SEBI’s changes to Buy-back, Delisting & Takeover Regs

SEBI, on March 24th 2015, announced amendments to the Buy-back, De-listing and Takeover Regulations. Some of the amendments are discussed in this note below:

Buy-back Regulations

The Buy-back regulations now facilitate tendering of shares through the stock exchange mechanism.

Takeover Regulations

The Substantial Acquisition of Shares and Takeovers (SAST) regulations now allow acquirers to de-list companies through open offer. However, the acquirer has to declare his intention for de-listing at the time of making the detailed public statement.

In case a competing offer is made, the acquirer shall not be entitled to delist the company or pay interest to the shareholders on account of delay due to competing offer.

Like the amended Buy-back regulations, the Takeover regulations too allow shareholders to tender their shares through the stock exchange mechanism.

De-listing Regulations

Promoters won’t be allowed to propose de-listing if any of the promoters’ group has sold shares within 6 months of the Board meeting where delisting proposal was approved. Also, the promoters’ group or the acquirer will not be allowed to sell shares of the company from the date of the Board meeting till the completion of the process.

Prior to granting approval for de-listing, the Board has to appoint a merchant banker to carry out due diligence and obtain details of trading (off-market as well as market) of the equity shares of the company in the past 2 years by top-25 shareholders and provide such details to the merchant bankers for due diligence.

The de-listing offer will be successful only if the post-offer promoter holding will be at-least 90% (of total excluding those held by custodians) and at-least 25% of public shareholders have participated in the book building process. This will be exempted in case the acquirer/promoter demonstrates they have sent offer letter to all shareholders through physical or electronic means. The existing requirement of higher of 90% or more than 50% of offer size has been done away with, which led to the Fresenius Kabi case.