Bhagwati Committee Report: Proposed Amendments To Takeover Code

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: Recently, the Bhagwati Committee set up to recommend changes to the SEBI Takeover Regulations has submitted its much awaited report. Further, the draft amendments to the Regulations have also been provided. It is worth reviewing the changes proposed.

As the Report points out, this Committee was set up as early as mid-1998 and it has taken it almost 4 years to complete the job - a time that is more than the time taken to formulate the original Regulations themselves! However, has this long period of time shown some revolutionary changes that will cure the ills of the subject that it deals with? The answer, it is submitted, is no.

Interestingly, the basic structure and requirements of the Regulations will remain the same. The Regulations still require an open offer to be made in consequence to a substantial acquisition of shares and/or change in control. The open offer required is still of 20%. There is still the procedure of making a public announcement and sending a letter of offer thereafter. The requirement of escrow account, the obligations of the acquirer, the target company, the merchant banker, etc. remain substantially the same. What the Committee has recommended is mainly tightening of the screws here and there, curing some of evils noticed, attempting to plug some loopholes, shortening of the total time period for the open offer, etc.

Of course, it is not suggested that the structure should be changed just for the sake of it. All change cannot be equated with progress or improvement. But at the same time, the evils of the capital markets, which has resulted in a substantial apathy of the retail investor, need a fresh outlook which is sadly missing. What requires special emphasis is that the consequences of violations of these and other Regulations remain even today fairly tame.