REGULATORY
SEBI Law
Under the rules & regulations framed by the Securities and Exchange Board of India Act 1992 (SEBI) Act, additional regulatory compliances are expected in the case of a merger or acquisition of shares in a listed company.
Any merger/ amalgamation (“M&A”) involving any listed company (directly/ indirectly) may have implications from inter-alia following regulations issued by SEBI from time to time as follows :
SEBI Regulations 2018
SEBI Issuance of Capital and Disclosure Requirements(“ICDR Regulations”) Regulations 2018
In the case of acquisition of shares by way of subscription of shares, the subscription must be conducted in accordance with the ICDR Regulations. The specified securities are allotted on a preferential basis and the equity shares are allotted .
- Pursuant to the exercise of options attached to warrants issued on a preferential basis are subject to lock-in for periods ranging between one to three years, as prescribed under the ICDR Regulations.
SEBI Regulations 2015
SEBI Listing Obligations and Disclosure Requirements (“LODR Regulations”) Regulations 2015
In the case of M&A transactions pursued by listed companies in India, the companies must follow the LODR Regulations. As and when a listed company plans to undertake a scheme of arrangement, the listed company is obliged to:
- File the draft scheme of arrangement with the stock exchange or exchanges for the purpose of obtaining an observation letter or no-objection letter.
- Only after receipt of the observation letter or no-objection letter can the company file a scheme of arrangement before the NCLT seeking its approval.
- Upon sanction of the scheme, the company must inform stock exchanges and file the requisite documents as mentioned in the LODR Regulations including pre and post arrangement shareholding pattern and the capital structure with the stock exchanges.
SEBI Regulations 2011
SEBI Substantial Acquisition of Shares and Takeovers (“Takeover Regulations”) Regulations 2011
The SEBI Takeover Regulations apply to all direct and indirect acquisitions of shares, voting rights, or things that can influence a listed company in India, with the exception of companies listed on a stock exchange’s institutional trading platform without having a public offering.
- Further, certain types of acquisitions, such as inter-state transfers of shares among immediate relatives, promoters, etc, are exempt from the requirement of making an open offer to shareholders under the Takeover Regulations. The cumulative shareholding after the open offer should not exceed the largest permissible non-public shareholding.
