SEBI (Substantial Acquisition of Shares and Takeovers) Regulations
The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011 (SAST Regulations) govern the acquisition of shares and voting rights in listed companies beyond specified thresholds, mandating public announcements, open offers to shareholders, and disclosures to ensure transparency and minority shareholder protection.
The SAST Regulations 2011 replaced the earlier Takeover Code of 1997 and were substantially revised on the recommendations of the Takeover Regulations Advisory Committee chaired by C. Achuthan. The new framework aligned Indian takeover law more closely with international standards while retaining features suited to the Indian market structure.
The initial trigger for a mandatory open offer arises when an acquirer (together with parties acting in concert) acquires 25% or more of shares or voting rights in a target company. This is the creeping acquisition threshold — once an acquirer holds 25%, any further acquisition of more than 5% in any financial year also triggers an open offer obligation.
The open offer must be made for at least 26% of the total shares of the target company at a price determined under Regulation 8 (the higher of specified benchmark prices). The 26% minimum offer size ensures that the acquirer, upon completion of the open offer, can potentially hold up to 51% (25% existing + 26% offered), enabling a change of control while still leaving minority shareholders a fair exit opportunity.
Exemptions from the open offer obligation are available for acquisitions pursuant to a rights issue, bonus issue, buy-back, inter-se transfers among promoters, and acquisitions by financial institutions in enforcement of pledges. These exemptions recognise that not all acquisitions constitute a change in control.
Disclosure obligations are another key component. Under Regulation 29, any acquirer holding 5% or more must disclose their holding and any subsequent change of 2% or more to stock exchanges within two trading days. Promoters holding above 25% must make continuous disclosures.
The SAST Regulations also introduced the concept of a voluntary open offer, allowing acquirers holding between 25% and 75% to make an offer to increase their stake without a specific trigger, provided they offer at least 10% of total shares.