INDIA Law and Practice Contributed by: Raj Ramachandran, Varun Sriram, Krutamana Pisipati, Aadhitya Logeshen and Abheejit V, JSA
6.13 Securities Regulator’s or Stock Exchange Process
deposit such aggregate amount in the escrow account as per the relevant regulations. 6.10 Types of Deal Protection Measures The following deal protection measures may be avail- able. • Break-up fees or reverse break-up fees are not very common in the Indian transaction market. There is also a restriction on public companies to provide financial assistance for the purchase or subscription of their own shares. • Matching rights would apply akin to a right of refusal in the event of a competing bid, although they would not apply during an exclusivity period. • Exclusivity periods are typically stipulated to pre- vent companies from soliciting other bids and to give effect to any conditions that may need to be complied with. • In most instances of a proposal to transfer shares involving a material or significant stake, approval of the company’s shareholders is required under the terms of a shareholders’ agreement executed between the parties. 6.11 Additional Governance Rights The buyer would typically have visibility on the mini- mum quantum of shares that they would hold after the acquisition. So long as the unacquired shares are not significant enough in quantum to have an impact on the manner in which the acquirer would prefer to operate the business, the acquirer may proceed with the transaction. No alterations solely affecting the rights of the remain- ing shareholders, which may be considered prejudicial or disproportionate, can be made. However, certain challenges would remain in giving effect to related party transactions within the acquirer group. 6.12 Irrevocable Commitments In negotiated transactions, principal shareholders pro- vide confirmations to sell their shares by executing binding contracts. Typically, there is no opportunity to pursue a better offer unless the acquirer violates the contractual terms, the exclusivity period or long-stop date has expired, or a condition precedent for closing cannot be met.
Companies first issue a draft offer document, which is filed with the SEBI. Draft offer documents are available in the public domain, including the portal of the SEBI, the concerned stock exchanges, or the concerned merchant banker. The detailed timeframes for the vari- ous steps leading up to the listing are contained in the offer document. 6.14 Timing of the Takeover Offer Once made, an “open offer” cannot be withdrawn, except, inter alia, in the following circumstances. • Statutory approvals required for the “open offer” or for effecting the acquisition have been refused, subject to the requirement for approvals having been specifically disclosed in the detailed public statement (“DPS”) and the letter of offer. • Any condition stipulated in the share purchase agreement is not met for reasons beyond the reasonable control of the acquirer, provided that the condition has been specifically disclosed in the DPS and the letter of offer. • Such circumstances that, in the opinion of SEBI, merit the withdrawal of the “open offer”. If the acquirer is unable to make the payment within ten working days of the closure of the “open offer”, the acquirer will be required to pay interest (at a rate specified by the SEBI) to the shareholders of the target company for the delay. If statutory approvals are required for some but not all shareholders, the acquirer can make payments to those shareholders for whom no such approvals are required to complete the “open offer”. 7. Overview of Regulatory Requirements 7.1 Regulations Applicable to a Technology Company The Indian Companies Act, 2013, is the primary law that governs companies. For certain businesses (payment gateways and payment aggregators, non- banking financial companies), approvals from other authorities, such as the RBI, are required.
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