I had briefly written in an earlier post of a report in CNBC/moneycontrol.com of certain "clarifications" in respect of the amendments to Regulation 11(2) of the SEBI Takeover Regulations. As may be recollected, the amendments permitted acquisition of further shares upto 5% for persons who held shares between 55-75%. This press report has now been formalised by a clarifying circular dated August 6, 2009.
The circular is fairly self explanatory and is on the lines of the press report referred to earlier. A few quick comments though.
- The clarifying circular is issued under Regulation 5 which permits SEBI to, inter alia, issue directions to remove difficulties in interpretation. Section 11 of SEBI Act is also relied on.
- It is seen that some of the interpretation so given go clearly beyond the plain wording and meaning. It is possible that in the future, a legal issue may come up whether such "clarification" can go beyond the express and unambiguous wording of the Regulations.
- It is clarified that the 5% acquisition may be made in one or more tranches and also without any time limit.
- For calculating the 5% acquisitions, sales cannot be netted off. Thus, only gross purchases would be counted. For example, the acquirer cannot purchase 4%, then sell 3% and then acquire another 4% and claim that the net purchases is within the 5% limit.
- The cumulative holding of the acquirer cannot exceed 75%. Thus, a person holding, say, 73% can acquire only a further 2%.
- The cumulative holding limit of 75% is irrespective of the minimum public shareholding that is required to maintained under the Listing Agreement. Thus, e.g., in respect of a company having a 10% minimum public shareholding, the upper limit for this Regulation will still be 75% and not 90%.
- Jayant Thakur