Relaxation of Takeover Regulations to Facilitate Promoter Funding in Listed Companies

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Jun 20, 2020

Relaxation of Takeover Regulations to Facilitate Promoter Funding in Listed Companies

The Securities and Exchange Board of India (‘SEBI’) has relaxed the creeping acquisition limits and voluntary open offer conditions in the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 to facilitate promoter funding in listed companies.

1. Creeping Acquisition Limit Increased to 10%

Promoters holding 25% or more of the voting rights of the listed company can now increase their shareholding in a financial year by up to 10% (instead of the existing limit of 5%) of the voting rights of the listed company, without being required to make an open offer to the public shareholders. This relaxation only applies to a preferential allotment of shares to such promoters and not a secondary purchase.

2. Relaxation for Voluntary Offers

SEBI has also relaxed the conditions for a voluntary open offer by shareholders holding 25% or more of the voting rights by exempting them from the restriction that no creeping acquisitions have been made in the last 52 weeks.

3. Implications

These relaxations will help promoters consolidate their stake (including to protect against takeover threats) without being burdened with an open offer and help listed companies raise funds from their promoters in this difficult environment. They are only available from June 16, 2020 until March 31, 2021.

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