Author:
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The Takeover Code or substantial acquisition of shares.
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Name: Sukant Vikram
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Class: 5th year BBA LLB
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Symbiosis Law School
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Introduction —-
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With the announcement of the policy of globalization, the doors of Indian economy were opened for the overseas investors. But to compete at the world platform, the scale of business was needed to be increased. In this changed scenario, mergers and acquisitions were the best option available for the corporates considering the time factor involved in capturing the opportunities made available by the globalization.
But soon the predators with huge disposable wealth started exploiting this opportunity to the prejudice of retail investor. This created a need for some regulation to protect the interest of investors which were done through -:
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1.Enactment of SEBI Act, 1992
2.Enactment of SEBI (Substantial acquisition of shares and takeover) Regulations, 1992.
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In the light of then present circumstances, the need for some law to regulate takeover was strongly felt. Moreover to achieve its objectives as stated in SEBI Act, 1992, SEBI enacted SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1994 in exercise of powers conferred under section 30 of the Act which laid down a procedure to be followed by an acquirer for acquiring majority shares or controlling in another company, so that process of takeover is carried out in a fair and transparent manner.
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Thereafter, these regulations have been amended a number of times to address the changing circumstances and needs of corporate sector. In 1997 SEBI Takeover Code has been rechristened by enacting SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 substituting SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1994.
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Merger&Acquisition Trends in Current Scenario —- Structured Reconstruction
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In India it was only in 20th century that the concept of takeover took birth but even then the concept of hostile takeovers was not known to anybody. This concept emerged when Swaraj Paul started efforts to takeover Escorts Ltd. and DCM Ltd. He was the first hostile raider among the raiders of Indian stock market. Although Paul could not succeed in his efforts because the incumbents fend him off by using the technicalities of rules governing non-residents but this created a need for a takeover code.
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This need was further accentuated in 1990s when the government initiated the policy of liberalization and globalization which resulted in growth of Indian economy at an increased pace, and it created a highly competitive business environment, which motivated many companies to restructure their corporate strategies by including the tools of mergers and takeovers.
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In the meantime, SEBI was established in 1992 as a body corporate under the SEBI Act, 1992 with the main objectives to- i) protect the interest of investors in securities market, and ii) to provide for the orderly development of securities market. Thus while the possibility of takeover of a company through share acquisition is desirable in new competitive business environment for achieving strategic corporate objectives, there has to be well defined regulation so that the interest of all concerned are not jeopardized by sudden takeover threats.
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In the light of then present circumstances, the need for some law to regulate takeover was strongly felt. Moreover to achieve its objectives as stated in SEBI Act, 1992, SEBI enacted SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1994 in exercise of powers conferred under section 30 of the Act which laid down a procedure to be followed by an acquirer for acquiring majority shares or controlling in another company, so that process of takeover is carried out in a fair and transparent manner.
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Thereafter, these regulations have been amended a number of times to address the changing circumstances and needs of corporate sector. In 1997 SEBI Takeover Code has been rechristened by enacting SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 substituting SEBI (Substantial Acquisition of Shares a