The Securities and Exchange Board of India (SEBI) is considering proposing a new framework for delisting after an open offer.
According to the standards in force, a mandatory 26% open offer is required for the acquisition of shares held by all shareholders other than the acquirer, if the acquirer has agreed to acquire shares representing voting rights ( 25% or more), or control of a listed company.
In such an acquisition, the acquirer may potentially cross 75 percent, which is the current maximum non-public interest under the law. In addition, the rules stipulate a minimum public participation of 25 percent for all listed companies and if this limit is exceeded, the non-public participation must be reduced to 75 percent within one year.
In addition, in the event that the acquirer intends to dilute the stake, the promoter’s stake should first be reduced to 75 percent and then be increased to 90 percent.
According to a subgroup of SEBI’s Primary Market Advisory Committee (PMAC), the consequent flow of public transactions would also confuse secondary market investors who do not need to be already shareholders of the listed company with a offer to buy their shares, followed by an offer to sell shares, then an offer to buy their shares.
“Such directionally contradictory transactions in a sequence complicate the takeover of listed companies and deter an incoming acquirer from seeking to acquire control of listed companies,” the subgroup report said.
The panel noted that there is indeed a need to streamline the operation of the Takeover Regulations, the SCRR and the Delisting Regulations. However, during rationalization, one should not compromise on the balance of competing interests, notes the report.
The discovery of the write-off price (which is obtained as part of the reverse book-building process) is the right of public shareholders and this right can be properly addressed since shareholders would retain the right to accept or reject the price of the write-off. ‘offer by depositing or refraining from depositing their shares under the open offer.
Under the current write-off regulations, the discovery of the price is set by the public shareholders and the purchaser has the right to refuse the price and make a counter-offer.
“A new streamlined framework is proposed below for use in the event of a change of control (either fully or from one-to-one) with the entry of new incoming acquirers. Such open offers involving a new incoming buyer can benefit from this framework where public shareholders can respond to the open offer and accept delisting in a single, unified process.
In such a framework, the acquirer must stipulate the higher price that he is willing to pay for the delisting and the public shareholders can refuse it if they do not like it.
“The group believes that the aforementioned framework strikes a fair balance between maintaining all of the regulatory objectives involved in open bids under the Take-over Bids Regulations and the Write-off Regulations, which allows acquirers to deal with more easily and more logically without compromising the substantive rights of public shareholders. , “It said.
It has also been clarified for the avoidance of doubt that the aforementioned framework is only available in the case of open offers under the regulation on takeover bids for a new purchaser seeking to acquire sole or joint control, indicates the discussion paper.
The capital market regulator asked for comments on the proposed standards by July 16.