Background

The SEBI (SAST) Regulations, 2011 were introduced to regulate the acquisition of shares, voting rights, and control in listed companies in India. They aim to ensure transparency and fairness in takeover and acquisition activities. The regulations protect the interests of minority shareholders by mandating open offers on substantial acquisitions. They also provide a clear framework for disclosures and obligations of acquirers and target companies. Overall, the regulations promote orderly development and integrity of the securities market.

Applicability

These regulations apply to the acquisition of shares, voting rights, or control in listed companies in India. They are applicable to any acquirer, including persons acting in concert, who acquires shares or voting rights beyond the prescribed thresholds. The regulations cover direct and indirect acquisitions, whether through market purchases, agreements, or corporate actions. They are also applicable to preferential allotments, conversions of securities, and changes in control. Certain exemptions are provided for specified transactions, subject to conditions laid down by SEBI.

Compliance Requirements under the Regulations

1. Disclosure of acquisition of 5% or more of shares/voting rights (Regulation 29(1))

Any acquirer or person acting in concert with him acquiring 5% or more of shares/voting rights in a target company shall disclose the aggregate shareholding/voting rights in such form as prescribed to Stock Exchange and Company (10% in case of securities listed on Innovators Growth Platform)

2. Disclosure of acquisition and disposal amounting to +/-2% (Regulation 29(2))

Acquirer along with persons acting in concert holding 5% (10% for securities listed on Innovators Growth Platform for +/- 5% change)) or more of shares/voting rights shall disclose the number of shares or voting rights held and any change representing two per cent or more of the shares or voting rights in such target company in such form as may be specified.

3. Disclosure to Stock Exchange for encumbrance of Shares (Regulation 31(1)(3))

Disclosure of encumbered shares by the promoters within 7 working days from the creation or invocation or release of encumbrance to Stock Exchange and Company. This requirement is not applicable where the encumbrance is undertaken in a depository

4. Disclosure to Stock Exchange for Invocation / Release of Encumbered of Shares (Regulation 31(2), (3))

Promoters to disclose invocation/release of encumbrance within seven working days from the creation or invocation or release of encumbrance to Stock Exchange and Company. This requirement is not applicable where the encumbrance is undertaken in a depository

Penalty & Punishment

• Board may issue directions as provided in Regulation 32(1)
• General penalty: Listed entity/any other person who contravenes any provision of the regulations shall be liable for: a) action as per Securities Law, b) fine, c) suspension of trading, d)freezing of promoter/promoter group holding of designated securities, as may be applicable, in coordination with depositories, e) any other action specified by Board

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