Delisting before open offer: SEBI’s missed opportunity?

The Securities and Exchange Board of India (SEBI) has recently notified crucial amendments to the SEBI (Delisting of Equity Shares) Regulations, 2009 (Delisting Regulations), and the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Regulations). These amendments were followed up with a circular permitting on-market settlement of buyback, delisting and open offers.

The above changes are aimed at easing the process of acquisition of listed companies by permitting an acquirer to make a delisting offer prior to completion of the mandatory open offer (in situations where the acquisition triggers the requirement to make an open offer).

Backdrop

By way of background, in terms of the Takeover Regulations, if an acquirer’s shareholding in the target company (taken together with the shareholding of persons acting in concert with the acquirer) exceeds the maximum permissible non-public shareholding (i.e. 75%) pursuant to an open offer, the acquirer is required to bring down its shareholding below the prescribed level within one year, and is prohibited from making a delisting offer during the one-year period.

Ganesh Prasad is a partner and Sanjay Khan is an associate at Khaitan & Co. The views of the authors are personal, and should not be considered as those of the firm.