In India’s capital markets, disclosure is the cornerstone of transparency and investor confidence. To uphold these principles, the Securities and Exchange Board of India (SEBI) has established a comprehensive disclosure regime through its various regulations. Why is this important? Because information asymmetry is one of the biggest risks in capital markets. This article specifically examines the disclosure requirements under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Code” or “SAST”) and the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”), both of which are fundamentally rooted in the disclosure regime. Together, these frameworks ensure that promoters, acquirers, and other key stakeholders keep investors informed of significant changes in acquisition, disposal, trading of shares, shareholding, control, or encumbrances. Although the regulations clearly spell out the requirements, companies and promoters often encounter practical challenges. With SEBI’s push towards digitisation through the System Driven Disclosures (SDD) framework, the process has become more structured and automated, reducing manual intervention and the chances of error. Yet, the practical challenges for promoters, acquirers, and compliance officers continue to lie in timing, thresholds, and interaction between the two frameworks. This article aims to simplify the disclosure requirements under the Takeover Code and PIT Regulations and seeks to provide not only a practical understanding of these disclosure requirements but also to highlight the recurring challenges faced by market participants.

SEBI introduced SDD framework through its circular dated December 01, 2015, and it has been decided to explore the possibility of disclosing such information based on these systems. Initially, the SDD system run in parallel with the then existing system i.e. the promoters/promoter group complying with the disclosure obligations manually. For this automation to work, listed companies are required to provide accurate and updated information of promoters, promoter group members, directors, and designated persons directly to their designated depository. The information includes PAN details, and, in cases where PAN is not applicable, the relevant demat account numbers. Once such details are mapped at the depository level, the system can automatically capture and disseminate changes in shareholding. Later, SEBI through its circular dated August 13, 2021, clarified that entities complying with the SDD framework by submitting PAN details to depositories are not required to make manual filings of disclosures under Regulation 7(2)(a) and Regulation 7(2)(b) of the PIT Regulations. Subsequently, through its circular dated March 07, 2022, SEBI extended the automation framework to disclosures under the Takeover Regulations. Accordingly, transactions executed in the depository system under Regulations 29 and 31 are automatically captured through SDD, and manual filings are not required, except for certain specified transactions where disclosure obligations continue.

1. Threshold-based triggers: Any acquisition or disposal of shares by an acquirer, together with persons acting in concert (PACs), that results in a disclosure requirement.

Scenario 1 – If X and Y are PACs to each other and if X acquires say 3% and if Y also acquires 3%, then cumulatively their shareholding shall be 6% and thus this scenario shall require submission of manual disclosures under Regulation 29(1).

Scenario 2 – If X and Y are PACs to each other and if cumulatively they holds 5% or more and there is change of 2% either individually and collectively, then this scenario shall require submission of manual disclosures under Regulation 29(2).

2. Physical shareholding: Where the acquirer and/or PACs continue to hold shares in physical form.
3. Listed companies that have not provided PAN details of their promoters (including members of the promoter group) to the designated depository, or those that have not appointed any depository as their designated depository

The framework also requires that any change in the details of promoters or directors must be updated by the listed company on the same day with its depository, which in turn shares the update with the other depository. This ensures that the automation system is always synchronized and reflects the most accurate information. Also, this mechanism requires reconciliation of data shall be conducted by listed companies, stock exchanges and depositories at least once in a quarter or immediately whenever any discrepancy is noticed in the automated filed disclosures.

For better clarity, it is important to examine the disclosure requirements under the Takeover Code and the PIT Regulations, supported by practical examples.

Disclosures under the Takeover Code

Chapter V of Takeover Code lays down the necessary disclosure’s obligations, that are mentioned below:

Regulation 29 – Disclosure of Acquisition or Disposal of Shares

• Initial Trigger (5% rule):

Any acquirer, together with persons acting in concert (PACs), acquiring 5% or more of the shares or voting rights in a listed company must disclose their aggregate shareholding and voting rights.

• Subsequent Change (2%rule):

Once the 5% threshold is crossed, every change of 2% or more in shareholding or voting rights whether increase or decrease must also be disclosed.

Importantly, disclosure is still required even if the change results in the shareholding falling below 5%.

• Timeline:

Disclosures must be made within 2 working days of the acquisition, disposal, or receipt of intimation of allotment of shares or voting rights.

• Recipients of Disclosure:
• All stock exchanges where the shares are listed.
• The target company at its registered office.

Important Points

• The acquisition and holding of any convertible security shall also be regarded as shares, and disclosures of such acquisitions and holdings shall be made accordingly.
• The disclosure must be in the format prescribed in the SEBI Master Circular SEBI/HO/CFD/PoD-1/P/CIR/2023/31dated February 16, 2023.
• For the purpose of Regulation 29, the shares taken by way of encumbrance shall be treated as an acquisition and the shares given upon release of encumbrance shall be treated as a disposal, and disclosures shall be made by such person accordingly in such form as may be specified. However, this requirement does not apply to banks, public financial institutions, housing finance companies, or systemically important NBFCs when they hold shares as pledgees in the ordinary course of lending.

Regulation 31 – Disclosure of Encumbered Shares by Promoters

• Who must disclose?

Only promoters and persons acting in concert with them.

However, the aforesaid disclosure requirement shall not be applicable where such encumbrance is undertaken in a depository

• What must be disclosed?
• Creation of encumbrance (pledge, lien, negative lien, non-disposal undertaking, etc.).
• Invocation of encumbrance (e.g., bank enforcing a pledge).
• Release of encumbrance.
• Timeline:

Within 7 working days of creation, invocation, or release of encumbrance.

• Recipients of Disclosure:
• Every stock exchange where the company’s shares are listed.
• The target company at its registered office.
• Yearly Declaration:

Promoters along with PAC must also declare once a year that no encumbrances whether directly or indirectly exist beyond those already disclosed. This annual declaration must be filed within 7 working days from the end of the financial year.

• To every stock exchange, and
• To the Audit Committee of the target company

Example 1:

Mr. A holds 2.8% in PQR Ltd., while his associates (PACs) hold 1.4% and nil respectively. Together, they initially hold 4.2%.

• Step 1: PAC 2 gets 1.1% shares through a preferential allotment. This increases the group’s total holding to 5.3%. Since their holding has crossed the 5% threshold, a Reg. 29(1) disclosure must be made within two working days.
• Step 2: Later, Mr. A buys another 1.5% through bulk deals, raising the group’s holding to 6.8%. However, no disclosure is needed because the increase from the last disclosed level (5.3% → 6.8%) is less than 2%.
• Step 3: A week later, PAC 1 sells 2.4% shares in a block deal, reducing the combined holding to 4.4%. Since this is a downward change of more than 2% compared to the last reported holding (6.8% → 4.4%), a Reg. 29(2) disclosure is required, even though their stake has now fallen below 5%.

Under the SDD framework, any acquisition or disposal of shares by an acquirer, along with persons acting in concert (PACs), that meets the disclosure thresholds must be filed manually. In the example above, the disclosure requirement is triggered when the acquirer’s holdings are combined with those of the PACs thus manual filing is to be done mandatorily and the disclosure is not covered under the SDD framework.

Example 2:

The promoters of XYZ Ltd., holding 42%, pledge 8% of their shares with a financial institution to secure a loan. Since pledging is treated as an encumbrance, this requires a Reg. 31(1) disclosure to the company and stock exchanges within seven working days. Later, when 3% of the pledge is released after loan repayment, a Reg. 31(2) disclosure must also be made.

However, these disclosure requirements do not apply if the encumbrance is created within a depository system.

Disclosures under the PIT Law

Regulation 7 – Disclosures by Certain Persons

Initial Disclosure (Reg. 7(1)(b))

• Triggered when a person is appointed as a director or KMP, or on becoming a promoter or promoter group member.
• Such person must disclose their holdings in the company’s securities as on that date.

Continual Disclosures (Reg. 7(2)(a)) — Threshold trigger

• Applies to promoters, promoter group members, directors, and designated persons.
• Any acquisition or disposal of securities where the value traded during a calendar quarter exceeds INR 10 lakh (in one or multiple transactions) must be disclosed.
• Disclosures are required again if subsequent trades, after an earlier disclosure, cumulatively cross the INR 10 lakh mark.

Timeline (Reg. 7(2)(a) & (b))

• Disclosure by promoter/director/designated person to the company: within 2 trading days of the transaction crossing the threshold.
• Disclosure by the company to the stock exchange: within 2 trading days of receipt or becoming aware.

Disclosures by Connected Persons (Reg. 7(3))

• A listed company may, at its discretion, require other connected persons to disclose their holdings and trades to monitor compliance.

Example 3 – Director Appointment

1 May: Mr. D is appointed in a listed company and holds 2,000 shares on that date.

Under Reg. 7(1)(b), Mr. D must disclose this holding to the company within seven days of appointment.

Example 4 – Promoter Transactions

1. Mr. P makes three purchases in the shares of ABC Limited, a listed entity in the month of  July 2025:
• INR 4 lakh (first transaction)
• INR 3 lakh (second transaction)
• INR 5 lakh (third transaction)
2. Cumulatively, after the third transaction, the traded value in the quarter = INR 12 lakh, which crosses the INR 10 lakh threshold under Reg. 7(2)(a).
3. At this point, P’s acquisition is automatically reported by the depository system under SDD, if ABC Limited has complied with SDD requirements with the depositary.
4. Earlier, P would have had to disclose to the company within two trading days, and the company to the exchange within two more trading days.