acquire a minimum of 20% of the shares or voting rights which it does not already own in the company provided such acquirer may acquire additional shares or voting rights entitling him up to 5% voting rights in the company, through open market purchase in normal segment on the stock exchange but not through bulk deal/negotiated deal/preferential allotment. Also, if the shareholding of such acquirer increased by up to 5% pursuant to a buyback of shares by the company, then this requirement is not triggered. But in any case, the post-acquisition shareholding of the acquirer together should not increase beyond 75%.
- If an acquisition made to an open offer results in the public shareholding in the target company being reduced below the minimum level, the acquirer would be required to take steps to facilitate compliance by the target company with the relevant provisions of listing agreement with stock exchange within the time period prescribed therein.
- An acquirer cannot directly or indirectly acquire control over a company unless such acquirer makes a public announcement offering to acquire a minimum of 20% of shares which it does not already own in the company.
- When an acquirer who holds 55% or more but less than 75% of shares, intends to consolidate its holdings while ensuring that the public shareholding in the target company does not fall below the minimum level permitted by listing agreement with the stock exchanges, the acquirer may do so by making an open offer in accordance with the Takeover Code.
- The open offer for the acquisition of a further minimum of 20% of shares of the company has to be made by way of a public announcement which must be made within four working days of entering into an agreement for the acquisition or decision to acquire or control over the company.
- Takeover code is not applicable to unlisted companies in any stock exchanges.