SEBI comes out with procedural changes to takeover rules

The Securities and Exchange Board of India (SEBI) has decided to remove the 25 per cent margin money requirement for entities bidding through the auction route in the offer for sale by promoters to reduce their stake in listed companies. As the deadline to achieve minimum public shareholding of 25 per cent is nearing, and the OFS (offer for sale) route had become popular among corporates, SEBI has effected some changes to make it more economical, efficient and transparent, according to U. K. Sinha, Chairman.

Addressing presspersons, after the board meeting here on Friday, Mr. Sinha said a large number of promoters were expected to offload shares through the OFS route. He said institutions might place bids with 100 per cent upfront margin as done earlier, and modification or cancellation of such orders would be permitted. The settlement of funds and securities would take place on T+1 trading cycle. The earlier requirement of 25 per cent margin is not mandatory, he said. However, institutions could also bid without margins. In that case, they won’t be allowed to revise their bids. All the rules of the secondary market transactions such as T+2 days settlement would be applicable to them, Mr. Sinha said. This would restrict any downward revision of the bids. To make the bids transparent, the order book would be made available to the market, and the indicative price would be disclosed throughout the trading session, he added.

On the amendment to takeover regulations, he said, based on some suggestions which were procedural in nature, SEBI had made changes in the area of SAST (substantial acquisition of shares and takeovers) on the relevant date for making public announcement and determination of offer price in cases of combined modes of acquisition and in respect of preferential allotment. Besides, in order to bring parity in disclosure requirements among various SEBI regulations, the disclosure requirement with regard to buy or sell two per cent by persons holding more than five per cent as specified in takeover regulations 2011 had been modified in line with SEBI Regulations of 1992. SEBI had also clarified the reckoning period of ninety days in case of increase in voting rights due to buyback by ``target company’’ as ninety days from the date of closure of the buyback offer.

SEBI had also decided that market purchases made during the open offer period could be completed during the period subject to such shares being kept in an escrow account. The existing regulations allowed purchase of shares from stock exchanges which required to be completed within two days as per settlement process, thus creating an anomalous situation.

KYC norms

With a view to simplifying operations and in order to align the SEBI KYC (know your client) registration agency regulations 2011 (KRA regulations), with the proposal of Central KYC Registry, SEBI had said that the intermediaries would retain the original KYC documents of their clients and would furnish the scanned images of the KYC documents with proper authentication to the KRAs.