Disclosures of acquisition and disposal under SEBI(SAST) Regulations 2011

In corporate it’s often happened that in the process of corporate restructuring through merger takeovers, interest of various stakeholders got affected and Companies generally neglect these concerns to secure their own benefit. To curb such practice in market and to keep an eye on corporate deals in securities which might suppress the rights of minority shareholders, SEBI((Substantial Acquisition of Shares and Takeovers) Regulations, 2011) was introduced.

SEBI (SAST) Regulations 2011 regulates the direct and indirect acquisition of shares or voting rights in, or control over Companies.

This Regulation is bifurcated in various chapter namely:

  1. Preliminary
  2. Substantial Acquisition of Shares, Voting Rights or Control
  3. Open Offer Process
  4. Other Obligations
  5. Disclosures of Shareholding and Control
  6. Miscellaneous

In this article we will get through the basic obligation which is generally applicable on every listed entity, promoter or majority stakeholders of listed entity.

To understand the regulation, it is necessary to have a glance at some terminology:

Acquirer: Any person who, directly or indirectly, acquires or agrees to acquire whether by himself, or through, or with persons acting in concert with him, shares or voting rights in, or control over a target company

Acquisition: Directly or indirectly, acquiring or agreeing to acquire shares or voting rights in, or control over, a target company

Control: Right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner

Provided that a director or officer of a target company shall not be considered to be in control over such target company, merely by virtue of holding such position;

Persons acting in concert:

  • persons who, with a common objective or purpose of acquisition of shares or voting rights in, or exercising control over a target company, pursuant to an agreement or understanding, formal or informal, directly or indirectly co-operate for acquisition of shares or voting rights in, or exercise of control over the target company
  • Without prejudice to the generality of the foregoing, the persons falling within the following categories shall be deemed to be persons acting in concert with other persons within the same category, unless the contrary is established:
    • a company, its holding company, subsidiary company and any company under the same management or control
    • a company, its directors, and any person entrusted with the management of the company
    • directors of companies referred to in item (i) and (ii) of this sub-clause and associates of such directors
    • promoters and members of the promoter group
    • immediate relatives
    • a mutual fund, its sponsor, trustees, trustee company, and asset management company
    • a collective investment scheme and its collective investment management company, trustees and trustee company
    • a venture capital fund and its sponsor, trustees, trustee company and asset management company
    • an alternative investment fund and its sponsor, trustees, trustee company and manager
    • a merchant banker and its client, who is an acquirer
    • a portfolio manager and its client, who is an acquirer;
    • banks, financial advisors and stockbrokers of the acquirer, or of any company which is a holding company or subsidiary of the acquirer, and where the acquirer is an individual, of the immediate relative of such individual
    • an investment company or fund and any person who has an interest in such investment company or fund as a shareholder or unitholder having not less than 10 per cent of the paid-up capital of the investment company or unit capital of the fund, and any other investment company or fund in which such person or his associate holds not less than 10 per cent of the paid-up capital of that investment company or unit capital of that fund
  • Promoter & Promoter group: Same meaning as in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and includes a member of the promoter group;

    Target Company: A company and includes a body corporate or corporation established under a Central legislation, State legislation or Provincial legislation for the time being in force, whose shares are listed on a stock exchange

    Regulation 29 of SAST Regulations deals with Disclosure of acquisition and disposal.

    This regulation has four sub regulations

    RegulationCompliance
    29(1)Any acquirer who acquires: Shares or Voting rights in a target company which taken together with shares or voting rights, if any: held by him and by persons acting in concert with him in such target company aggregating to 5% or more of the shares of such target company, shall disclose their aggregate shareholding and voting rights
    29(2)Any person, who together with persons acting in concert with him holds: Shares or Voting rights entitling them to 5 % or more of the shares or voting rights in a target company shall disclose the number of shares or voting rights held and change in shareholding or voting rights Even if such change results in shareholding falling below five per cent, if there has been change in such holdings from the last disclosure made under sub-regulation (1) or under this sub regulation; and such change exceeds 2% of total shareholding or voting rights in the target company
    29(3)The above said disclosures to be made Within 2 working days of the receipt of intimation of: allotment of shares, or the acquisition or the disposal of shares or voting rights in the target company to: every stock exchange where the shares of the target company are listed the target company at its registered office.
    29(4)Shares taken by way of encumbrance shall be treated as an acquisition, Shares given upon release of encumbrance shall be treated as a disposal And disclosures shall be made by such person accordingly Exception: This regulation does not apply to a scheduled commercial bank or public financial institution or a housing finance company or a systemically important non-banking financial company as pledgee in connection with a pledge of shares for securing indebtedness in the ordinary course of business.

    Regulation 30 of SAST Regulations deals with Continual Disclosure

    This regulation has three sub regulations

    RegulationCompliance
    30(1)Every person who with persons acting in concert with him holds: Shares or Voting rights25% or more of voting right in target company Shall disclose their aggregate shareholding and voting rights as of the 31st day of March, in such target company.
    30(2)The promoter of every target company shall together with persons acting in concert with him, disclose their aggregate shareholding and voting rights as of the 31st day of March, in such target company
    30(3)The above said disclosure shall be made within 7 days from the end of each financial year to: every stock exchange where the shares of the target company are listed the target company at its registered office

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