INDIA Law and Practice Contributed by: Raj Ramachandran and Krutamana Pisipati, JSA
6.2 Mandatory Offer The SEBI Regulations stipulate in certain instances that a mandatory “open offer” is made, ie, where: • the acquirer proposes to acquire 25% or more of the shares or voting rights in a target company; • the acquirer’s stake is equal to 25% or more of the voting rights in the target company; and • there is a proposal to undertake an additional 5% shares or voting rights in a target com- pany, etc. All of these instances include the stake of the acquirer and the persons acting in concert with the acquirer together in determining if there is a breach of the threshold or trigger for the “open offer”. 6.3 Transaction Structures For acquisitions of unlisted public companies, there are options inter alia of undertaking a fast track merger (a merger involving a wholly owned subsidiary), a regular merger where the approval of the National Company Law Tribunal would be required (involving companies that are not in a holding-subsidiary relationship or having a com- mon parent holding structure) or an acquisition (which would be the quickest if there are no regulatory approvals required). 6.4 Consideration and Minimum Price In India it is typical for cash to be the primary form of consideration as discussed in 4.3 Liquid- ity Event: Form of Consideration . There are also certain pricing norms under the Indian Foreign Exchange Management Act, 1999. In the event the stake is being purchased by a non-resident party from an Indian resident
involve independent parties without any involve- ment by a regulatory agency. Purchasers or acquirers often require the seller to provide confirmation that there are no pending or likely claims from the tax authorities as under Indian law, a sale of asset during ongoing tax proceedings can be reversed by the authorities with a few exceptions. 6. Acquisitions of Public (Exchange-Listed) Technology Companies 6.1 Stakebuilding Where there is an acquisition of a material stake in a public listed company in India (breaching a defined threshold either individually or in the aggregate), an “open offer” has to be made to the public shareholders. The “open offers” need to be for at least 26% of the shareholding of the target company. The Securities Exchange Board of India’s (SEBI) Regulations (the “SEBI Regulations”) also pre- scribe that any acquirer, together with persons acting in concert with them to acquire shares or voting rights in a target company, which together amount to 5% or more of the shares of the target company, will disclose their aggregate share- holding and voting rights in the target company. This reporting will have to be undertaken within two working days of receipt of intimation of allot- ment or acquisition of shares or voting rights. The buyer is required to disclose its intention to either delist the target company or retain the listed status of the target company in the public announcement required to be made.
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