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Bhagwati panel allows simultaneous offers for buyback and takeover

The Justice P N Bhagwati Committee set up by the Securities and Exchange Board of India to review the takeover code, has finalised its recommendations today.

According to the recommendations, the term acquirer shall exclude a company making a offer for buyback in terms of the SEBI buyback regulations.

The committee felt that no general exception need be made vis-a-vis the takeover code, if, pursuant to buyback, a shareholder were to involuntarily cross the threshold limits specified under the takeover regulations. The takeover code will not be trigged provided there has been no change in control.

Earlier, the SEBI wanted to exempt increase in promoters' holding after buyback under the takeover code.

The panel opined that hike in holding through buyback would mean an acquisition and hence should be treated as per the takeover code provisions. It was, however, felt that under some circumstances, it was not mandatory to make an open offer to shareholders.

There was a view among the members of the panel that promoters might face problems immediately after raising their holding beyond the prescribed limits. For they would need to make an open offer, which they may not want to at that point of time. The considered view was that some general exemptions from the takeover code would be in place.

The committee further recommended that when a buyback offer is open, takeover offer can be made. However, the buyback offer cannot be withdrawn. It can, however, be modified, subject to the company obtaining fresh special resolution from its shareholders.

When a takeover offer is made, a buyback offer can also be made subject to a special resolution passed by the company after the date of public announcement of the takeover offer.

To make a buyback offer while a takeover offer is on, a company has to be backed up by a special resolution. The capital should be left untouched when a takeover bid is in progress.

The committee also recommended that buyback offer and takeover offer are mutually exclusive and would be governed by the respective regulations.

Accordingly, any buyback offer made when a takeover is in progress, the same will not be considered as a competitive bid.

UNI

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