CHAPTER I: Preliminary

Short title and commencement.

1. (1) These regulations shall be called the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

(2) These regulations shall come into force on the date of their publication in the Official Gazette.

Definitions.

2. (1) In these regulations, unless the context otherwise requires: —

1. “Act” means the Securities and Exchange Board of India Act, 1992 (15 of 1992);
2. “acquirer” means any person who, directly or indirectly, acquires or agrees to acquire shares or voting rights in the target company, or acquires or agrees to acquire control over the target company, either by himself or with any person acting in concert with the acquirer;
3. “control” shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner.
   Explanation: —
   1. Where there are two or more persons in control over the target company, the cesser of any one of such persons from such control shall not be deemed to be a change in control of management nor shall any change in the nature and quantum of control amongst them constitute change in control of management:
      Provided that the transfer from joint control to sole control is effected in accordance with clause (e) of sub-regulation (1) of regulation 3.
   2. If consequent upon change in control of the target company in accordance with regulation 3, the control acquired is equal to or less than the control exercised by person(s) prior to such acquisition of control, such control shall not be deemed to be a change in control;]
      (cc) “disinvestment” means the sale by the Central Government or by the State Government as the case may be] of its shares or voting rights and/or control, in a listed Public Sector Undertaking;]
4. “investigating officer” means any person appointed by the Board under regulation 38;
5. “person acting in concert” comprises,—
   1. persons who, for a common objective or purpose of substantial acquisition of shares or voting rights or gaining control over the target company, pursuant to an agreement or understanding (formal or informal), directly or indirectly co-operate by acquiring or agreeing to acquire shares or voting rights in the target company or control over the target company,
   2. without prejudice to the generality of this definition, the following persons will be deemed to be persons acting in concert with other persons in the same category, unless the contrary is established :
      1. a company, its holding company, or subsidiary or such company or company under the same management either individually or together with each other;
      2. a company with any of its directors, or any person entrusted with the management of the funds of the company;
      3. directors of companies referred to in sub-clause (i) of clause (2) and their associates;
      4. mutual fund with sponsor or trustee or asset management company;
      5. foreign institutional investors with sub-account(s);
      6. merchant bankers with their client(s) as acquirer;
      7. portfolio managers with their client(s) as acquirer;
      8. venture capital funds with sponsors;
      9. banks with financial advisers, stock brokers of the acquirer, or any company which is a holding company, subsidiary or relative of the acquirer :
      
      Provided that sub-clause (ix) shall not apply to a bank whose sole relationship with the acquirer or with any company, which is a holding company or a subsidiary of the acquirer or with a relative of the acquirer, is by way of providing normal commercial banking services or such activities in connection with the offer such as confirming availability of funds, handling acceptances and other registration work;
      10. any investment company with any person who has an interest as director, fund manager, trustee, or as a shareholder having not less than 2 per cent of the paid-up capital of that company or with any other investment company in which such person or his associate holds not less than 2 per cent of the paid-up capital of the latter company.
          Note : For the purposes of this clause “associate” means,—
          1. any relative of that person within the meaning of section 6 of the Companies Act, 1956 (1 of 1956); and
          2. family trusts and Hindu undivided families;

(f) “offer period” means the period between the date of entering into Memorandum of Understanding or the public announcement, as the case may be and the date of completion of offer formalities relating to the offer made under these regulations;]

(g) “panel” means a panel constituted by the Board for the purpose of regulation 4;

(h) ‘promoter’ means—

1. any person who is in control of the target company;
2. any person named as promoter in any offer document of the target company or any shareholding pattern filed by the target company with the stock exchanges pursuant to the Listing Agreement, whichever is later;
   and includes any person belonging to the promoter group as mentioned in Explanation I :
   Provided that a director or officer of the target company or any other person shall not be a promoter, if he is acting as such merely in his professional capacity.

Explanation I : For the purpose of this clause, ‘promoter groups’ shall include :

1. in case promoter is a body corporate—
   1. a subsidiary or holding company of that body corporate;
   2. any company in which the promoter holds 10 per cent or more of the equity capital or which holds 10 per cent or more of the equity capital of the promoter;
   3. any company in which a group of individuals or companies or combinations thereof who holds 20 per cent or more of the equity capital in that company also holds 20 per cent or more of the equity capital of the target company; and
2. in case the promoter is an individual—
   1. the spouse of that person, or any parent, brother, sister or child of that person of his spouse;
   2. any company in which 10 per cent or more of the share capital is held by the promoter or an immediate relative of the promoter or a firm or HUF in which the promoter or any one or more of his immediate relative is a member;
   3. any company in which a company specified in (i) above, holds 10 per cent or more, of the share capital; and
   4. any HUF or firm in which the aggregate share of the promoter and his immediate relatives is equal to or more than 10 per cent of the total.

Explanation II : Financial Institutions, Scheduled Banks, Foreign Institutional Investors (FIIs) and Mutual Funds shall not be deemed to be a promoter or promoter group merely by virtue of their shareholding. Provided that the Financial Institutions, Scheduled Banks and Foreign Institutional Investors (FIIs) shall be treated as promoters or promoter group for the subsidiaries or companies promoted by them or mutual funds sponsored by them.]

1. “public financial institution” means a public financial institution as defined in section 4A of the Companies Act, 1956;
2. 1[(ii) “Public Sector Undertaking” means a company in which the Central Government or a State Government] holds 50% or more of its equity capital or is in control of the company;]

(j) “public shareholding” means shareholding held by persons other than promoters as defined under clause (h);

(k) “shares” means shares in the share capital of a company carrying voting rights and includes any security which would entitle the holder to receive shares with voting rights but shall not include preference shares;

(l) “sick industrial company” shall have the same meaning assigned to it in clause (o) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), or any statutory re-enactment thereof;

(m) “State level financial institution” means a State Financial Corporation established under section 3 of the State Financial Institutions Act, 1951, and includes a development corporation established as a company by a State Government with the object of development of industries or agricultural activities in the State;

(n) “stock exchange” means a stock exchange which has been granted recognition under section 4 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(o) “target company” means a listed company whose shares or voting rights or control is directly or indirectly acquired or is being acquired;

(p) “working days” shall mean the working days of the Board.]

(2) All other expressions unless defined herein shall have the same meaning as have been assigned to them under the Act or the Securities Contracts (Regulation) Act, 1956, or the Companies Act, 1956, or any statutory modification or re-enactment thereto, as the case may be.

Applicability of the regulation.

3. (1) Nothing contained in regulations 10, 11 and 12 of these regulations shall apply to :

1. allotment in pursuance of an application made to a public issue :
   Provided that if such an allotment is made pursuant to a firm allotment in the public issues, such allotment shall be exempt only if full disclosures are made in the prospectus about the identity of the acquirer who has agreed to acquire the shares, the purpose of acquisition, consequential changes in voting rights, shareholding pattern of the company and in the board of directors of the company, if any, and whether such allotment would result in change in control over the company;
2. allotment pursuant to an application made by the shareholder for rights issue,
   (i) to the extent of his entitlement; and
   (ii) up to the percentage specified in regulation 11:
   Provided that the limit mentioned in sub-clause (ii) will not apply to the acquisition by any person, presently in control of the company and who has in the rights letter of offer made disclosures that they intend to acquire additional shares beyond their entitlement, if the issue is undersubscribed:
   Provided further that this exemption shall not be available in case the acquisition of securities results in the change of control of management;
3. ***
4. allotment to the underwriters pursuant to any underwriting agreement;
5. inter se transfer of shares amongst—
   1. group coming within the definition of group as defined in the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) where persons constituting such group have been shown as group in the last published Annual Report of the target company;]
   2. relatives within the meaning of section 6 of the Companies Act, 1956 (1 of 1956);
   3. (a)Qualifying Indian promoters and foreign collaborators who are shareholders;
      (b)Qualifying promoters :
      Provided that the transferor(s) as well as the transferee(s) have been holding shares in the target company for a period of at least three years prior to the proposed acquisition.]
      [Explanation : For the purpose of the exemption under sub-clause (iii) the term qualifying promoter” means—
      
      1. any person who is directly or indirectly in control of the company; or
      2. any person named as promoter in any document for offer of securities to the public or existing shareholders or in the shareholding pattern disclosed by the company under the provisions of the Listing Agreement, whichever is later; and includes,
      1. where the qualifying promoter is an individual,—
         1. a relative of the qualifying promoter within the meaning of section 6 of the Companies Act, 1956 (1 of 1956);
         2. any firm or company, directly or indirectly, controlled by the qualifying promoter or a relative of the qualifying promoter or a firm or Hindu undivided family in which the qualifying promoter or his relative is a partner or a coparcener or a combination thereof :
            Provided that, in case of a partnership firm, the share of the qualifying promoter or his relative, as the case may be, in such firm should not be less than fifty per cent (50%);
      2. where the qualifying promoter is a body corporate,—
         1. a subsidiary or holding company of that body; or
         2. any firm or company, directly or indirectly, controlled by the qualifying promoter of that body corporate or by his relative or a firm or Hindu undivided family in which the qualifying promoter or his relative is a partner or coparcener or a combination thereof:
            Provided that, in case of a partnership firm, the share of such qualifying promoter or his relative, as the case may be, in such firm should not be less than fifty per cent (50%),
   4. the acquirer and persons acting in concert with him, where such transfer of shares takes place three years after the date of closure of the public offer made by them under these regulations.]

[Explanation.—(1) The exemption under sub-clauses (iii) and (iv) shall not be available if inter se transfer of shares is at a price exceeding 25% of the price as determined in terms of sub-regulations (4) and (5) of regulation 20.

(2) The benefit of availing exemption under this clause, from applicability of the regulations for increasing shareholding or inter se transfer of shareholding shall be subject to such transferor(s) and transferee(s) having complied with regulation 6, regulation 7 and regulation 8;]

(f) acquisition of shares in the ordinary course of business by,—

1. a registered stock-broker of a stock exchange on behalf of clients;
2. a registered market maker of a stock exchange in respect of shares for which he is the market maker, during the course of market making;
3. by Public Financial Institutions on their own account;
4. by banks and public financial institutions as pledgees;
5. the International Finance Corporation, Asian Development Bank, International Bank for Reconstruction and Development, Commonwealth Development Corporation and such other international financial institutions;
6. a merchant banker or a promoter of the target company pursuant to a scheme of safety net under the provisions of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 in excess of limit specified in sub-regulation (1) of regulation 11;]
7. a merchant banker or nominated investor in the process of market making and subscription by the nominated investor to the unsubscribed portion of issue, in terms of Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009:
   

   Provided that benefit of exception provided in sub-clause (vii) shall not be available if the acquisition of securities in the process of market making or subscription to the unsubscribed portion of issue results in change in control over the target company, directly or indirectly.

(ff) acquisition of shares by a person in exchange of shares received under a public offer made under these regulations;]

(g) acquisition of shares by way of transmission on succession or inheritance;

(h) acquisition of shares by Government companies within the meaning of section 617 of the Companies Act, 1956 (1 of 1956), and statutory corporations :
[Provided that this exemption shall not be applicable if a Government company acquires shares or voting rights or control of a listed Public Sector Undertaking through the competitive bidding process of the Central Government 1[or the State Government as the case may be,] for the purpose of disinvestment;]

(i) transfer of shares from State level financial institutions, including their subsidiaries, to co-promoter(s) of the company 1[or their successors or assignee(s) or an acquirer who has substituted an erstwhile promoter] pursuant to an agreement between such financial institution and such co-promoter(s);

(ia) transfer of shares from venture capital funds or foreign venture capital investors registered with the Board to promoters of a venture capital undertaking or venture capital undertaking pursuant to an agreement between such venture capital fund or foreign venture capital investors with such promoters or venture capital undertaking;]

(j) pursuant to a scheme :

1. framed under section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986);
2. of arrangement or reconstruction including amalgamation or merger or demerger under any law or regulation, Indian or foreign;

(ja) change in control by takeover of management of the borrower target company by the secured creditor or by restoration of management to the said target company by the said secured creditor in terms of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);]

(k) acquisition of shares in companies whose shares are not listed on any stock exchange.
Explanation.—The exemption under clause (k) above shall not be applicable if by virtue of acquisition or change of control of any unlisted company, whether in India or abroad, the acquirer acquires shares or voting rights or control over a listed company;
(ka) acquisition of shares in terms of guidelines or regulations regarding delisting of securities specified or framed by the Board;]

(l) [***] other cases as may be exempted from the applicability of Chapter III by the Board under regulation 4.

1(A). For the removal of doubt, it is clarified that nothing contained in sub-regulation (1) shall affect the applicability of the listing requirements.

3. In respect of acquisitions under clauses [***] (e), (h) and (i) of sub-regulation (1), the stock exchanges where the shares of the company are listed shall, for information of the public, be notified of the details of the proposed transactions at least 4 working days in advance of the date of the proposed acquisition, in case of acquisition exceeding 5 per cent of the voting share capital of the company.

4. In respect of acquisitions under clauses (a), (b), [***] (e) and (i) of sub-regulation (1), the acquirer shall, within 21 days of the date of acquisition, submit a report along with supporting documents to the Board giving all details in respect of acquisitions which (taken together with shares or voting rights, if any, held by him or by persons acting in concert with him) would entitle such person to exercise 15 per cent or more of the voting rights in a company.
Explanation.—For the purposes of sub-regulations (3) and (4), the relevant date in case of securities which are convertible into shares shall be the date of conversion of such securities.]

5. The acquirer shall, along with the report referred to under sub-regulation (4), pay a fee of Rs twenty five thousand rupees to the Board, either by a banker’s cheque or demand draft in favour of the Securities and Exchange Board of India, payable at Mumbai.

Takeover Panel.

4. (1) The Board shall for the purposes of this regulation constitute a panel of majority of independent persons from within the categories mentioned in sub-section (5) of section 4 of the Act.

(2) For seeking exemption under clause (1) of sub-regulation (1) of regulation 3, the acquirer shall file an application supported by a duly sworn affidavit with the Board, giving details of the proposed acquisition and the grounds on which the exemption has been sought.

(3) The acquirer shall, along with the application referred to under sub-regulation (2), pay a fee of fifty thousands rupees to the Board, either by a banker’s cheque or demand draft in favour of the Securities and Exchange Board of India, payable at Mumbai.

(4) The Board shall within 5 days of the receipt of an application under sub-regulation (2) forward the application to the panel.

(5) The panel shall within 15 days from the date of receipt of application make a recommendation on the application to the Board.

(6) The Board shall after affording reasonable opportunity to the concerned parties and after considering all the relevant facts including the recommendations, if any, pass a reasoned order on the application under sub-regulation (2) within 30 days thereof.

(7) The order of the Board under sub-regulation (6) shall be published by the Board.

Power of the Board.

5. In order to remove any difficulties in the interpretation or application of the provisions of these regulations, the Board shall have the power to issue directions through guidance notes or circulars:

Provided that where any direction is issued by the Board in a specific case relating to interpretation or application of any provision of these regulations, it shall be done only after affording a reasonable opportunity to the concerned parties and after recording reasons for the direction.

Index
	CHAPTER I: Preliminary
	CHAPTER II: Disclosures of shareholding and control in a listed company
	CHAPTER III: Substantial acquisition of shares or voting rights in and Acquisition of control over a listed company
	CHAPTER IV: Bail Out Takeovers
	CHAPTER V: Investigation and action by the board