Foreign acquirers and the Takeover Code

The acquisition of an Indian listed company by a foreign company is regulated by the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (Takeover Code).

Public announcement

Under regulation 10 of the Takeover Code, a foreign company cannot acquire 15% or more of the voting rights of an India listed company without making a public announcement. If the acquirer already owns more than 15%, (but less than 55%) of the voting rights of the target, regulation 11 of the code says that it cannot acquire more than 5% of the voting rights of the target in any financial year without making a public announcement.

The public announcement must comply with the requirements of regulation 16 of the code. It should include the percentage of shares to be acquired from the public, the minimum offer price, the mode of payment of consideration, the identity of the acquirer and its promoters, and the existing shareholding of the acquirer. The public announcement should also include the salient features of the agreement entered into by the acquirer for the acquisition of control, the object and purpose of the acquisition and the highest and average price paid by the acquirer. In addition it should state the names of persons acting in concert with the acquirer for the purchase of shares in the target during the 12-month period prior to the date of the public announcement.

Uday Walia is a partner at S&R Associates, a New Delhi-based law firm.