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Sunday, July 08, 2001













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Defining substantial quantity

THE SEBI (substantial acquisition of shares and takeovers) regulations, 1997 have defined substantial quantity of shares or voting rights separately for two different purposes.

For the purpose of disclosures to be made by acquirer(s):

Five per cent or more shares: A person who, along with PAC, if any (referred to as `acquirer' hereinafter) acquires shares or voting rights (which when taken together with his existing holding) would entitle him to more than 5 per cent shares or voting rights of target company, is required to disclose the aggregate of his shareholding to the target company within 4 working days of acquisition or within 4 working days of receipt of intimation of allotment of shares.

More than 15 per cent shares: An acquirer who holds more than 15 per cent shares or voting rights of target company shall, within 21 days from the financial year ending March 31 as well as the record date fixed for the purpose of dividend declaration, disclose his aggregate shareholding to the target company.

The target company is, in turn, required to inform all stock exchanges where the shares of target company are listed, within 30 days from the financial year ending March 31 as well as the record date fixed for the dividend declaration.

Open offer limit: An acquirer who intends to acquire shares which, along with his existing shareholding, would entitle him to more than 15 per cent voting rights, can acquire such additional shares only after making a public announcement (PA) to acquire at least an additional 20 per cent of the voting capital of the target company from the shareholders through an open offer.

Creeping limit of 5 per cent: An acquirer who has 15 per cent or more but less than 75 per cent of shares or voting rights of a target company can consolidate his holding up to 5 per cent of the voting rights in any period of 12 months. However, any additional acquisition over and above 5 per cent can be made only after making a public announcement to acquire at least 20 per cent shares of target company from the shareholders through an open offer.

Consolidation of holding: An acquirer who has 75 per cent shares or voting rights of a target company can acquire further shares or voting rights only after making a public announcement specifying the number of shares to be acquired through open offer from the shareholders of a target company.

What is a public announcement?

A public announcement (PA) is an announcement given in the newspapers by acquirer primarily disclosing his intention to acquire a minimum of 20 per cent shares of the target company from existing shareholders by means of an open offer.

The other disclosures in this announcement include the offer price, number of shares to be acquired from the public, identity of acquirer, purpose of acquisition, future plans of acquirer, if any, regarding the target company, change in control over the target company, if any, the procedure to be followed by acquirer in accepting the shares tendered by the shareholders and the period within which all the formalities pertaining to the offer would be completed.

The PA is made to ensure that the shareholders of the target company are aware of the exit opportunity available to them in case of a takeover/substantial acquisition of shares of the target company. They may, on the basis of disclosures contained therein and in the letter of offer, either continue with the target company or decide to exit from it.

(SEBI Guide)


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