INDIA Law and Practice Contributed by: Kunal Chandra, Kabeer Mathur, Chinmay Bilgi, Sharnam Vaswani and Rajdeep Mukherjee, Trilegal
6.9 Voting by Proxy Voting by proxy is statutorily permitted under the Companies Act, 2013. Shareholders can appoint a proxy to attend general meetings and cast votes in a poll but are prohibited from speaking at the meeting or voting by a show of hands. 6.10 Squeeze-Out Mechanisms Once an acquirer secures 90% or more of the equity share capital, the Companies Act, 2013 provides a direct squeeze-out mechanism, allowing the acquirer to notify and compel the minority to sell their remaining shares at a fair value determined by a registered val - uer. Alternatively, companies may execute a minority squeeze-out via a selective capital reduction scheme, which requires approval from 75% of voting securities and final sanction by the NCLT. 6.11 Irrevocable Commitments Securing irrevocable commitments from principal shareholders to tender shares is a standard practice in unlisted bilateral negotiations. However, for listed companies, negotiating hard voting commitments pri - or to an open offer may result in SEBI classifying the principal shareholders as “Persons Acting in Concert” with the acquirer, thereby exposing them to joint and several liability under the Takeover Regulations. Once binding agreements are executed, such commitments typically do not allow termination if a higher compet - ing offer emerges. For listed targets, the bid becomes public upon the acquirer executing a binding agreement or breaching the 25% ownership threshold. This requires an imme - diate public announcement on the stock exchanges, followed by a DPS, published in national newspapers outlining the commercial parameters of the offer. Acquisition of a stake in an unlisted target is not sub - ject to public bids. 7.2 Type of Disclosure Required When issuing shares as consideration, the issuer must make baseline disclosures such as the objects of the 7. Disclosure 7.1 Making a Bid Public
issuance, the extent of promoter participation and the identity of allottees/investors. In addition to these general disclosures, transaction- specific disclosures are also required to be made in the offer documents and stock exchange filings. These typically include: (a) details of the underly - ing transaction (including structure and considera - tion mechanics); (b) the commercial rationale for the share issuance; (c) the basis of valuation and pricing of the shares (including any valuation reports); and (d) the resulting dilution impact on existing sharehold - ers (including changes in shareholding pattern and control, if any). 7.3 Producing Financial Statements Acquirers launching an open offer for a listed target must include comprehensive, audited financial state - ments in their DPS and letter of offer. This encom - passes balance sheets, profit and loss accounts, total revenue and net profit. These statements must be pre - pared and disclosed in accordance with the account - ing standards (eg, Indian GAAP or IFRS) applicable in While unlisted transaction documents remain entirely confidential, the transparency requirements for listed takeovers are substantially higher. The underlying definitive agreements (eg, the share purchase agree - ment) that triggered the open offer must be physically disclosed and made available for public inspection by the target’s shareholders during the entire offer period. the bidder’s home jurisdiction. 7.4 Transaction Documents
8. Duties of Directors 8.1 Principal Directors’ Duties
Under the Companies Act, 2013, directors, in the con - text of a business combination, are required to act in good faith, exercise independent judgement and act in the interest of all stakeholders, and not only share- holders. In transactions involving listed companies, directors are also required to ensure that the terms of the transaction are evaluated objectively. In the con - text of a takeover, this includes constituting a com - mittee of independent directors to assess the offer
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