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Takeover is a process wherein an acquirer takes over the control or management of a target company by acquiring the substantial quantity of shares or voting rights of such company. The concept of Takeover and the procedure for Takeovers have been enshrined in the Securities Exchange Board of India, (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.


Appointment of a merchant banker

Before making any public announcement of offer referred to in regulation 10 or regulation 11 or regulation 12, the acquirer shall appoint a merchant banker in Category I holding a certificate of registration granted by the Board, who is not an associate of or group of the acquirer or the target company.[Regulation 13] 

Public Announcement

A public announcement is an announcement made in the newspapers by the acquirer primarily disclosing his intention to acquire shares of the target company from existing shareholders by means of an open offer for not less than 20% of shares.

Public Announcement is made to ensure that the shareholders of the target company are aware of an exit opportunity available to them.

The disclosures in the announcement include:-

·         the offer price, number of shares to be acquired from the public,

·         identity of acquirer,

·         purpose of acquisition,

·         future plans of acquirer, if any, regarding the target company,

·         change in control over the target company, if any,

·         the procedure to be followed by acquirer in accepting the shares tendered by the shareholders and

·         the period within which all the formalities pertaining to the offer would be completed.

No misleading information

The public announcement of the offer or any other advertisement, circular, brochure, publicity material or letter of offer issued in relation to the acquisition of shares shall not contain any misleading information.[Regulation 17]

Timing of the public announcement of offer

The acquirer is required to make the P.A within four working days of the entering into an agreement to acquire shares or deciding to acquire shares/ voting rights of target company or after any such change or changes as would result in change in control over the target company.

In case of indirect acquisition or change in control, the PA shall be made by the acquirer within three months of consummation of such acquisition or change in control or restructuring of the parent or the company holding shares of or control over the target company in India. [Regulation 14]

Escrow Account

Before making the Public Announcement, the acquirer has to open an escrow account in the form of cash deposited with a scheduled commercial bank or bank guarantee in favour of the Merchant Banker or deposit of acceptable securities with appropriate margin with the Merchant Banker. The Merchant Banker is also required to confirm that firm financial arrangements are in place for fulfilling the offer obligations. The escrow amount shall be 25% of the consideration if offer size is less than Rs. 100 cr. and 10% for excess of consideration above Rs. 100 cr.

Letter of offer

A draft letter of offer is required to be filed with SEBI within 14 days from the date of Public Announcement . The following also need to filed along with the draft:-

·         a filing fee of Rs.50,000/- per letter of offer (payable by Banker’sCheque / Demand Draft)

·         A due diligence certificate

·         Registration details

The letter of offer shall be despatched to the shareholders not earlier than 21 days from its submission to the Board.

Specified date:

The public announcement shall specify a date, which shall be the specified date for the purpose of determining the names of the shareholders to whom the letter of offer should be sent: However such specified date shall not be later than the thirtieth day from the date of the public announcement. [Regulation 19]

Minimum Offer Price and Payments made

It is not the duty of SEBI to approve the offer price, however it ensures that all the relevant arameters are taken in to consideration for fixing the offer price and that the justification for the same is disclosed in the offer document. The offer price shall be the highest of:-

-     Negotiated price under the agreement.

-     Price paid by the acquirer or PAC with him for acquisition if any, including by way of public rights/ preferential issue during the 26-week period prior to the date of the PA.

-     Average of weekly high & low of the closing prices of shares as quoted on the Stock exchanges, where shares of Target company are most frequently traded during 26 weeks prior to the date of the Public Announcement

 In case the shares of target company are not frequently traded, then the offer price shall be determined by reliance on the parameters, like: the negotiated price under the agreement, highest price paid by the acquirer or PAC

Acquirers are required to complete the payment of consideration to shareholders who have accepted the offer within 30 days from the date of closure of the offer.

In case the delay in payment is on account of non-receipt of statutory approvals and if the same is not due to willful default or neglect on part of the acquirer, the acquirers would be liable to pay interest to the shareholders for the delayed period in accordance with Regulations. Acquirer(s) are however not to be made accountable for postal delays.

If the delay in payment of consideration is not due to the above reasons, it would be treated as a violation of the Regulations.

Safeguards incorporated so as to ensure that the Shareholders get their payments

The regulations provide for opening of escrow account. In case, the acquirer fails to make payment, Merchant Banker has a right to forfeit the escrow account and distribute the proceeds in the following way.

1/3 of amount to target company

1/3 to regional Stock Exchanges, for credit to investor protection fund etc.

1/3 to be distributed on pro rata basis among the shareholders who have accepted the offer.

 The Merchant Banker advised by SEBI is required to ensure that the rejected documents which are kept in the custody of the Registrar / Merchant Banker are sent back to the shareholder through Registered Post.

Besides forfeiture of escrow account, SEBI can take separate action against the acquirer which may include prosecution / barring the acquirer from entering the capital market for a period etc.

General obligations of the acquirer

·         The public announcement of an offer to acquire the shares of the target company shall be made only when the acquirer is able to implement the offer.

·          Within 14 days of the public announcement of the offer, the acquirer shall send a copy of the draft letter of offer to the target company at its registered office address, for being placed before the board of directors and to all the stock exchanges where the shares of the company are listed.

·         The acquirer shall ensure that the letter of offer is sent to all the shareholders (including non-resident Indians) of the target company, whose names appear on the register of members of the company as on the specified date mentioned in the public announcement, so as to reach them within 45 days from the date of public announcement.

·         The date of opening of the offer shall be not later than the [fifty fifth] day from the date of public announcement.

·         The offer to acquire shares from the shareholders shall remain open for a period of 20 days.

Revision of offer

The acquirer who has made the public announcement of offer may make upward revisions in his offer in respect of the price and the number of shares to be acquired, at any time up to seven working days prior to the date of the closure of the offer.

However such upward revision of offer shall be made only upon the acquirer—

(a)     making a public announcement in respect of such changes or amendments in all the newspapers in which the original public announcement was made;

(b)   simultaneously with the issue of such public announcement, informing the Board, all the stock exchanges on which the shares of the company are listed, and the target company at its registered office;

(c)    increasing the value of the escrow account as provided under sub-regulation (9) of regulation 28.

Withdrawl of offer

The offer once made cannot be withdrawn except in the following circumstances:

·         ·Statutory approval(s) required have been refused

·         The sole acquirer being a natural person has died

·         Such circumstances as in the opinion of the Board merits withdrawal. [Regulation 27]


The following transactions are however exempted from making an offer and are not required to be reported to SEBI:

·         allotment to underwriter pursuant to any underwriting agreement;

·         acquisition of shares in ordinary course of business by;

·         Regd. Stock brokers on behalf of clients;

·         Regd. Market makers;

·         Public financial institutions on their own account;

·         banks & FIs as pledges

·         Acquisition of shares by way of transmission on succession or by inheritance;

·         acquisition of shares by Govt. companies;

·         acquisition pursuant to a scheme framed under section 18 of SICA 1985;

·         of arrangement/ restructuring including amalgamation or merger or de-merger under any law or Regulation Indian or Foreign;

·         Acquisition of shares in companies whose shares are not listed;

·         However, if by virtue of acquisition of shares of unlisted company, the acquirer acquires shares or voting rights (over the limits specified) in the listed company, acquirer is required to make an open offer in accordance with the Regulations.


The Regulations have laid down the general obligations of acquirer, target company and the Merchant Banker. For failure to carry out these obligations as well as for failure / non compliance of other provisions of the Regulations, the Regulations have laid down the penalties for non compliance. These penalties include

a) forfeiture of the escrow account,

b) directing the person concerned to sell the shares acquired in violation of the regulations,

c) directing the person concerned not to further deal in securities,

d) levy monetary penalties,

e) initiate prosecution proceedings.

f) directing appointment of a merchant banker for the purpose of causing disinvestment of shares acquired in breach of regulations 10, 11 or 12

g) directing transfer of any proceeds or securities to the Investors Protection Fund of arecognised stock exchange;

h) directing the target company or depository to cancel the shares where an acquisition of shares pursuant to an allotment is in breach of regulations 10,11 or 12;

i) directing the target company or the depository not to give effect to transfer or further freeze the transfer of any such shares and not to permit the acquirer or any nominee or any proxy of the acquirer to exercise any voting or other rights attached to such shares acquired in violation of regulations 10, 11 or 12;

j) debarring any person concerned from accessing the capital market or dealing in securities for such period as may be determined by the Board;

k) directing the person concerned to make public offer to the shareholders of the target company to acquire such number of shares at such offer price as determined by the Board;

l) directing disinvestment of such shares as are in excess of the percentage of the shareholding or voting rights specified for disclosure requirement under the regulations 6,7 or 8;

m) directing the person concerned not to dispose of assets of the target company contrary to the undertaking given in the letter of offer;

n) directing the person concerned, who has failed to make a public offer or delayed the making of a public offer in terms of these Regulations, to the shareholders, whose shares have been accepted in the public offer made after the delay, the consideration amount along with interest at the rate not less than the applicable rate of interest payable by banks on fixed deposits.

Further, the Board of Directors of the target company would also be liable for action in terms of the Regulations and the SEBI Act for failure to carry out their obligations specified in the Regulations.

Action can also be initiated for suspension, cancellation of certificate of registration against an intermediary such as the Merchant Banker to the offer.

M S MIRZA July 9, 2010
no coments
 vishnu (CA, CS and ACCA(UK) January 25, 2011
its great effort and wonderful
raj mohan October 24, 2012
no comments
anitha November 4, 2012
i wana proper article for procedure of takeover
pranaya Behuria November 23, 2016
What are the laws applicable for acquire Listed company?
Byronhit May 29, 2017
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