Background
Securities and Exchange Board of India (“SEBI”) vide its notification dated 16th June, 2020 has issued the Substantial Acquisition of Shares and Takeovers (Amendment) Regulations, 2020 (“SAST”) under which promoters are provided with relaxation of holding more than 25% of the stake in listed companies upto 35% without triggering an open offer obligation.
Key Highlights of the Amendment
- Insertion of new proviso is done in Sub Regulation 2 of Regulation 3 of the SEBI(SAST) Regulations,2011 via SEBI(SAST)(Amendment) Regulations, 2020.
- Earlier any acquirer along with a person acting in concert, holding 25% stake (or more) in listed entities, were allowed to acquire further 5% stake in any financial year, without triggering open offer obligation under Takeover Code.
- Now, through insertion of new proviso via SEBI(SAST) (Amendment) Regulations, 2020 SEBI has granted one-time relaxation, allowing acquisition beyond five per cent but upto ten per cent of the voting rights in the target company shall be permitted for the financial year 2020-21 only in respect of acquisition by a promoter pursuant to preferential issue of equity shares by the target company
- For clarification of this one time relaxation sub regulation 1 has been inserted in Regulation 6 and said that this relaxation is granted till 31st March, 2021 only.
Impact on Target Company and the Promoters
- Now, Promoters holding more than 25% of stake in listed companies, can further acquire equity shares upto 10% without triggering an open offer obligation upto 31st March, 2021.
