Monday, February 7, 2011

Literature on Takeover Regulations

I recently came across two papers dealing with the SEBI Takeover Regulations and other related legislation in India, and a discussion of issues that arise in takeovers of Indian companies.

1. The Emerging Market for Corporate Control in India: Assessing (and Devising) Shark Repellants for India's Regulatory Environment by Abhinav Chandrachud.

Inbound and domestic hostile takeover activity in India have failed to make a dent in the corporate vocabulary, for historical, cultural and regulatory reasons. Conversely, the scale of negotiated “friendly” deals in India has been on the rise. At the regulatory level, Indian promoters are permitted to hold large stakes in their corporations, and are warned in advance when potentially hostile acquirers gain toeholds in their corporations, enabling them to consequently consolidate their holdings. Severe restrictions imposed by India’s central bank on financing acquisitions tend to multiply these difficulties. Historically, the loyalty of domestic institutional investors to established promoter houses, made it difficult to unseat the interests of entrenched Indian promoters. Culturally, “nationalist sentiment” has formed an “invisible barrier” to hostile takeover activity in India, as regulators continue to side with India’s “national champions”. Restrictive foreign investment regulations have long precluded the agility of the inbound raider. However, in recent times the regulatory and historical landscape in India has metamorphosed dramatically. Shareholding patterns in Indian corporations have undergone significant change with the inflow of foreign strategic and institutional investors, even as foreign investment restrictions have been relaxed. Further, the market for corporate control in India has seen interesting movement in the past few years. This paper addresses two questions. As its first and primary question, this paper analyzes whether there is a legitimate possibility that the market for corporate control will gain a greater foothold in India, and whether “invisible barriers” still preclude hostile acquisitions in India. Second, assuming that the answer to the first question is in the affirmative, this paper seeks to address the question of whether the most widely known conventional “shark repellant” deal defense mechanism, viz. the poison pill, is possible under the Indian regulatory regime, although it has been ruled out in previous academic writings.
2. Comparing Takeover Laws in the UK, India and Singapore by Krishna Shorewala and Vasundhara Vasumitra.

This paper makes a first of its kind comparative analysis of the Takeover Regulations in the UK, India and Singapore. It examines how the economic, social and political context of these countries shapes its takeover regulations. Special attention is given to the impact of shareholding patterns and policy objectives on the Regulations. The authors take four major areas of comparative analysis:

- thresholds for mandatory offers;
- penalties for breach/non-compliance of the regulations;
- self-regulation and the need for providing a statutory basis for the regulations; and finally,
- the role of the courts under each system.
These papers add to the preexisting academic (and some practitioner) literature in the form of the following:
a. Hostile Takeovers in India: New Prospects, Challenges and Regulatory Opportunities by Shaun Mathew;

b. Indian Takeover Regulation - Under Reformed and Over Modified by Sandeep Parekh;

c. Thwarting the market for corporate control: takeover regulation in India by Jairus Banaji;

d. Shishir Jose Vayttaden, SEBI’s Takeover Regulations, LexisNexis (2010).
In case readers have come across other literature, we welcome additions to the list through the Comments section.


Karan Tyagi said...

Rising Multinationals: Law and the Evolution of Outbound Acquisitions by Indian Companies- Afra Afsharipour, University of California

Coffee said...

I recently came across:

"The Evolution of Hostile Takeover Regimes in Developed and Emerging Markets: An Analytical Framework" by John Armour, Jack B. Jacobs & Curtis J. Milhaupt-

This is in a broader context, but has some discussion on the Indian Takeover Regulations