ADRs/GDRs to be treated on a par with domestic shares

07/02/2008 MUMBAI: A gloomy look on the Bombay Stock Exchange as the Fears of recession in US, fuelled further by reports of contraction in services sector and Fed Reserve's comments yesterday, sent the domestic stock markets on a tailspin with the benchmark Sensex tumbling by over 626 points today, the biggest loss in the last two weeks. Photo: Paul Noronha NICAID:110096543

The Securities and Exchange Board of India (SEBI) has decided to amend the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations (Takeover Regulations) to give applicability of open offer obligations in case of GDRs/ADRs.

“In tune with market developments, the board decided to amend the Takeover Regulations to provide that where the ADR/ GDR holders are entitled to exercise voting rights on the shares underlying GDRs / ADRs by virtue of clauses in the depositary agreement or otherwise, open offer obligations shall be triggered upon crossing the threshold limits set out under Chapter III of the Regulations,” said SEBI Chairman C. B. Bhave.

Under Chapter III of the regulation, “no acquirer shall acquire share or voting rights which entitle such acquirer to exercise 15 per cent or more of the voting rights in a company, unless such acquirer makes a public announcement to acquire shares of such company in accordance with the regulation.”

Further Regulation 7 (1A) of the Takeover Regulations requires disclosures on (+ /-) 2 per cent acquisition/divestment by the acquirers holding shares / voting rights between 15-55 per cent. The board decided to extend such disclosure requirements to acquirers holding shares/voting rights between 15-75 per cent.

SEBI has also stipulated that a listed company undergoing corporate restructuring (merger, demerger or amalgamation) under a scheme of arrangement shall submit an auditors’ certificate to the stock exchange to the effect that the accounting treatment followed in respect of financials contained in the scheme is in compliance with all the applicable accounting standards. This requirement will be prescribed through amendments to listing agreement.

An unlisted company undergoing similar corporate restructuring and proposing to make an IPO shall make disclosures in the Draft Red Herring Prospectus in terms of Accounting Standards 14. This will be mandated through the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.

The board decided to extend the facility of anchor investors to issue of IDRs as applicable to public issues.