'Takeover Code Maintains An Even Keel'

By: Amrish Shah, Transaction Tax Leader, Ernst & Young

The Indian regulatory landscape has been witnessing a period of change over the past few years. With changes proposed to the direct and indirect tax regimes, corporate as well as securities law, these are certainly interesting times to do business in.  All of us have been waiting and watching to see how many of these proposed changes see the light of day. As far as the Takeover Code is concerned, the wait is over. The Securities Exchange Board of India (SEBI) set up the Takeover Regulations Advisory Committee (TRAC) to examine the existing Takeover Code (TOC) which related to substantial acquisitions and takeovers of Indian listed companies. Headed by Mr. C. Achuthan, the TRAC conducted its examination and released a draft of the new Takeover Regulations (TRAC recommendations) in July 2010.  Based on the TRAC recommendations, SEBI took certain key decisions on takeover regulations on the 28th July 2011. Some of the notable decisions involve increasing the initial open offer trigger threshold, increasing the mandatory open offer size and determination of the open offer price.  While SEBI has made public a press release with details of its decisions, the blueprint of the draft amendment is awaited.  As per the existing TOC, on acquisition of 15% in a listed company, an acquirer needs to make a mandatory open offer of at least 20% to the public shareholders. One of the most significant TRAC recommendations to raise the initial trigger threshold of 15% to 25% has been accepted by SEBI.  Such a higher threshold would greatly enhance the ability of Indian listed companies to raise funds (in the upward swinging interest regime) from financial investors, in the form of capital, without triggering open offer requirements.  Even from the financial investor