Another important change which may come about is to accord priority in accepting shares in open offers for those holding 500 shares and lower. This is being seen as beneficial for both companies and also investors.

These, and a number of other issues, were raised by investors' associations and industry chambers which met the Bhagwati panel on the first day of the three-day meeting of the panel here on Wednesday.

After the three-day meeting, Sebi is expected to set up a group which would write the draft report incorporating changes to the existing code. This report would then be brought before the committee again, which would, therefore, require one more meeting to clear the draft report which would then be thrown open for public debate. Thereafter, the Sebi board would give final shape to the new takeover regulations.

Member of Parliament Kirit Somaiya is understood to have raised the issue of safeguards for professionally-managed companies at the Wednesday's meeting, an issue which is now being seen as important by Sebi. "For companies which are professionally managed, getting a white knight to ward off takeover threats may be difficult. What is to be done for that?" Sebi sources asked.

Speaking to reporters after the meeting, Sebi chairman Devendra Raj Mehta said the interaction, with both industry and investor representatives together, was very beneficial to the regulator, since a number of important issues were thrown open for discussion. "It is also important to see whether the code needs to be changed every time there is a hostile bid, since there have so far been only nine hostile takeover bids in the country," Mr Mehta said. He said Sebi will examine the legal position of whether it can force acquirers to divest illegally-acquired shares or freeze the voting rights on those shares. No change seems likely in the minimum offer price formula though a proposal for altering it has come.

From the discussions and emerging consensus, it now appears Sebi may not meddle with the 5 per cent creeping acquisition limit or the 20 per cent minimum open offer norm. "Hiking minimum offers above 20 per cent may turn counter-productive and reduce takeovers, which is not healthy," Sebi sources told The Financial Express.

In the case of inter-se transfers between promoters, there is a feeling that an open offer should be made mandatory. Though not strictly an inter-se transfer, the ACC case where Gujarat Ambuja group has come into the company and the Tatas have exited, has made Sebi sit up and take notice.

In the case of indirect takeovers of foreign companies, which hold a controlling stake in India, if a foreign parent of a foreign company having a controlling interest in an Indian company is taken over, the immediate foreign parent of the Indian company may be asked to make an open offer.