SEBI accepts Takeover Code, buyout trigger point at 25%

The Securities and Exchange Board of India (SEBI) board has okayed the all-important Takeover Code. Recommendations of the Takeover Regulations Advisory Committee (TRAC) have, by and large, been accepted, chairman UK Sinha told the press.

Mandatory open offer size has been raised to 26% from 20% and the trigger point for buyout will now stand at 25% from 15%. With this, companies will now need to make mandatory open offer for further 26% stake after buying 25% in takeovers. SEBI has, however, abolished non-compete fees to be paid by acquirers in takeover deals. It has also gone ahead and asked merchant banks to disclose track record to IPO investors. It has also initiated a process to make IPO forms shorter and simpler. "The form will now carry track record of the merchant banker and pricing information. The new format will reduce size of IPO application," Sinha said.  Apart from the Takeover Code, the other matters that were discussed included the much talked-about know-your-customer (KYC) norms for all SEBI-regulated entities. The SEBI board has approved uniform KYC norms for all stock market transactions. "We will have uniform KYC norms for benefit of retail investors. The registration authority will be set up and this authority will share data with multiple agencies," he said adding that the board has adopted Unique Identity Number Aadhar for KYC procedures of stock market investors. Quick snapshot of Changes in the Takeover Code

• Initial trigger threshold increased to 25 % from the existing 15 %.
• There shall be no separate provision for non-compete fees and all shareholders shall be given exit at the same
  price.
• In cases of competitive offers, the successful bidder can acquire shares of other bidder(s) after the offer period without attracting open offer obligations.
• Voluntary offers have been introduced subject to certain conditions.
• A recommendation on the offer by the Board of Target Company has been made mandatory.
• As regards definition of control and offer size, the Board decided as under: Existing definition of control shall be retained as it is. The minimum offer size shall be increased from the existing 20 %the total issued capital to 26 % of the total  issued capital.

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