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Legitimate ISSUES AND TAKEOVER CODE Presentation by Mohit Saraf Partner Luthra & Luthra Law Offices L&L/MDI

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Agenda Overview of Takeover Regulations Salient Definitions Types of Takeovers Required Disclosures Takeover code Trigger Exempted Categories Takeover at a Global Level Takeover and Disinvestment Advantages L&L/MDI

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Overview of Takeover Regulations "Takeover" is an exchange whereby a man (singular, gathering of people or organization) procures control over the benefits of the organization either: specifically by turning into the proprietor of those advantages; or in a roundabout way by getting control of the administration of the organization . Takeover can be of a recorded or an Unlisted organization in the event of Takeover of an Unlisted and firmly held organization – Companies Act, 1956 to apply. If there should be an occurrence of Takeover of a recorded organization, the accompanying lawful system to apply: L&L/MDI

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Overview of Takeover Regulations (Cont'd.) SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 issued by the Securities and Exchange Board of India (SEBI); Companies Act, 1956; and Listing Agreement "Assume control" – assuming control over the control of administration "Considerable obtaining of shares or voting Rights"- getting significant amount of shares or voting rights SEBI Regulations surprisingly presented in 1994, yet discovered lacking to control threatening takeovers or manage aggressive offers and correction of offers. L&L/MDI

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Overview of Takeover Regulations (Cont'd.) The Takeover Code came in for a considerable lot of feedback because of the different escape clauses which surfaced. Case: Torrent gathering and Bombay Dyeing Under the 1994 Takeover Code - a procurement bringing about the acquirer's share holding surpassing 10% - an open declaration to gain no less than 20% of their current share holding to be made. The Torrent assemble made an open offer to obtain 20% in Ahmedabad Electricity Company ("AEC") at Rs. 65 for every share. L&L/MDI

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Overview of Takeover Regulations (Cont'd.) This was trailed by Bombay Dyeing's offer to get a lion's share stake in AEC at a cost of Rs. 90 for every share on an all or none premise. SEBI rejected Bombay Dyeing's open offer on specialized grounds as the offer was not made inside the 14 day time frame taking after the general population declaration by Torrent. Downpour raised its offer cost to Rs. 132 for every share, except shareholders neglected to react in expectation of another offer by Bombay Dyeing. The Torrent offer slumped accepting just around 1% reaction. Bombay Dyeing did not catch up with an updated offer as it felt that the reexamined cost of Rs. 132 was too high. AEC scrip erupted from Rs. 70 to a high of Rs. 170 in only a few months. L&L/MDI

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Overview of Takeover Regulations (Cont'd.) The takeover of Damania Airways is a case of an organization neglecting to convey because of inadequate assets. The Khemkas of the NEPC aggregate, in the wake of getting administration control in Damania Airways made an open offer to secure 20% in the organization at Rs. 19.60 for each share. The decision cost was then Rs. 15.50. SEBI weight constrained Khemkas to overhaul cost of open offer to Rs. 35.25 NEPC aggregate not able to make installments to every one of the shareholders. L&L/MDI

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Overview of Takeover Regulations (Cont'd.) SEBI issued demonstrate make see NEPC for its inability to meet duties to shareholders who reacted to the open offer. Current status: Khemkas have been banned from getting to the capital market for a long time for damaging the takeover controls. Bhagwati Committee delegated under the chairmanship of Justice P N Bhagwati for stopping provisos. On the premise of proposals recommended SEBI informed 1997 controls. L&L/MDI

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Salient Definitions Acquirer" has been characterized as any individual who specifically or by implication procures or consents to obtain: offers or the voting rights in the objective organization; or control over the objective organization either independent from anyone else or with any individual acting working together with the acquirer "Target Company" implies a recorded organization whose shares or voting rights or control is straightforwardly or in a roundabout way gained. L&L/MDI

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Salient Definitions (Cont'd.) Control has been given a comprehensive definition and incorporates: a) the privilege to name most of the executives. b) To control the administration or approach choices. People acting in show ("PAC") has been characterized as: any individual set up to have, with the acquirer, the regular target of purchasing: a generous measure of shares; or voting rights in an organization; or gaining control of an organization following an assention or comprehension (formal or casual) or by participating with the acquirer, straightforwardly or by implication. L&L/MDI

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Salient Definitions (Cont'd.) The idea of PAC expect hugeness with regards to take overs: securing made by the acquirer stays underneath as far as possible brought together with the voting privileges of people acting in show, the edge may surpass. Illustration: Bajoria – Bombay Dying Tussle. PAC in instance of Bajoria: Mega Resources, Mega Stock, Hooghly Mills, Ms Pooja Bajoria, Ms Mohini Devi Bajoria, Ms Lata Devi Bajoria and Ms Meenakshi Jatia L&L/MDI

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Salient Definitions (Cont'd.) Bajoria together with PAC procured over 15%. Stopping – Collusion were a few unique gatherings act in show to purchase value. Case: Reliance L&L/MDI

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Types of Takeover (Cont'd.) Takeover offers might be named under: 1) Hostile takeover 2) Friendly takeover 3) Bailout takeover Hostile takeover The strategy for attempting to take the control of the organization without the information of the current administration is known as "threatening takeover". Case: - Bombay Dyeing and Manufacturing Co Ltd - Bajoria battle L&L/MDI

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Types of Takeover (Cont'd.) Bajoria together with individuals acting in show gained over 5% of shares in Bombay Dyeing without making proper divulgences, required at the 5% level under the Takeover Regulations. Dissension documented by Bombay Dyeing before SEBI and CLB. Appeal to before CLB – petitioning God for amendment of enlist of individuals in regard of all shares over 5%. Bajorias having legitimately exchanged shares over 5% amid pendency of appeal to - no correction SEBI –barred Bajoria, alongside people acting in show, from getting to the capital market for one year with prompt impact. CII, FICCI and Assocham –Introduction for Promoter well disposed revisions Creeping obtaining limit raised from 5% to 10% with impact from October 25, 2001 L&L/MDI

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Types of Takeover (Cont'd.) Tendency of Financial Institutions (FI) to assist Promoters in antagonistic takeovers However, in Raasi Cements Limited (RCL) and India Cements Limited (ICL), FIs felt tricked. ICL in its antagonistic offer for RCL made an open offer for RCL offers at Rs. 300 for each share when the share cost was at Rs. 100. Promoters of RCL sold out its 32% stake to ICL in an arranged arrangement amid the term of the open offer at cost extending between Rs.200 to Rs. 286 for every share ICL had full control of RCL without purchasing single share from the institutional financial specialists. L&L/MDI

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Types of Takeover (Cont'd.) - Friendly takeover Management of an organization may confront genuine money related issues or dangers of unfriendly takeover Unable to avoid the takeover endeavor. An agreeable corporate body or gathering of organizations may act the hero by purchasing shares of the organization in the open market as well as by pumping assets to help the administration. Example: Sterlite Industries Limited ("SIL") – Indian Aluminum Company Limited ("Indal"). L&L/MDI

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Types of Takeover (Cont'd.) SIL made an open offer to buy 10% of the shares of Indal from the Public. (Takeover trigger at 10% then) SEBI thought of decision of open offer of at the very least 20%. SIL required to build its open offer to 20%. Indal, feeling defenseless against a takeover risk from SIL, asked for its outside partner Alcan to act the hero. SIL made a money offer at Rs. 115 for every share and Alcan made an offer for Rs.175. L&L/MDI

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Types of Takeover (Cont'd.) SIL from that point reported its aim to get 52% and amended it cost to Rs.221 per share. For this situation FIs were a key component holding 36% of the value. Upon the arrival of conclusion of the offer time frame, FIs hit an arrangement with Alcan for Rs. 200 for each share. Indal with the assistance of Alcan was succesful in wardinf of the unfriendly risk. L&L/MDI

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Types of Takeover (Cont'd.) Bailout takeover Taking over of the administration of such frail organizations for sustaining them back in typical exercises by an organization having aptitude and assets is known as "Bailout takeover" Example: L&L/MDI

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Disclosure under Takeover Code at least 5% shares or voting rights: An Acquirer, who alongside the PAC, gets shares or voting privileges of an organization which shareholding together with his current shareholding surpasses 5% of shares or voting rights in an organization reveal his total shareholding or voting rights inside four working days of receipt of insinuation of allocation or obtaining of shares or voting rights, all things considered. Such organization should reveal to every single Stock Exchange on which its shares are recorded, the total number of shares held by each of such individual inside 7 days of receipt of data. L&L/MDI

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Disclosure under Takeover Code (Cont'd.) More than 15% shares or voting rights Any acquirer alongside PAC holding over 15% yet under 75% of shares or voting rights in an organization might uncover to the organization after getting a further: 5%; or 10% of shares or voting rights amid any time of 12 months . L&L/MDI

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Disclosure unde