New SEBI Takeover Code Highlights

SEBI Takeover Code amended: Creeping acquisition has been allowed beyond 55 percent upto 75 percent
Background
Securities and Exchange Board of India (‘SEBI’) recently relaxed the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (‘SEBI Takeover Code’) which governs the takeovers of listed
companies in India. As per the existing provisions of the SEBI Takeover Code, no acquirer shall acquire shares or voting rights (taken together with shares or voting rights, if any, held by him or by persons acting in
concert with him) of 15 percent or more in a listed company without making an open offer to acquire a minimum of 20 percent of such listed company’s shares from the public shareholders.

However, regulation 11(1) permits an acquirer (together with persons acting in concert with him) who holds more than 15  percent but less than 55 percent of shares or voting rights in a listed company to acquire additional shares or voting rights not exceeding 5  percent in any financial year (ending on 31 March) without making an open offer to the public shareholders of the listed company. This acquisition (also known
as creeping acquisition) of 5 percent voting rights every financial year without making an open offer is allowed till the voting rights of the acquirer reaches 55 percent.Any acquisition of share or voting right in the company beyond 55 percent would require the acquirer to make an open offer of at least 20 percent of voting rights to the public shareholders.
Amendments to the SEBI Takeover Code 
SEBI has now amended regulation 11(2) to insert a proviso after the first proviso which allows the acquirer, who together with persons acting in concert with him holds, 55 percent or more but less than
75 percent of the shares or voting rights in the listed Company, to acquire either by himself or through or with persons acting in concert with him, additional shares or voting rights upto 5 percent in the listed
company subject to following conditions:
(i) The acquisition is made through open market purchases in normal segment on the stock exchange but not through bulk deal / block deal / negotiated deal / preferential  allotment;
or
The increase in shareholding or voting rights of the acquirer is pursuant to a buyback of shares by the listed company;
(ii) the post acquisition shareholding of the acquirer together with persons acting in concert with him shall not increase beyond 75 percent

Additionally to bring consistency with the above amendment, change in Regulation 11(2A) is made, whereby consolidating the shares above  55 percent but less than 75 percent, open offer is  not mandatory, as
above amendment allows creeping acquisition beyond 55 percent. It is interesting to note that, even now preferential allotment is not permitted for acquiring shares or voting rights above 55 percent without
making an open offer.

Source: SEBI (Substantial Acquisition of Shares and
Takeovers)(Amendment) Regulations, 2008 dated 30 October 2008 to 
give effect to the Press Release dated 27 October 2008 to amend SEBI 
Takeover Code.