Takeover Panel Suggests Key Powers For Sebi

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Mumbai, May 9: : The Securities and Exchange Board of India (Sebi)-appointed committee headed by former Chief Justice of India PN Bhagwati, to review the provisions of the Sebi takeover code, has finalised sweeping changes to the regulations.

Among the major amendments proposed by the panel in its draft report are arming Sebi with powers to ensure disinvestment of shares acquired in breach of specific sections of the regulations and stopping transfer of shares in cases where it feels a violation of the takeover regulations is likely to take place.

Among other key recommendations are those ensuring greater disclosure at various levels of holdings by the acquirer, and a provision that the acquirer would not undertake substantial asset stripping unless prior approval of the target company’s shareholders is secured.

The committee has also said banks and financial institutions should be encouraged to finance takeovers.

It says an offer should always be for 20 per cent or above; but the offer may be subject to an acceptance level of less than 20 per cent.

These and several other important recommendations form part of the changes proposed by the Bhagwati panel. The report of the panel and the draft amendments have been put up by the stock market regulator on its website www.sebi.gov.in, and comments from the public have also been invited. The comments are to reach the legal department of the regulator within three weeks from May 9, Sebi said in a statement on Thursday.

Sebi had constituted the panel to review the provisions of Sebi (Substantial Acquisition of Shares and Takeovers) Regulations 1997 in June 1998. The committee constituted of representatives from chambers of commerce and industry, investor associations, legal experts, merchant bankers, Institute of Chartered Accountants of India and Sebi.

The panel has said change in control can be brought about only after a special resolution passed by the shareholders in a general meeting and postal ballot should be allowed in respect of such meetings. The panel recommends that the present exemption for preferential allotment be continued subject to the condition that any resolution for preferential issue should provide for postal ballot to enable greater shareholder participation.