Compliance Requirements under the Regulation

1. Acquirer to appoint Merchant Banker as Manager for the Open Offer (Regulation 12)

Prior to making a public announcement, the acquirer shall appoint a merchant banker registered with the Board, who is not an associate of the acquirer, as the manager to the open offer.

a) Term ‘associate’ has the same meaning as in SEBI (Merchant Bankers) Regulations 1992

b) The public announcement of the open offer for acquiring shares required under these regulations shall be made by the acquirer through such manager to the open offer.

     2. Timing of Public Offer (Regulation 13)

The public announcement referred to in regulation 3 and regulation 4 shall be made in accordance with regulation 14 and regulation 15, on the date of agreeing to acquire shares or voting rights in, or control over the target company

Such a Public Announcement to be made within such time as specified in Reg 13(2),(3),(3),(4) of SAST Regulations

3. Publication of Public Announcement (Regulation 14(1),(2))

The public announcement shall be sent to all stock exchanges where the target company’s shares are listed, and they will immediately disseminate the information. A copy shall also be sent to the Board and the target company’s registered office within one working day of date of Public Announcement

4. Publication of detailed public statement (Regulation 13(4),14(3),(4))

A detailed public statement shall be published by the acquirer through the manager to the open offer not later than five working days of the public announcement. Such statement shall be published in one widely circulated English national daily, one Hindi national daily, one regional language daily at the target company’s registered office location, and one regional language daily at the stock exchange with the highest trading volume in the target company’s shares over the last 60 trading days. Along with the publication of the detailed public statement, a copy shall be sent to:

(i) the Board through the open offer manager,

(ii) all stock exchanges where the target company’s shares are listed for immediate dissemination,

(iii) the target company’s registered office for circulation to its Board members.

5. Publication of detailed public statement pursuant to public announcement made in clause e Reg 13(2) (Regulation 13(2) clause e, 14(3),(4))

The detailed public statement pursuant to a public announcement made under clause (e) of sub-regulation (2)case of indirect acquisition of shares or voting rights in, or control over the target company where none of the parameters referred to in sub-regulation (2) of regulation 5 are met shall be made not later than five working days of the completion of the primary acquisition of shares or voting rights in, or control over the company or entity holding shares or voting rights in, or control over the target company. Such statement shall be published in one widely circulated English national daily, one Hindi national daily, one regional language daily at the target company’s registered office location, and one regional language daily at the stock exchange with the highest trading volume in the target company’s shares over the last 60 trading days.

Along with the publication of the detailed public statement, a copy shall be sent to:

(i) the Board through the open offer manager,

(ii) all stock exchanges where the target company’s shares are listed for immediate dissemination,

(iii) the target company’s registered office for circulation to its Board members.

6. Contents of Public Announcement (Regulation 15)

Public announcement to include:

a) name & identity of acquirer & PACs/sellers,if any

b) nature, consideration of proposed acquisition & price per share

c) offer price & payment method & any min. acceptance conditions

d) acquirer’s intention to delist/retain target co’s listing,with details for delisting

   7. Filing of Letter of Offer with SEBI (Regulation 16)

Within five working days of the detailed public statement under Regulation 13(4), the acquirer must file a draft letter of offer with the Board, through the open offer manager, along with a non-refundable fee via NEFT/RTGS/IMPS or online payment through the SEBI Payment Gateway. At the time, the acquirer shall send a copy of the draft letter of offer to the target company at its registered office address and to all stock exchanges where the shares of the target company are listed

  8. Creation of Escrow Account (Regulation 17)

Not later than two working days prior to the date of the detailed public statement of the open offer for acquiring shares, the acquirer shall create an escrow account towards security for performance of his obligations under these regulations, and deposit in escrow account such aggregate amount as per the following scale: Consideration payable under the Open Offer / Escrow Amount On the first Rs 500 crore/ an amount equal to 25% of the consideration On the balance consideration /an additional amount equal to 10% of the balance consideration

  9. Dispatch of Letter of offer to shareholders where comments are received from SEBI (Regulation 18(2))

The letter of offer shall be dispatched to the shareholders whose names appear on the register of members of the target company as of the identified date, not later than seven working days from the receipt of comments from the Board or where no comments are offered by the Board, within seven working days from the expiry of the period stipulated in sub-regulation (4) of regulation 16. Letter of offer can be dispatched through electronic mode.

10. Dispatch of Letter of offer to shareholders where no comments are received from SEBI (Regulation 18(2))

The letter of offer shall be dispatched to the shareholders whose names appear on the register of members of the target company as of the identified date, not later than seven working days from the receipt of comments from the Board or where no comments are offered by the Board, within seven working days from the expiry of the period stipulated in sub-regulation (4) of regulation 16. Letter of offer can be dispatched through electronic mode.

11. Dispatch of Letter of offer to custodians, if any (Regulation 18(3))

Simultaneously with the dispatch of the letter of offer to shareholders, the acquirer shall send the letter of offer to the custodian of shares underlying depository receipts, if any, of the target company.

12. Disclosures of every acquisition made during the Offer period under Reg. 18(6) (Regulation 18(6))

The acquirer shall disclose during the offer period every acquisition made by the acquirer or persons acting in concert with him of any shares of the target company in such form as may be specified, to each of the stock exchanges on which the shares of the target company are listed and to the target company at its registered office within twenty-four hours of such acquisition, and the stock exchanges shall forthwith disseminate such information to the public

13. Restriction of acquisition of shares during the tendering period (Regulation 18(6))

The acquirer and persons acting in concert with him shall not acquire or sell any shares of the target company during the period between three working days prior to the commencement of the tendering period and until the expiry of the tendering period

14. Advertisement announcing schedule of activities for the open offer, etc (Regulation 18(7))

Acquirer must publish an advertisement one working day before tendering period begins and it shall include schedule of activities for open offer, status of statutory & other approvals related to acquisition/open offer, any unfulfilled conditions & their status, procedure for tendering acceptances, etc

Such advertisement shall be,—

(a) published in all the newspapers in which the detailed public statement pursuant to the public announcement was made; and

(b) simultaneously sent to the Board, all the stock exchanges on which the shares of the target company are listed, and the target company at its registered office.

15. Tendering period for open offer (Regulation 18(8))

The tendering period shall start not later than twelve working days from date of receipt of comments from the Board under sub-regulation (4) of regulation 16 and shall remain open for ten working days.

Regulation 16(4) deals with the time period which Board may take to give comments, if any on the Draft Letter of Offer filed

16. Time limit for completion of all formalities under the Open Offer by the acquirer (Regulation 18(10))

The acquirer shall, within ten working days from the last date of the tendering period, complete all requirements under these regulations and other applicable law relating to the open offer including payment of consideration to the shareholders who have accepted the open offer.

17. Non-payment to shareholders who have accepted the Open Offer (Regulation 18(11A))

In case the acquirer is unable to make payment to the shareholders who have accepted the open offer within such period, the acquirer shall pay interest for the period of delay to all such shareholders whose shares have been accepted in the open offer, at the rate of ten per cent per annum

In case the delay was not attributable to any act of omission or commission of the acquirer, or due to the reasons or circumstances beyond the control of acquirer, the Board may grant waiver from the payment of interest. The payment of interest would be without prejudice to the Board taking any action under regulation 32 of these regulation or under the Act

18. Post offer advertisement (Regulation 18(12))

The acquirer shall issue a post offer advertisement within five working days after the offer period, giving details including aggregate number of shares tendered, accepted, date of payment of consideration. Such advertisement shall be,—

(i) published in all newspapers in which detailed public statement pursuant to the public announcement was made; &

(ii) simultaneously sent to Board, all the stock exchanges on which the shares of target company are listed, and target company at its registered office.

19. Conditional Offer (Regulation 19(1),(2))

An acquirer may make an open offer conditional on a minimum level of acceptance. If the desired level is not met, the acquirer will not acquire shares, and the agreement triggering the open offer will be rescinded.

Where an open offer is made conditional upon minimum level of acceptances, the acquirer and persons acting in concert with him shall not acquire, during the offer period, any shares in the target company except under the open offer and any underlying agreement for the sale of shares of the target company pursuant to which the open offer is made.

20. Competing offers (Regulation 20(1))

Upon a public announcement of an open offer for acquiring shares of a target company being made, any person, other than the acquirer who has made such public announcement, shall be entitled to make a public announcement of an open offer within fifteen working days of the date of the detailed public statement made by the acquirer who has made the first public announcement.

21. Size of Open Offer to be made via Competing Offer (Regulation 20(2))

The open offer under Regulation 20(1) must cover enough shares so that, combined with the acquirer’s and PACs holdings, it equals or exceeds the acquirer’s initial holding, including shares to be acquired under the offer and any related agreement.

a) An open offer made within Regulation 20(1) shall not be regarded as a voluntary open offer under regulation 6, and the provisions of these regulations shall apply accordingly

b) Every open offer made under Regulation 20(1) and the open offer first made shall be regarded as competing offers for purposes of these regulations

c) No person may announce or enter into any transaction requiring an open offer after the 15 working days mentioned in sub-regulation (1) and before the offer period ends

d) A competing offer cannot be conditional on a minimum level of acceptances unless the initial open offer is also conditional on such a level.

e) No person may announce or enter into any transaction requiring a public announcement of an open offer for acquiring shares until the offer period ends, where:

(a) the open offer is for shares acquired through disinvestment under regulation 13(2)(d); or

(b) the offer is made following a relaxation granted by the Board under regulation 11(2).

22. Creation of Special Escrow Account (Regulation 21(1),(2))

The acquirer must open special escrow a/c with a registered banker and deposit an amount, along with cash from regulation 17(10)(b), to cover full consideration payable to shareholders under open offer. The manager to the offer shall be authorized to operate the account on the acquirer’s behalf.

Subject to provisos to sub-regulation (11) of regulation 18, the acquirer shall complete payment of consideration whether in the form of cash, or as the case may be, by issue, exchange or transfer of securities, to all shareholders who have tendered shares in acceptance of the open offer, within ten working days of the expiry of the tendering period.

23. Transfer of Unclaimed balances lying in special escrow account to be transferred to IEPF (Regulation 21(3))

Unclaimed balances lying to credit of special escrow a/c referred to in Reg 21(1) at end of seven years from date of deposit thereof, shall be transferred to IEPF established under the Securities and Exchange Board of India (Investor Protection and Education Fund) Regulations, 2009.

24. Conditions for completion of acquisition (Regulation 22)

The acquirer shall not complete the acquisition of shares or voting rights in, or control over, the target company, whether by way of subscription to shares or a purchase of shares attracting the obligation to make an open offer for acquiring shares, until the expiry of the offer period

This provision however shall be subject to such conditions/provisios as stipulated in Regulation 22 of SAST Regulations

25. Conditions for withdrawal of Open Offer (Regulation 23(1))

An open offer cannot be withdrawn except under the following circumstances:

(a) Statutory approvals for the offer or acquisition are refused, as disclosed in the public statement and offer letter;

(b) The acquirer, if a natural person, has died;

(c) A condition in the acquisition agreement is unmet due to factors beyond the acquirer’s control, and the agreement is rescinded, as disclosed in the public statement and offer letter;

(d) The Board determines that circumstances merit withdrawal.

Note: An acquirer cannot withdraw an offer under regulation 13(2)(g) if the preferential issue is unsuccessful.

26. Public Announcement to be made in case of withdrawal of open offer (Regulation 23(2))

In the event of the withdrawal of the open offer, the acquirer must, through the manager to the open offer, within two working days: (a) announce the reasons for the withdrawal in the same newspapers where the public announcement of the open offer was made; and (b) simultaneously inform in writing: (i) the Board, (ii) all stock exchanges where the target company’s shares are listed, which must immediately disseminate the information to the public, and (iii) the target company at its registered office.

Penalty & Punishments

Penalty under SEBI Act 1992 for contravention where no separate penalty has been provided. Section 15HB:  Whoever fails to comply with any provision of this Act, the rules or the regulations made or directions issued by the Board thereunder for which no separate penalty has been provided, shall be [liable to a penalty which shall not be less than one lakh rupees but which may extend to one crore rupees.

Section 15H:  If any person, who is required under this Act or any rules or regulations made thereunder, fails to-

(i)  disclose the aggregate of his shareholding in the body corporate before he acquires any shares of that body corporate; or 

(ii)  make a public announcement to acquire shares at a minimum price; or

(iii) make a public offer by sending letter of offer to the shareholders of the concerned company; or 

(iv)  make payment of consideration to the shareholders who sold their shares pursuant to letter of offer, he shall be liable to a penalty which shall not be less than ten lakh rupees but which may extend to twenty-five crore rupees or three times the amount of profits made out of such failure, whichever is higher

Sec 15A of SEBI Act:

If any person, who is required under this Act or any rules or regulations made thereunder,—

(a)  to furnish any document, return or report to the Board, fails to furnish the same or who furnishes or files false, incorrect or incomplete information, return, report, books or other documents, he shall be liable to a penalty which shall not be less than one lakh rupees but  which  may  extend  to  one  lakh  rupees  for  each  day  during  which  such failure continues subject to a maximum of one crore rupees