Practical Issues & Case Studies

Transcription

1 New Takeover Regulations Practical Issues & Case Studies Jayesh Thakur 31 Agenda / Scope of Presentation Brief Background Broad Overview of Provisions Issues, Case Studies Slide 2 CA. Jayesh Thakur, 1

2 Objective of New Takeover Regulations System of Disclosure of Information Greater transparency in acquisition of shares and takeovers of companies To alert existing management about the possibilities of a change in management Public announcement to acquire at least 26% shares Provide exit option to the existing shareholders, if they do not have any confidence in the likely new management Slide 3 Broad Overview New Takeover Regulations 2011 Core Regulations Mandatory Disclosure Regulations Regulation 3(1) Regulation 3(2) Regulation 4 Acquisition of 25% or more of the shares or voting rights of any company Consolidation of holding Creeping Acquisition of 5% per FY to acquirers holding 25% or more Acquisition of control over company direct and indirect Regulation 29 Regulation 30 Initial Disclosure Continual Disclosure Additional 5% Slide 4 CA. Jayesh Thakur, 2

3 Trigger Events Regulation 3(1) - Shareholding of Acquirer (either by him or together with PAC) who acquires shares/voting rights 25% Open Offer Minimum 26% Regulation 3(2) - Consolidation of holdings -Shareholding of Acquirer (together with PAC) is >25% but <75% -Total shareholding of the acquirer post open offer should not exceed maximum permissible non-public shareholding (75%) >5% Open offer Up to Maximum 75% Slide 5 Trigger Events Regulation 4 Acquisition of Control Control over target company triggers New Takeover Code irrespective of, - Shares acquired - Shares held - Voting rights held Control can be - Direct - Indirect Slide 6 CA. Jayesh Thakur, 3

4 Disclosure Initial Disclosure (Regulation 29 and 31) - Regulation Trigger Disclosure by/to Time period 29(1) 5% / more of shares / voting rights 29(2) Acquisition / disposal 2% / more if 5% / more already held 31(1) / (2) Creation or invocation or release of encumbrance Acquirer / Target company and Stock Exchange Acquirer / Target company and Stock Exchange / Target company and Stock Exchange 2 working days of: share allotment acquisition 2 working days 7 working days Slide 7 Disclosure Continual Disclosure (Regulation 30) - Regulation Disclosure by Disclosure to Time period 30(1) 25% / more held Target company and Stock Exchange 30(2) and PACs Target company and Stock Exchange 7 working days from end of FY 7 working days from end of FY Slide 8 CA. Jayesh Thakur, 4

5 Open Offer Trigger 0% 75% 25% 100% Creeping acquisition 5% each FY Offer size : Minimum 26% Slide 9 Acquisition by individual v. PAC Individual s/pacs Pre Creeping Acquisition Post Outcome A 23% 3% 26%? B 7% 2% 9%? Total 30% 5% 35%? Slide 10 CA. Jayesh Thakur, 5

6 Case study 1 Holds 32% - 1 April 2012 Acquires 5% - April 2012 Sells 3% - June 2012 B listed Co. Acquires 2% - August 2012 Acquires 1% - November 2012 Trigger? Slide 11 Case Study 2 Holds 27% - 1 April 2012 Sells 3% - June 2012 Acquires 5% - August 2012 B listed Co. -Trigger? -Creeping acquisition exemption? Slide 12 CA. Jayesh Thakur, 6

7 Case study 3 Holds 26% - 1 April 2012 Acquires 3% - April 2012 Sells 5% - June 2012 Acquires 3% - August 2012 B listed Co. Breach of creeping limit? Slide 13 Case Study 4 Holds 26% - 1 April 2012 Acquires 3% - April 2012 Sells 3% - June 2012 Acquires 4% - August 2012 B listed Co. Creeping acquisition limit? Slide 14 CA. Jayesh Thakur, 7

8 Inter se transfer qualifying persons Holding Company Subsidiaries 50+% S1 S2 S3 A, B, C 50+% Company B S4 S5 Slide 15 Case Study 5 Inter se transfer Facts 60% Hold Co. A has subsidiary E E has subsidiary F A is subsidiary of Hold Co. Hold Co. has subsidiary B B has subsidiary C 100% 30% A D 100% E B 60% F Trigger? Slide 16 CA. Jayesh Thakur, 8

9 Case Study 6 Inter se transfer - relative A 9% Daughter of A 9% Married February 2012 Husband 9% His Brother January % - 9% (Since inception) 24% + 9% = 33% Inter se transfer exemption available? Slide 17 Case Study 7 Inter se transfer - relative A 9% Daughter of A 9% Married February 2012 Husband 9% His Brother January % - 9% + 4% = 26% (Since inception) 24% + 9% + 5% = 33% Inter se transfer exemption? Slide 18 CA. Jayesh Thakur, 9

10 Case Study 8 Inter se transfer - relative Son s widow 29% Daughter 29% Father-inlaw 29% Inter se transfer exemption? Slide 19 Case Study 9 Original s 5% ( April 2012) A B C D 15% / 10% 10% 5% / 10% 10% 40% Listed in January 2010 Inter se transfer exemption? Slide 20 CA. Jayesh Thakur, 10

11 Case Study 10 30% Pvt. Co. A 50% 6 % Trigger? Slide 21 Case Study 11 PAC 1 PAC 2 PAC 1 PAC 2 5% 5% 50% 50% Listing Co. Private Company (controlled by s) 10% Listing Co. Inter se transfer? Slide 22 CA. Jayesh Thakur, 11

12 Case Study 12 PAC 1 PAC 2 PAC 1 PAC 2 5% 5% 90% 10% Listing Co. Private Company (controlled by s) 10% Listing Co. Inter se transfer? Slide 23 Case Study % Private Co. 50% Merger/Demerger into Increased to 60% post merger Exemption? Slide 24 CA. Jayesh Thakur, 12

13 Case Study 14 A P Ltd. 100% X Ltd. 100% Y Ltd. 50% Merges into Z Z Ltd. A% B% AP PQR Exemption? Slide 25 Case Study 15 Exemption post-merger Merger A B C C Original of August % 0.50% Foreign India 45.50% C acquires 4% from open market June 2012 A and B merged into C C s stake in increased to 52.50% Exemption? Slide 26 CA. Jayesh Thakur, 13

14 Consolidation / Creeping Case Study 16 s 49% of equity shares Issue of warrants 7% Target Company Trigger? Slide 27 Consolidation / Creeping Case Study 17 effected the following two transactions: - Agreement with its investors for issue of FCDs - Issued warrants to promoters Warrants converted simultaneously with FCDs Warrants s 64.02% 62.90% FCDs Investors Trigger? Slide 28 CA. Jayesh Thakur, 14

15 Consolidation / Creeping Case Study 18 s hold 49.88% in ListCo Pursuant to a preferential allotment holding increase % Same year 0.59% of the equity capital of transferred between the s but not through any exempt route 41.88% % 0.59% Transfer not through exempt route Preferential allotment 2 8% Creping limit? Slide 29 Consolidation / Creeping Case Study 19 s hold 24% of the equity shares of the Target Company Buy-back scheme Target Company completed holding increases to 28% post buyback not participating s 24% 28% Other Shareholders Buy-back Target Company Trigger? Slide 30 CA. Jayesh Thakur, 15

16 CASE STUDY 20 s hold 26% of the equity shares of the Target Company The promoters propose buy-back of shares of the Target Company from its shareholders As a result, promoter holding increases to 53% of the equity capital of the Target Company s 26% 33% Other Shareholders Buy-back Target Company Open offer? Slide 31 Consolidation / Creeping Case Study 21 30% Strategic Investor Co. 30% Heavy Losses Permissible? Slide 32 CA. Jayesh Thakur, 16

17 Case Study 22 Director holding 30% of the equity shares of the Target Company Director proposed to be appointed Chairman in Director 30% Other Shareholders 70% Change in control? Slide 33 Thank You 2012 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, refers to PricewaterhouseCoopers Private Limited (a limited liability company in India), which is a member firm of PricewaterhouseCoopers International Limited (IL), each member firm of which is a separate legal entity. CA. Jayesh Thakur, 17