INDIA Law and Practice Contributed by: Anand Lakra, Shivpriya Nanda, Zain Pandit and Ami Shah, JSA Advocates & Solicitors
between the signing date and the closing date in relation to a transaction such that the target con - tinues to operate in the ordinary course. Such obligations usually include restrictions on the restructuring of capital, incurrence of indebted - ness, termination of existing lines of business and other price protection measures. 5.5 Definitive Agreements It is permissible and common for tender offer terms and conditions to be documented in defin - itive agreements. A tender offer (usually in the form of a term sheet) includes key commercial terms such as pricing, transaction approvals and covenants relating to confidentiality. Such key commercial terms are also captured in the defini - tive documents in more detail. 6. Structuring 6.1 Length of Process for Acquisition/ Sale The timing for any acquisition/sale is largely dependent on the listed status, the industry in which the target operates and the manner of acquisition. All other aspects being equal, an acquisition of shares of a listed entity above the prescribed thresholds will require more time than an unlisted entity since the acquirer will be under an obliga - tion to make an open offer to the public share - holders of the listed entity (which takes approxi - mately three to four months to complete) and will only be able to complete the underlying transac - tion after the completion of the open offer unless the acquirer deposits 100% of the open offer consideration in escrow. Unlisted entities on the other hand have no such bar.
Entities which operate in regulated sectors such as banks and non-banking financial com - panies (NBFCs) would not be able to complete the underlying transaction until approvals from the specific regulators (in the present case, the RBI) are received. In contrast, entities operating in unregulated sectors such as IT/ITes do not require any regulatory approvals and according - ly such acquisitions can be completed quickly. Additionally, combinations which require the prior approval of the CCI (ie, transactions which breach the specified thresholds and are unable to claim the exemption set out above) would have to wait for such approvals. Lastly, depending on the form of business com - bination, the timelines may differ. A combination in the form of a merger/amalgamation may take up to 8-12 months while a share transfer can be completed within a few days. 6.2 Mandatory Offer Threshold Under the Takeover Regulations, the require - ment to make a mandatory open offer to public shareholders of a listed company occurs upon the initial acquisition of 25% of shares or voting rights, either directly or indirectly. Furthermore, if an acquirer already holds 25% or more of the shares or voting rights in a listed company, an open offer will be triggered upon an additional acquisition of more than 5% of shares or voting rights in such listed entity in a financial year. A mandatory open offer is required to be made for 26% of the expanded capital of the listed entity. 6.3 Consideration Cash is the most commonly used form of con - sideration in M&A transactions in India. Some of the common tools to bridge value gaps include deferred consideration and earnout structures, however, if any party is a non-resident, the restrictions under the exchange control laws will
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