Open Offer Could Be Up to 25% In Sebi's Takeover Code

SEBI-appointed takeover committee headed by C Achutan, former presiding officer of the Securities Appellate Tribunal has recommended some changes in takeover code.

The major change is increasing the open offer thresold to 25%, up from the current 15% and once done, should make an offer to buy the remaining 75%, instead of the present 20%.

This means an open offer will kick in only when an entity acquires atleast 25% in a listed company.

The new threshold will also align Indian rules with the open offer trigger limits followed globally by countries including Singapore (30%), UK (30%), Malaysia (33%) and Hong Kong (35%).

Under the Sebi (Substantial Acquisition of Shares and Takeover) Regulations, 1997, known as the the Takeover Code, once a company acquires 15% or more of voting rights in a target company, it has to make a mandatory open offer for an additional 20% shares. The new slabs indicates that only with 25% share, a new sahareholder will get a representation in the board room, that too for voting on special issues.

Panel has also proposed that non-compete fee of upto 25% of the deal size to the seller, where sellers / promoters are paid more than the other shareholders to prevent them from the starting the same business again, must be avoided.

It has also propsed that the 52-week average price should be taken into consideration while determining the price for the open offer.

Sebi introduced a formal takeover code in 1997 that helped set basic rules for mergers and acquisitions. It last reviewed the code in 2002, mandating greater disclosures of holdings at every stage and exempted preferential issues from the purview of the code.

Reference: SEBI

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