SEBI Takeover Code explained: this guide covers what SEBI Takeover Code means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011 (SAST) govern the acquisition of shares and takeovers of listed companies. Popularly called the "Takeover Code," these regulations balance the interests of acquirers, target companies, and public shareholders by requiring transparency and an opportunity for minority shareholders to exit at a fair price.
Key Triggering Events for Open Offer
| Regulation | Trigger | Result |
|---|---|---|
| Reg 3(1) | Acquisition that takes holding from below 25% to 25% or above | Mandatory open offer for 26% |
| Reg 3(2) (creeping) | Already holds 25%-75%; acquires more than 5% additional in a FY | Mandatory open offer for 26% |
| Reg 4 (control) | Acquiring control regardless of shareholding % | Mandatory open offer for 26% |
| Reg 5 (hostile) | Voluntary open offer by any acquirer | Voluntary offer for any percentage |
Open Offer Price (Regulation 8)
The open offer price must be the highest of:
- Highest price paid by acquirer (or PAC) in last 52 weeks before PA
- Volume-weighted average market price of 60 trading days preceding PA date
- Price at which preferential allotment/conversion was made (if any in last 52 weeks)
- The per share value computed from highest price paid for any acquisition in last 26 weeks
Voluntary Open Offer (Regulation 6)
An acquirer who holds between 25%-75% can make a voluntary open offer without any mandatory trigger. Minimum size: 10% of total voting rights. Cannot reduce the offer size after announcement. Cannot acquire shares in market during offer period.
Persons Acting in Concert (PAC) — Regulation 2(q)
PAC concept is central to threshold calculation. If A holds 15% and B (A's affiliate) holds 12%, combined holding is 27% — triggering open offer obligation. PAC includes:
- Promoter group members
- Companies under common control or common management
- Relatives (as per Companies Act definition)
- Any person with explicit or implicit agreement to coordinate on acquisition
Timeline of Open Offer
| Event | Deadline |
|---|---|
| Public Announcement (PA) + Detailed Public Statement (DPS) | Within 5 working days of triggering event |
| PA published in newspapers | On day of PA |
| Draft Letter of Offer submitted to SEBI | Within 15 working days of PA |
| SEBI comments on draft | Within 15 working days of receipt |
| Letter of Offer dispatched to shareholders | At least 15 working days before offer opens |
| Open offer period | Minimum 10 working days |
| Payment to tendering shareholders | Within 10 working days of close of offer |
Exemptions from Open Offer (Regulation 10)
- Acquisition from a state financial institution by scheduled bank or company
- Acquisition pursuant to a scheme of arrangement under Companies Act approved by NCLT
- Acquisition in delisting of shares
- Inter-se transfer between promoters (within promoter group, certain conditions)
- Rights issue and bonus shares (if proportionate)
- Inheritance/gift (no consideration paid)
Deposit in Escrow
Acquirer must deposit in escrow at the time of PA:
- 25% of maximum consideration payable (for consideration up to Rs.500 crore)
- Additional deposit of 50% of remaining balance for consideration > Rs.500 crore
- Escrow released upon completion of offer and payment to shareholders
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