Rift over draft takeover code | business | Hindustan Times
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Rift over draft takeover code

The new draft takeover code aimed to overhaul the country’s corporate acquisition regime is set for major changes before it is finally rolled out as differences between the government and capital market regulator Securities Exchange Board of India (SEBI) on several issues remain to be ironed out.

business Updated: Oct 28, 2010 02:13 IST

The new draft takeover code aimed to overhaul the country’s corporate acquisition regime is set for major changes before it is finally rolled out as differences between the government and capital market regulator Securities Exchange Board of India (SEBI) on several issues remain to be ironed out.

The finance and corporate affairs ministries are of the view that some areas need greater discussion. One of the issues is the extent of the open offer that an acquirer would mandatorily need to make.

In July, a SEBI appointed panel had recommended increasing the threshold for an open offer from 15 per cent to 25 per cent. Besides, the acquirer will have to make an open offer to buy 100 per cent of a target company’s shares against the current 20 per cent.

The government is of the view that further discussions are required before this proposal is put into practice. “There are some critical issues which are unacceptable in the present form as detailed in the draft,” said a government source, who did not wish to be identified.

According to a government directive earlier this year, every listed entity is required to maintain a minimum public shareholding of 25 per cent.

For companies that currently do not comply with this rule, the promoters are required to bring down their stake by at least 5 per cent every year till the promoter holding comes down to 75 per cent.

Sources said the SEBI panel’s proposal to make an open offer for the entire 75 per cent after the open offer trigger could result in a delisting of the target firm. SEBI chairman C.B. Bhave said the takeover code needs further discussion. SEBI