To safeguard the interest of small shareholders vis-a-vis promoters and other large investors during company takeovers, market regulator Sebi today brought the entities holding more than five per cent stake under its insider trading regulations.
Tightening its takeover regulations, Sebi also said the price offered to the public shareholders and the price for preferential allotment would need to be decided on basis of the prevailing market price on the earliest date when the company's board approves the transaction.
Sebi Chairman U K Sinha said that some decisions have been taken related to preferential as well as shareholder arrangements related to takeover regulations at its board meeting today here.
To bring parity in disclosure requirements among various market norms, Sebi also decided to align takeover related disclosures with that of insider trading norms.
"... the disclosure requirement with regard to buy or sell two per cent by persons holding more than five per cent as specified in Takeover Regulations, 2011 shall be modified in line with Sebi (Prohibition of Insider Trading) Regulations, 1992," Sebi said.
The market regulator also said that where open offer obligations are triggered -- pursuant to an agreement or otherwise in combination of any modes of acquisition -- the relevant date for making the public announcement and determination of offer price would be the "earliest date on which obligations are triggered".
"This will, however, not be applicable if the subsequent trigger is on account of willful and deliberate act on the part of the acquirer," it added.
Sinha emphasised that this would avoid any uncertainty or controversy about the exact date on which share price or valuation would take place.
The Sebi chief noted that at present, there is a certain amount of uncertainty over preferential allotment of shares that if a decision has been taken about it, then whether the date of the board decision or date of the shareholder decision should be the effective date.
"And going by the first decision, that whenever the earliest announcement takes place, here also we are now clarifying that the date of the board decision will be the relevant date. So that acquirer does not have any uncertainty about what price he may asked to pay three or four weeks later," Sinha said.
Sebi said that if voting rights of a shareholder, not part of buyback arrangement, goes beyond the threshold level, the open offer requirement would not be triggered.
In such cases, Sebi noted that open offer requirement