The Coronavirus Pandemic has leapfrogged all the historic pandemics & crisis and has put the whole economic ecosystem to a halt, having a long-lasting impact on the businesses across the Globe. While lock-down may be a preventive measure for health of our people, but businesses’ health surely is taking a hit. This Pandemic has also knocked the doors of Regulators and they are faced with the challenge of making urgent changes in varied laws in these stressful conditions, which must deliver upon their objectives and also be proportionate, reasonable and lawful.
SEBI on 16th June, 2020 has amended SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 & SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 with a view to extend a helping hand to promoters and their companies.
Amended SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
SEBI on 16th June, 2020 has granted temporary relaxations available upto March 31, 2021 with a view to extend a helping hand to promoters by easing the provisions of Substantial Acquisition of Shares under Takeover Regulations:
- Creeping acquisition limit increased up to 10% in a financial year for preferential issue of shares to Promoters
Presently, if Acquirer along with Person Acting in Concert (‘PAC’) holds more than 25% but less than 75% of shares or voting rights, then they can acquire only up to 5% within the creeping acquisition limit in a financial year, without making an Open Offer under the Regulations.
Now, for FY 2020-21 SEBI vide its amendment has increased this creeping acquisition limit of up to 5% to up to 10% for preferential issue of shares to promoters.
Impact: Considering the present situation of fallen stock market prices, it is an attractive move by SEBI for Promoters to infuse funds up to 10% shares or voting rights in the Company without attracting open offer obligation.
- Pre-condition of not acquiring any shares relaxed to encourage Voluntary Open Offers
Presently, if Acquirer along with PAC holds more than 25% but less than 75% of shares or voting rights, then instead of making a normal open offer for 26% shares, such persons may make a Voluntary Open Offer for 10% shares of the Target Company, subject to satisfaction of two pre-conditions:
- Acquirer along with PAC has not acquired any shares in last 52 weeks, except through open offer;
- The aggregate shareholding after completion of the open offer shall not exceed 75% of voting rights;
Now, SEBI vide its amendment has granted relaxation from the first pre-condition up to March 31, 2021.
Impact: This relaxation has removed a hurdle for persons who have acquired shares in last 52 weeks without making open offer and made them eligible too for making Voluntary Open Offer which involves less financial obligation instead of normal open offer.
Amendment in SEBI (Issue of Capital & Disclosure Requirements) Regulations, 2018
SEBI on 16th June, 2020 has also amended Chapter VI of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 relating to Qualified Institutions Placement (‘QIP’) whereby the gap between two QIPs has been reduced from six months to two weeks in order to promote more institutional investment in listed companies.
Impact: This fund-raising friendly move of the Regulator will assist listed corporates to have two consecutive rounds of QIPs within a reduced gap of 2 weeks, as against the erstwhile 6 months.