NATIONAL LAW UNIVERSITY ODISHA

CUTTACK 753015
B.B.A.LL.B.(HONS.)
SEMSETER V, 2012 BATCH

COPRORATE LAW II : PROJECT

TAKEOVER : PUBLIC ANNOUNCEMENT, TIME LIMIT AND WITHDRAWAL
OF OFFER.

PREPARED UNDER THE GUIDANCE OF:

M L SHANKAR KAARMUKILAN
ASSISTANT PROFESSOR OF LAW
SCHOOL OF LAW
NATIONAL LAW UNIVERSITY ODISHA, CUTTACK

SUBMITTED BY :
AVILASH KUMBHAR
2012/ B.B.A.LL.B.(HONS.)/015

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Corporate Law II Project, 21102014

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Contents
INTRODUCTION: ....................................................................................................................................... 2
STATEMENT OF PROBLEMS:.................................................................................................................. 3
SCOPE, OBJECTIVE & SIGNIFICANCE: ................................................................................................. 3
RESEARCH QUESTION:- .......................................................................................................................... 3
PUBLIC ANNOUNCEMENT...................................................................................................................... 4
TIMING FOR MAKING A PUBLIC ANNOUNCEMENT ........................................................................ 5
PREFERENTIAL ALLOTMENT OF SHARES:..................................................................................... 5
ANALYSIS: .......................................................................................................................................... 5
MORE THAN ONE MODE OF ACQUISITION OF SHARES: ............................................................. 6
ANALYSIS: .......................................................................................................................................... 6
PHASES OF ANNOUNCEMNT: ................................................................................................................ 7
PUBLIC ANNOUNCEMENT:- ............................................................................................................... 7
DETAILED PUBLIC STATEMENT ..................................................................................................... 10
COMPETING OFFER ................................................................................................................................ 12
TIMING OF COMPETING OFFER: ..................................................................................................... 13
ANALYSIS: ............................................................................................................................................ 13
WITHDRAWAL OF OFFER: .................................................................................................................... 13
CONCLUSION: .......................................................................................................................................... 15
BIBLIOGRAPHY: ...................................................................................................................................... 16

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INTRODUCTION:
In the few years since its origin in 1989, the Securities Exchange Board of India (SEBI) has
come in for more fire than credit. Its original order was to ensure the protection of interest of
investors securities. For this reason, various rules and regulations have been published. In
attempting to reconcile the demand of economic development with investors protection, the
takeover code misses the mark in specific zones. Certain conceivable outcomes of going around
the provisions of the code while not explicitly violating them exist. Particularly, there are some
hazy areas regarding the mandatory open offer necessity. Covert acquisitions through indirect
methods are still conceivable in various ways. This paper will concentrate on method set down in
Substantial Acquisition of Share and Takeover Regulation 2011 which orders public
announcement of takeover of Target Company.

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STATEMENT OF PROBLEMS:
It is well accepted that no legislator can plug every loophole in the law. In case of public
announcement, its significance should be noted. The right to withdraw offer is another key area
to put emphasis on. In the Takeover code the term such circumstances need wide interpretation
in order to ascertain what could be that such circumstances in the absence of which it will
serve as stool for strong acquirer to use such mechanism in a unfair manner.

SCOPE, OBJECTIVE & SIGNIFICANCE:

In this paper the author has taken the task to review some of the legal aspects and procedure laid
down in the Takeover code in the areas of public announcement and timing & withdrawal of
offer. In will look into some of the landmark judgments of SAT in order to determine the various
interpretations given in the case.

RESEARCH QUESTION: What is significance of Public announcement of takeover?

What is the time limit for various offer of takeover?

Legality of withdrawal of offer made by public announcement

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PUBLIC ANNOUNCEMENT
The takeover offer procedure might likewise begin in different ways. For instance, a hostile offer
can start because of the production of 'concrete data'. The provision of concrete data is regardless
considered to have happened if the acquirer publishes the name of the target company in
consolidation with a proposed offer cost or a preparatory timetable for the behavior of the
proposed offer. This concrete data does not need to be published by the acquirer as a press
discharge. In any case, a target company may keep an open takeover offer from being affirmed
under the standards identifying with open takeover offers.
This requires a public statement from the target coming stating that the acquirer and the target
company are in consultation concerning the intended public takeover offer. Such statement must
be published immediately after the acquirer statement containing concrete information has been
published. The acquirer statement then no longer qualifies as the formal announcement of a
public takeover bid under the rules relating to public takeover bids. This means that the
regulatory periods set out in the rules relating to public takeover bids will not yet commence. A
third possibility is that the bid process starts with the announcement of a mandatory bid.
The above does not affect the obligation of both the acquirer and the target company to publish
price-sensitive information without delay. For instance, this obligation applies in the event that
information on preparations for a public takeover bid has been leaked.

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TIMING FOR MAKING A PUBLIC ANNOUNCEMENT

Regulation 13 of the SAST 2011 provides for the timing of making a public announcement for
different modes of acquisition of shares of a target company. SEBI has made certain changes
while amending Takeover code 2011 in respect of timing of making a public announcement in
case of:

preferential allotment of shares; and

Acquisition of shares of a target company by more than one mode of acquisition of

shares.

PREFERENTIAL ALLOTMENT OF SHARES:

In case acquisition of shares is under preferential issue which triggers an open offer requirement
an acquirer is required to make a public announcement on the date on which a special resolution
is passed by the target company under Section 62(1A) of the Companies Act, 1956 for the
acquisition of shares or voting rights in or control over the target company.1
Amendment has been made to Regulation 13(2) pursuant to which an acquirer is required to
make a public announcement on the date when the board of directors of the target company
authorizes such preferential allotment of shares as opposed to the earlier case wherein the
announcement was to be made on date on which a special resolution is passed.
ANALYSIS:
The rationale for this amendment is that the day Board approves the preferential allotment, the
market comes to know about the same and the share price becomes volatile on account of the
knowledge about the preferential allotment in spite of the fact that the shareholders have not
approved the preferential allotment. To plug this loophole resulting in volatility in share price,
SEBI has changed the date for making a public announcement from date of passing of
shareholders resolution to date of passing of Board resolution

Regulation 13(2) of SAST 2011

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MORE THAN ONE MODE OF ACQUISITION OF SHARES:

Currently, Takeover Codes provides for the timing of making a public announcement for the
different modes of acquisition of shares. However, Takeover Code is silent about timing of
making a public announcement in case an acquirer intends to acquire shares of a target company
by way of more than one mode of acquisition of shares as provided under Regulation 13 of the
Takeover Code.
In order to address the aforesaid issue, a new Regulation 13(2A) has been inserted2 . With this
amendment, in case of more than one mode of acquisition of shares either by way of an
agreement and the one or more modes of acquisition of shares as provided under Regulation
13(2) of the Takeover Code or only through one or more modes of acquisition as provided under
Regulation 13(2) of the Takeover Code, an acquirer is required to make a public announcement
on the date of first such acquisition giving the details of the proposed subsequent acquisition.
ANALYSIS:
The above change is welcome since there was always an ambiguity on the timing for making a
public announcement in a situation where the acquirer was proposing to acquire the shares
through a combination of purchase from an existing shareholder and purchase through
preferential allotment since the timing for making a public announcement was different in case
of secondary purchase and preferential allotment, This change will bring the much needed clarity
with respect to such cases where more than one mode of acquisition is used by the acquirer to
purchase the shares of the target company.

(2A) Notwithstanding anything contained in sub-regulation (2), a public announcement referred to in regulation 3
and regulation 4 for a proposed acquisition of shares or voting rights in or control over the target company
through a combination of,- (i) an agreement and any one or more modes of acquisition referred to in subregulation (2) of regulation 13, or (ii) any one or more modes of acquisition referred in clause (a) to (i) of subregulation (2) of regulation 13, shall be made on the date of first such acquisition, provided the acquirer discloses
in the public announcement the details of the proposed subsequent acquisitio

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PHASES OF ANNOUNCEMNT:
The regulations have prescribed the separate timeline for Public Announcement as well as for
Detailed Public Statement.
PUBLIC ANNOUNCEMENT:The Public Announcement shall be sent to all the stock exchanges on which the shares of the
target company are listed. Further, a copy of the same shall also be sent to the Board and to the
target company at its registered office within one working day of the date of the public
announcement. The time within which the Public Announcement is required to be made to the
Stock Exchanges under different circumstances are tabulated below:

Applicable Regulation

Particular

Time of making Public

Announcement

to

Stock

Exchange
13(1)

Agreement

to

Acquire On the same day of entering

Shares or Voting Rights or into agreement to acquire

Control Over The Target share,
Company

control

voting
over

rights
the

or

Target

Company.
13(2)(a)

Market Purchase of shares

Prior to the placement of

purchase order with the
stock broker.

13(2)(b)

Acquisition

pursuant

to On the same day when the

conversion of Convertible option

to

convert

Securities without a fixed securities into

such

shares

is

date of conversion or upon exercised.

conversion of depository
receipts for the underlying
shares

13(2)(c)

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Acquiring shares or voting On the second working day

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rights or control pursuant to preceding

the

scheduled

conversion of Convertible date of conversion of such

Securities with a fixed date securities into shares.
of conversion

13(2)(d)

In case of disinvestment

On the date of execution of

agreement for acquisition of
shares or voting rights or
control

over

the

Target

Company.

13(2)(e)

In

case

of

Indirect Within four working days of

Acquisition

where

parameters

mentioned

the the

following

dates,

in whichever is earlier:

Regulation 5(2) are not meta.

When
acquisition

the

primary

is

contracted;

And
b.

Date on which the

intention or decision
make

the

to

primary

acquisition is announced in
the public domain.
13(2)(f)

In

case

of

Indirect On the same day of the

Acquisition

where

parameters

mentioned

Regulation 5(2) are met

the following dates, whichever

in is earlier:
a.

a.

When

acquisition

the
is

primary

contracted;

And
b.

Date on which the

intention or decision
make

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the

to

primary

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acquisition is announced in
the public domain.
13(2)(g)

Acquisition

of

shares, On the date when

the

voting rights or control over Special Resolution is passed

the

Target

pursuant

Company for

to

of

shares

Preferential under Section 81(1A) of

Issue

13(2)(h)

allotment

Companies Act 1956.

Increase in voting rights Not later than 90th day from

pursuant to a buy-back not the date of increase in
qualifying for exemption voting rights.
under Regulation 10

13(2)(i)

Acquisition

of

shares, Not later than two working

voting rights or control over days from the date of receipt

the Target Company where of such intimation.
the

such

beyond

acquisition

the

control

is
of

acquirer

13(3)

Voluntary Offer

On the same day when the

Acquirer decides to make
Voluntary Offer

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DETAILED PUBLIC STATEMENT

Timing of Detailed Public Statement
In terms of Regulation 13(4) of SEBI (SAST) Regulations, 2011, a Detailed Public Statement
shall be published by the acquirer through the Manager to the Open Offer within maximum 5
working days from the date of Public Announcement.
However in case of Indirect Acquisition where none of condition specified in Regulation 5(2) are
satisfied, the Detailed Public Statement shall be published not later than five working days of the
completion of the primary acquisition of shares or voting rights in or control over the company
or entity holding shares or voting rights in, or control over the target company. After the
publication of Detailed Public Statement, the acquirer is further required to file with the Board a
Draft of Letter of Offer within five working days from the date of Detailed Public Statement
containing such information as may be specified along with non-refundable fees as prescribed by
way of bankers cheque or demand draft payable in Mumbai in favor of the Board.

Regulation

Particulars

Time

To whom

14(1)

Public Announcement

On the same day

All

the

stock

exchanges on which
the shares of the target
company are listed.
The stock exchanges
shall

forthwith

disseminate
information

such
to

the

to

the

public.
14(2)

Public Announcement

One working day of Board

and

the date of the public target company at its

announcement

14(3)

Detailed

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registered office

Public 5 working days from Publication

in

the

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Statement

the date of Public following newspaper:

Announcement.
(a) One Hindi national
language daily with
wide circulation
(b) One English national
language daily with
wide circulation
(c) One regional national
language daily with
wide

circulation

language at a place
where

registered

office of the company

is situated.
(d) One

regional

language daily with

wide circulation at the
place of the stock
exchange where the
maximum volume of
trading in the shares
of the target company
is recorded during the
sixty

trading

days

preceding the date of

the

public

announcement.

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COMPETING OFFER
Any person other than the original acquirer who has made the subsisting open offer can make the
competing offer. Interestingly, the Takeover Code permits all persons other than the original
acquirer to make a competing offer and does not restrict even the PACs of the acquirer from
making a competing offer. This omission could be an oversight by the regulators but even if the
PAC of an acquirer makes a competing offer, the offers of the acquirer and the PAC shall be
consolidated as a single offer for the purposes of the Takeover Code.
The Takeover Code does not impose any restriction on the number of competing offers provided
all the offers are made within the timeframe prescribed.
Competing offer can be conditional as to the minimum level of acceptances only if the original
open offer conditional as to the minimum level of acceptances.
Though a competing offer under the Takeover Code is made by the acquirer voluntarily, a
competing offer shall not constitute voluntary offer under the Takeover Code. Therefore, the
conditions applicable to a voluntary offer under the Takeover Code shall not be applicable to a
competing offer.
The schedule of activities and the tendering period for all competing offers shall be identical and
the last date for tendering shares in acceptance of the every competing offer shall stand revised
to the last date for tendering shares in acceptance of the competing offer last made.

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TIMING OF COMPETING OFFER:

Competing offer has to be made within fifteen working days from the public announcement of
the original open offer.
No person can make a public announcement of an open offer for acquiring shares, or enter into
any transaction that would trigger the Takeover Code requiring a mandatory open offer, after
fifteen working days from the date of public announcement of an open offer under the Takeover
Code (voluntary or mandatory) till the expiry of the offer period for such open offer.
ANALYSIS:
This provision is meant to ensure that there are no overlapping or simultaneous open offers in a
target company except as competing offers which are made within fifteen days of public
announcement of first open offer. However, the question what if exists convertible securities are
converted into equity shares pursuant to Regulation 26(2)(c)(i) of the Takeover Code during that
period resulting in trigger of an open offer.

WITHDRAWAL OF OFFER:
Case of Pranidhi Holding Pvt. Ltd
A voluntary offer once made under the takeover code can only be withdrawn under exceptional
circumstances and a mere delay in the public offer coupled with fall in market price or
devaluation of Earning Per Share (EPS) cannot be reasons to permit the withdrawal of a public
offer.3

This case notices the nature of public and mandatory offer in relation to public

announcement. The court held that public offer will be governed by the same provision as a
mandatory and not by contract law simply being an offer to public. SAST Regulations is a
special law and all public offers such as the one in this case are to be governed by the SAST and
not the Indian Contact Act. If the argument of the acquirer were to be accepted that the public
offer has to be governed by the provisions of the Indian Contract Act, 1872 and since the offer
has not been accepted by the shareholders of the target company which leads to no conclusion of
the contract due to no acceptance and it can be withdrawn then then it would lead to a peculiar
situation wherein the acquirers would withdraw the public offer even when only some of the
shareholders would have tendered their shares and others would have not. Hence once public
3

Pramod Jain V SEBI

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announcement is made; there is no difference between these two offers. It is in this regard that an
acquirer should only make an offer when he can implement it4. The term such circumstances in
23(1)(d) of the Takeover code has been given wide interpretation in this case the court held that,
the term such circumstances5 should be ejusdem generis in that SEBI has the power to permit
withdrawal of open offer when the circumstances demands for it i.e. there has to be an element
of impossibility in implementing the offer.6
An acquirer who wishes to invest a substantial sum of money and acquire control of the target
company ought to have exercised proper due diligence before making the public announcement.7
This case demonstrates albeit indirectly one of the issues relating to hostile takeovers in India
under the old takeover code8. Although under the new takeover code the situation has not
improved greatly, on the contrary it has made hostile takeovers nearly impossible. But based on
the background of the new takeover code i.e. TRAC Report it is possible to argue that this was
not the intended consequence. However ruling(s) such as the present one will create more
difficulty to an already hostile climate for hostile takeovers.

Nirma Industries V SEBI MANU/SC/0536/2013

See 23(1)(d) of Substantial Acquisition of Shares and Takeover , 2011
6
Nirma Industries V SEBI MANU/SC/0536/2013
7
Id.
8
Substantial Acquisition of Shares and Takeover , 1997
5

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CONCLUSION:
The Bhagwati Committeee noted that mere acquisition of securities that would confer voting
rights on a later date should not trigger the application of the code at the time of acquisition,
before such voting rights are attracted. The ambit of the code is focused on "change in control"
of the target company. There is not much of a debate in requirement of Public announcement in
takeover but this done in order to give the investor an opportunity to exit or stay. The major
finding of this paper was the scope of withdrawal of offer where is noticed that it is not an
exclusive right or neither the acquirer has to option to revoke. In the Takeover code, though it
has scope for withdrawal only is such circumstances which means that the offers becomes
impossible

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BIBLIOGRAPHY:
SEBIS TAKEOVER REGULATIONS EDITION 2010 LEXIS NEXIS.

TAKEOVER STRATEGIES, COMPETITIVE BIDDING ANDDEFENSIVE TACTICSHANDBOOK OF MERGERS AND ACQUISITIONS, OXFORDUNIVERSITY PRESS
(IN PRESS)

ACQUISITION ACTIVITIES OF INITIAL PUBLIC OFFERINGS BY WOLFGANG

BESSLER AND JAN ZIMMERMANN, CENTER FOR FINANCE AND BANKING,
JUSTUS-LIEBIG UNIVERSITY.

INDIRECT TAKEOVER CONTROVERSIES BY CHAITANYA G. S AND SUJATA

IYENGAR.

RIGHT OF MINORITY OPPOSING TAKEOVER IN A TARGET COMPANY [2008]

84 CLA (MAG.) 45

TAKEOVER REGULATIONS ACHUTAN COMMITTEE REPORT A MISSED

OPPORTUNITY

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