SAST Regulation

SAST Regulation

1. SEBI SAST
REGULATIONS 2011

2. Inyear1992 -
Announcement of
PolicyofGlobalisation
inIndiaInyear1992-Change
inIndia’sCapital
MarketScenario
SEBIenactedSEBI
(SAST) Regulations,
1994initially
Then,SEBIenacted
SEBI (SAST)
Regulations,1997
Later, Takeover
RegulationsAdvisory
Committee(“TRAC”)
wasformedunderthe
chairmanshipofLate
C.Achuthan
SEBInotifiedSEBI
(SAST) Regulations,
2011
How Takeover Code evolved?

3. APPLICABILITY OF
TAKEOVER CODE?
Applicability
Listed Company
Any person controlling the Listed Company
Any person holding substantial stake in the
Listed Company

4. Main Definitions
1.“Acquirer”MeansAnyPersonWho,DirectlyOrIndirectly,AcquiresOrAgreesToAcquireWhetherByHimself,Or
Through,OrWithPersonsActingInConcertWithHim,SharesOrVotingRightsIn,OrControlOverATarget
Company;
2.“Acquisition”Means,DirectlyOrIndirectly,AcquiringOrAgreeingToAcquireSharesOrVotingRightsIn,Or
ControlOver,ATargetCompany;
3.“Control”IncludesTheRightToAppointMajorityOfTheDirectorsOrToControlTheManagementOrPolicy
DecisionsExercisableByAPersonOrPersonsActingIndividuallyOrInConcert,DirectlyOrIndirectly,IncludingBy
VirtueOfTheirShareholdingOrManagementRightsOrShareholdersAgreementsOrVotingAgreementsOrInAny
OtherManner:
ProvidedThatADirectorOrOfficerOfATargetCompanyShallNotBeConsideredToBeInControlOverSuch
TargetCompany,MerelyByVirtueOfHoldingSuchPosition;
4.“EnterpriseValue”meansthevaluecalculatedasmarketcapitalization(+)debt,minorityinterestandpreferredshares
(-)totalcashandcashequivalents;
5.“identifieddate”meansthedatefallingonthetenthworkingdaypriortothecommencementofthetenderingperiod,
forthepurposesofdeterminingtheshareholderstowhomtheletterofoffershallbesent.

5. 6.“OfferPeriod”MeansThePeriodBetweenTheDateOfEnteringIntoAnAgreement,FormalOrInformal,To
AcquireShares,VotingRightsIn,OrControlOverATargetCompanyRequiringAPublicAnnouncement,OrTheDate
OfThePublicAnnouncement,AsTheCaseMayBe,AndTheDateOnWhichThePaymentOfConsiderationTo
ShareholdersWhoHaveAcceptedTheOpenOfferIsMade,OrTheDateOnWhichOpenOfferIsWithdrawn,As
TheCaseMayBe;
7.“TargetCompany”meansacompanyandincludesabodycorporateorcorporationestablishedunderaCentral
legislation,StatelegislationorProvinciallegislationforthetimebeinginforce,whosesharesarelistedonastock
exchange;
8.“TenderingPeriod”meanstheperiodwithinwhichshareholdersmaytendertheirsharesinacceptanceofanopen
offertoacquiresharesmadeundertheseregulations;
9.“VolumeWeightedAverageMarketPrice”meanstheproductofthenumberofequitysharestradedonastock
exchangeandthepriceofeachequitysharedividedbythetotalnumberofequitysharestradedonthestockexchange;
10.“VolumeWeightedAveragePrice”meanstheproductofthenumberofequitysharesboughtandpriceofeachsuch
equitysharedividedbythetotalnumberofequitysharesbought;
11.“WorkingDay”meansanyworkingdayoftheBoard;
12.“WilfulDefaulter”meansanypersonwhoiscategorizedasawilfuldefaulterbyanybankorfinancialinstitutionor
consortiumthereof,inaccordancewiththeguidelinesonwilfuldefaultersissuedbytheReserveBankofIndiaand
includesanypersonwhosedirector,promoterorpartneriscategorizedassuch.

6. 13.“ImmediateRelative”meansanyspouseofaperson,andincludesparent,brother,sisterorchildofsuchperson
orofthespouse.
14.AdditionsToPersonsActingInConcert:-
•PromotersAndMembersofThePromoterGroup.
•ImmediateRelatives.
•ACollectiveInvestmentSchemeAnditsCollectiveInvestmentManagementCompany,TrusteesAndTrustee
Company.
15.AssociateMeans:-
•AnyImmediateRelativeofSuchPerson;
•TrustsofwhichSuchPersonorHisImmediateRelativeisaTrustee;
•PartnershipFirminwhichsuchpersonorhisimmediaterelativeisaPartner;andMembersofHinduUndivided
FamiliesofWhichSuch;
•PersonisACoparcener;

7. Purpose of Takeover
To ensure Fair Exit
Opportunityfor the
shareholders;
To ensure Fair
Play in Exit
Opportunity;
To ensure Fair
Disclosureabout the
change in shareholding
& control in the
Company.

8. Modes of Acquisition
•Direct Acquisition of Shares.
•Indirect Acquisition of Shares
•Direct Acquisition of Control.
•Indirect Acquisition of Control.

9. Direct Acquisition Of Shares And Control
•Acquisitionofcontrolsubstantiallydiffersfromacquisitionofsharesandvotingpower.
•TakeoverCodemandatesmakingofapublicannouncementofanopenofferforacquisitionofcontroldirectly
orindirectly,overatargetcompany.Thisisirrespectiveofacquisitionorholdingofsharesorvotingrightsina
targetcompany.
•Initialtriggerlimitsis25%
•creepingacquisitionlimithasbeenretainedat5%&canbedoneattherateof5%everyyeartilltheholdings
reach75%
•openofferhasbeenmademandatorywhenthereischangeincontrol.

10. Indirect Acquisition of Shares or Control
5.(1)Forthepurposesofregulation3andregulation4,acquisitionofsharesorvotingrights
in,orcontrolover,anycompanyorotherentity,thatwouldenableanypersonand
personsactinginconcertwithhimtoexerciseordirecttheexerciseofsuchpercentage
ofvotingrightsin,orcontrolover,atargetcompany,theacquisitionofwhichwould
otherwiseattracttheobligationtomakeapublicannouncementofanopenofferfor
acquiringsharesundertheseregulations,shallbeconsideredasanindirectacquisitionof
sharesorvotingrightsin,orcontroloverthetargetcompany.
(2) Notwithstandinganythingcontainedintheseregulations,inthecaseofanindirect
acquisitionattractingtheprovisionsofsub-regulation(1)where,—
(a) theproportionatenetassetvalueofthetargetcompanyas;
(b) theproportionatesalesturnoverofthetargetcompany;or
(c) theproportionatemarketcapitalisationofthetargetcompany;
isinexcessof80%,onthebasisofthemostrecentauditedannualfinancialstatements,
suchindirectacquisitionshallberegardedasadirectacquisitionofthetargetcompany
forallpurposesoftheseregulationsincludingwithoutlimitation,theobligationsrelating
totiming,pricingandothercompliancerequirementsfortheopenoffer.

11. Eg.:-
xyzisanunlistedcompany.itsowns51%inalistedcompany(target).the
consolidatedturnoverofxyzltdisrs.300lakhandtheconsolidatednavisrs.100
lakh.thestandalonesalesturnoverofaltdis250lakhanditsstandalonenavis85
lakh.
proportionatenavofalistedcompanyasapercentageoftheconsolidatednavof
xyzltdis85.00%(85Lakh/100Lakhx100).
proportionatesalesofalistedcompanyasapercentageoftheconsolidatedsales
ofxyzltdis83.33%(250Lakh/300Lakhx100).
hencethisacquisitionshallbedeemedasDirectAcquisitionofaltdandhence
alltherequirementfordirectacquisitionshallbeapplicable.

12. Voluntary Offer
•theacquirertogetherwithPACmusthold25%ormoreequitysharesorvotingrights.
•theacquirerorPACshouldnothaveacquiredanysharesbycreepingacquisitionorbyanymodewhichis
exemptedduringthe52weeksprecedingthepa.howeverhecanacquiresharesbywayofbonusorstocksplit
oranopenoffer.
•theopenoffershallbeforminimumof10%ofoutstandingshares.
•compliancestobemadeifavoluntaryopenofferismade:-
1.theacquirershallnotacquireanysharesduringtheopenofferotherwisethanundertheopenoffer.
2.theacquirercannotacquireanysharesforaperiodofsixmonthsaftercompletionofopenoffer.
Howeverhecanmakeanothervoluntaryofferormakeacompetingofferduringthesaidperiod.

13. Disclosure requirements
•thedisclosuresunderthischaptershallbeoftheaggregatedshareholdingandvotingrightsofthe
acquirerorpromoterofthetargetcompanyoreverypersonactinginconcertwithhim.
•forthepurposesofthischapter,theacquisitionandholdingofanyconvertiblesecurityshallalso
beregardedasshares,anddisclosuresofsuchacquisitionsandholdingsshallbemadeaccordingly.
•forthepurposesofthischapter,theterm“encumbrance”shallincludeapledge,lienoranysuch
transaction,bywhatevernamecalled.Forcreation&releasingofencumbrancemandatory
disclosureisrequired.
•uponreceiptofthedisclosuresrequiredunderthischapter,thestockexchangeshallforthwith
disseminatetheinformationsoreceived.

14. Disclosures Requirements

15. Disclosure requirement (Regulation 29)

16. Disclosure requirement (Regulation 30)

17. Disclosure requirement (Regulation 31)

18. Open Offer Process
Triggering Event
Public
Announcement
(as per Reg 13)
OpeningBank
account &
depositing funds
(Within 2 W. Days)
Making Detailed
Public Statement
(DPS)
(Within 5 W. Days)
Filing Draft Letter
of Offer with SEBI
(Within 5 W. days)
Expiry of
Competing offer
Period
(Within 15 W. Days
from date of DPS)
Receipt of SEBI
Comments on
draft letter of
offer
Dispatching
Letter of offer to
shareholders
Opening of
Tendering period
Closure of
Tendering period
Paymentto
shareholders
Post Offer
Compliances

19. Offer Size
•Theoffersizeshallbeforatleast26%oftotalsharesofthetargetcompany,ason10th
workingdayfromtheclosureofthetenderingperiod.
Tenderingperiod=periodwithinwhichshareholdersmaytendersharesfortheacceptanceof
anopenoffer.
•Shareholdersmayexerciseanadditional10%oftotalsharesoftargetcompanyasvoluntary
offer.
•Increaseintheoffersizeshallbemadewithin15daysfromthedateofPAofcompeting
offer.
•Acquirerwhoseshareholdingexceedsthemaximumpermissiblenon-publicshareholding,
shallnoteligibletomakevoluntarydelistingoffer,unlessaperiodof12Monthshaselapsed
fromthedateofthecompletionoftheofferperiod.
•Anyopenofferunderthisregulationshallbemadeonlytotheshareholdersoftarget
companyotherthanAcquirer,PAC,orpersondeemedtobePAC.

20. Offer Price
•IncaseofDirectandIndirectacquisitionofsharesofferpriceshallbehighestoffollowing:
1.Highestagreedornegotiatedpricepershareofthetargetcompanyforanyacquisitionunderagreement
attractingtheobligationtomakePA.
OR
2.TheVolumeWeightedAveragePrice(VWAP)paidorpayableforacquisitions;whetherbyacquirerorbyany
PACduring52weeksimmediatelyprecedingthedateofPA.
OR
3.Thehighestpricepaidorpayableforanyacquisition,whetherbytheacquirerorbyPACwithhimduringthe26
weeksimmediatelyprecedingthedateofPA.
VWAPincaseofFrequentlytradedShare:
TheVWAMPofsuchsharesforaperiodof60tradingdaysimmediatelyprecedingthedateofPAastradedon
thestockexchangewherethemaximumvolumeofTradinginsharesofthetargetcompanyarerecordedduring
suchperiod.
VWAPincaseofnonfrequentlytradedShare:
Insuchcasethepricedeterminedbytheacquirerandmanagertotheopenoffertakingintoaccountthevaluation
parameter.

21. Exemptions under Takeover Code
Automatic Exemption
Regulation 10
Exemption on application
Regulation 11
Relaxation from Procedural
requirements of Open Offer

22. EXEMPTIONS UNDER OPEN OFFER
Inter-se transfer of shares
amongst the following
Immediate
relatives
Promoters for last
3 years as per
Shareholding
pattern
Group
Companies
Personacting in
concert for not
less than 3 years
Shareholders for
last 3 years

23. EXEMPTIONS UNDER OPEN OFFER ARE AVAILABLE TO ACQUISITIONS/
INCREASE OF VOTING RIGHTS:
under Ordinary
Course of Business;
pursuant to a
scheme;
pursuant to Delisting;
Upon transmission,
succession or
inheritance;
Of voting rights
arising out of non
payment of dividend
on preference shares;
Pursuant to
Conversion of Debt
into Equity under
SDR scheme;
Of voting rights on
forfeiture of shares