In the aftermath of the Satyam scandal, SEBI took an initiative to
liberalize the regulations under the takeover code and the
guidelines for preferential issues, to provide a way out to
the companies which are in distress and whose boards are superseded
by either the Central Government or the State Government. For
this purpose, the market regulator introduced a new Clause,
Regulation 29A, in the takeover code which permits the relaxation of the
various norms applicable to the timing, pricing and size of open offers
by acquiring companies, subject to the application made by the board
of the target company to the Sebi. This new clause also enables
the relaxation of the guidelines for pricing the preferential issues.
According to the regulations in the takeover code, if an
acquirer, who is already holding 15 to 75%, wants to acquire additional
shares, he can do so only after making a public announcement for
further acquisition of shares. The rationale behind this regulation is
to provide an exit route to the outside shareholders, when a group
takes over or consolidates its control over a company.
However, the addition of Regulation 29A in the takeover
code provides an exemption from the applicability of the above
regulations to the companies whose boards are superseded by either the
central government or state government. This new Regulation
29A postulates the new board of directors of the target company to draft a transparent and open plan
in such a way that the entire competitive process is fair and sensible. Moreover, the new board needs
to apply to the SEBI for relaxation of the regulations under the takeover code. Nevertheless, the
grant of relaxations is at the discretion of SEBI. Once this relaxation is granted, the new board of the
target company can invite parties to express their interest in acquiring the company. |
