General Exemptions & Exemptions by Board
Regulation 10. General Exemptions
10(1).
Certain types of acquisitions are given exemption from the requirement to make an open offer.
This exemption applies from obligations under:
Regulation 3 (Substantial acquisition of shares/voting rights).
Regulation 4 (acquisition of control)..
However, the exemption is not automatic.
It is available only if the specific conditions prescribed for each exemption are fulfilled.
If such conditions are not complied with, the exemption cannot be claimed and the acquirer must make an open offer.
The types of acquisitions are as follows:
10(1)(a).
Acquisition of shares is exempt from open offer when it is an inter se transfer.
Inter - Se transfer means a transfer among specified related/connected persons).
Such exemption applies only when the transfer is between qualifying persons.
Qualifying persons include:
(i). Immediate relatives: Transfer of shares between close family members is allowed without triggering an open offer.
(ii). Promoters with established status:
Persons who are named as promoters in the shareholding pattern filed by the target company under listing regulations or these regulations.
Such persons must have been disclosed as promoters for at least 3 years prior to the proposed acquisition.
(iii).
Transfers between the following qualifying persons:
A company and its subsidiaries.
A company and its holding company.
Subsidiaries of the same holding company (i.e., fellow subsidiaries).
It also includes:
Persons holding at least 50% equity shares in such company.
Other companies where such persons hold at least 50% equity shares.
Subsidiaries of these companies.
However, there is a key condition:
The control over all these entities/persons must remain with the same set of persons.
In other words, ultimate control should not change due to the transfer.
Explanation:
The company shall include a body corporate, whether Indian or foreign.
(iv).
Transfer among persons acting in concert (PACs).
The transfer is available only if such persons have been acting in concert for at least 3 years prior to the proposed acquisition.
Additionally, they must have been disclosed as PACs in filings made under the listing regulations or the listing agreement.
Both conditions are mandatory:
Minimum 3 years of PAC relationship.
Proper disclosure in regulatory filings.
(v).
Certain shareholders acting in concert (PACs)
The shareholders must have been persons acting in concert for at least 3 years prior to the proposed acquisition.
They must also have been disclosed as PACs in filings under the listing regulations or the listing agreement.
The exemption also extends to a company formed by such shareholders, but with strict conditions:
The entire equity share capital of that company must be held by these shareholders.
Their shareholding in that company must be in the same proportion as their holdings in the target company.
There must be no differential voting rights in that company (i.e., equal voting rights per share).
Pricing Condition
There is a pricing condition to avail exemption for inter se transfers.
There is a need to determine whether the shares of the target company are frequently traded or infrequently traded.
If shares are frequently traded:
The acquisition price per share must not exceed a certain limit.
It cannot be more than 25% higher than the volume-weighted average market price (VWAP).
VWAP is calculated for the 60 trading days preceding the date of notice for the proposed inter se transfer.
The relevant stock exchange is the one where maximum trading volume occurred during this period.
If shares are infrequently traded:
The acquisition price must be compared with the fair value determined under Regulation 8(2)(e).
The price cannot be more than 25% higher than such determined value.
Compliance with Additional DIsclosures
Both parties involved in the transfer must comply and are required to fulfil all applicable disclosure requirements.
The transferor (seller).
The transferee (buyer).
These disclosures must be made as per Chapter V of the takeover regulations.
If such disclosure requirements are not complied with, the exemption cannot be claimed.
10(1)(b).
(i).
Acquisitions made in the ordinary course of business by certain regulated intermediaries.
An underwriter registered with the Securities and Exchange Board of India.
The acquisition must be by way of allotment of sharet,
This allotment of shares must be pursuant to an underwriting agreement
Such underwriting agreement must be in accordance with the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.
Since underwriting is a regular business activity, such acquisition is exempt from making an open offer.
(ii).
Acquisition in the ordinary course of business by a stock broker.
The stock broker must be registered with the Securities and Exchange Board of India.
The acquisition should be on behalf of his client, not for the broker’s own investment.
It arises when the broker exercises lien over shares:
Lien means the broker has a right over the shares due to non-payment or obligations of the client.
Such exercise of lien must be:
In respect of shares purchased on behalf of the client.
Done in accordance with the bye-laws of the stock exchange where the broker is a member.
Since this is a protective/operational action in the normal course of brokerage business, it is exempt from open offer obligation.
(iii).
Acquisitions in the ordinary course of business by certain market intermediaries.
The intermediaries are a merchant banker registered with the Securities and Exchange Board of India & a nominated investor,
The acquisition must occur in either of the following situations:
Market making activities.
Subscription to the unsubscribed portion of an issue.
Such activities must be carried out in accordance with Chapter XB of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.
Since these are routine capital market functions, the acquisition is exempt from the requirement to make an open offer.
(iv).
Any person acquiring shares pursuant to a safety net scheme is exempt.
Such acquisition must be in accordance with Regulation 44 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.
(v).
A merchant banker registered with the Securities and Exchange Board of India, acting as a stabilising agent, is exempt.
It also includes acquisition by the promoter or pre-issue shareholder for price stabilisation.
Such acquisition must be as per Regulation 45 of the ICDR Regulations.
(vi).
A registered market maker of a stock exchange is exempt.
It Applies when shares are acquired in the course of market making for those securities.
(vii).
A Scheduled Commercial Bank acting as an escrow agent is exempt.
Since it holds shares in a fiduciary capacity, no open offer is triggered.
(viii).
Invocation of pledge by:
Scheduled Commercial Banks, or
Public Financial Institutions
acting as pledgees, is exempt.
Understanding Safety Net Scheme
A safety net scheme is a mechanism used in public issues (IPOs/FPOs) to protect small investors from price fall after listing.
It is provided under the SEB (Issue of Capital and Disclosure Requirements) Regulations, 2009.
Under this scheme:
The issuer/promoter (or designated person) assures investors that:
They can sell back their shares if the market price falls below a certain level after listing.
The Safety Net Scheme applies usually to retail investor
It has a specified time period after listing (e.g., a few months).
It has a predetermined buyback price (generally issue price or a protected price)
How it works:
If the market price drops below the protected price, investors can return (sell) their shares under the scheme.
The designated entity buys back the shares, limiting investor loss.
10(1)(c).
Acquisitions made in later stages (subsequent stages) by an acquirer are exempt.
An open offer is not required to be made only if:
The acquirer must have already made a public announcement of an open offer.
Such open offer should be pursuant to a disinvestment agreement (e.g., government disinvestment or similar structured sale).
The exemption applies when:
The agreement itself contemplates multiple stages of acquisition.
The acquirer proceeds to acquire shares in those later stages as per the agreement.
Since the overall transaction (including future stages) is already disclosed and covered by the initial open offer, no fresh open offer is required for each stage.
Provided that:
(i).
Both the acquirer and the seller are the same at all the stages of acquisition.
(ii).
Full disclosures of all the subsequent stages of acquisition, if any, have been made in the:
Public announcement of the open offer and in the letter of offer.
10(1)(d).
(i).
Acquisitions pursuant to a scheme made under section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985 are exempt.
It also incudes any acquisition made under statutory modification or re-enactment of that act.
(ii).
Acquisitions happens through a scheme of arrangement involving the target company are exempt.
The target company may be involved as:
Transferor company (the company being merged/demerged), or
Transferee company (the company receiving assets/shares).
The scheme may include:
Amalgamation (two or more companies combine into one)
Merger (one company merges into another)
Demerger (one company splits into separate entities)
Reconstruction (reorganization of company structure)
The acquisition is not through direct purchase, but through legal restructuring approved by authority.
It must be sanctioned by a court or tribunal (like National Company Law Tribunal).
The order can be under Indian law, or Foreign law (in case of cross-border arrangements)
Once approved, the transfer of shares/assets happens automatically as per the scheme.
(iii).
Acquisitions arising out of schemes of arrangement are exempt.
The scheme must not directly involve the target company as a transferor company, or a transferee company.
It also covers reconstruction of entities, such as amalgamation , merger , demerger.
Such scheme must be carried out:
Pursuant to an order of a court or tribunal, or
under any applicable law or regulation (Indian or foreign).
However, the exemption is subject to two key conditions:
(A). Cash component condition:
The cash and cash equivalents in the consideration must be less than 25% of the total consideration.
This ensures it is largely a share-based restructuring, not a cash deal.
So , If the deal involves cash, it must be only a small portion.
Specifically: Cash and cash equivalents must be less than 25% of the total consideration
(B). Continuity of ownership condition:
After the scheme, persons holding at least 33% voting rights in the combined entity must be the same persons who held the entire voting rights before the scheme
This ensures continuity of control/ownership.
So , After the restructuring: At least 33% of the voting rights in the combined entity must be held by the same persons
These must be the persons who held the entire voting rights before the scheme.
10(1)(da).
Acquisition pursuant to a resolution plan approved is exempted.
Provided this is under section 31 of the Insolvency and Bankruptcy Code, 2016.
10(1)(e).
Acquisition pursuant to the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 are exempt.
10(1)(f).
Acquisition pursuant to the provisions of the Delisting Regulations are exempt.
10(1)(g).
Acquisition by way of transmission, succession or inheritance are exempt.
10(1)(h).
Acquisition of voting rights (including through preference shares with voting rights) is exempt when it arises due to the operation of law.
Specifically, this refers to Section 47(2) of the Companies Act, 2013.
Example: When preference shareholders get voting rights due to non-payment of dividend, and voting power increases automatically.
Since this is statutory (not voluntary acquisition), no open offer is required.
10(1)(i).
Acquisition of shares by lenders through conversion of debt is exempt.
The conversion must be part of a debt restructuring scheme.
Such restructuring must be done as per guidelines of the Reserve Bank of India.
Additional condition: The requirements under Regulation 158(6) of SEBI ICDR Regulations, 2018 must be complied with.
The definition of lender includes:
Scheduled Commercial Banks (excluding Regional Rural Banks).
All India Financial Institutions.
10(1)(j)
Increase in voting rights is exempt when it arises due to operation of law or company action, not a voluntary acquisition.
This includes two situations:
Operation of Section 106(1) of the Companies Act, 2013:
If a shareholder fails to comply with certain conditions (e.g., non-payment of calls), the company may restrict their voting rights.
As a result, the relative voting rights of other shareholders increase automatically.
Forfeiture of shares by the company:
When shares are forfeited (e.g., due to non-payment of calls), the total voting capital reduces.
This leads to a proportionate increase in voting rights of remaining shareholders.
Condition: Such forfeiture must be done in compliance with the Companies Act, 2013 and the Articles of Association.
10(2A).
Sometimes , there is an increase in voting rights of a shareholder beyond the thresholds specified under Regulation 3(1) and 3(2).
Such increase must happen without acquisition of control over the target company.
The increase should arise specifically due to: Conversion of equity shares with superior voting rights (SVR shares) into ordinary equity shares.
Since this is merely a conversion of existing share class and not a fresh acquisition, it does not trigger an open offer.
Therefore, such increase is exempt from the obligation to make an open offer under Regulation 3.
10(2B).
Acquisition through preferential issue are exempt from Open Offer.
The acquisition may involve:
Shares, or
Voting rights, or
Control of the target company.
Condition: In order to be exempt. the preferential issue must be made in full compliance with Regulation 164A of the SEBI (ICDR) Regulations, 2018.
If this condition is satisfied:
The acquirer is not required to make an open offer under:
Regulation 3(1) (substantial acquisition), and
Regulation 4 (acquisition of control).
Explanation:
This exemption also applies to a target company whose shares are infrequently traded.
However, this is not automatic and is subject to conditions:
The company must comply with Regulation 164A(2) & 164A(8) of the Regulations, 2018.
Additionally, The price of such infrequently traded shares must be determined in accordance with Regulation 165 of the ICDR Regulations, 2018.
10(3).
When a company undertakes a buy-back:
The total number of shares reduces
As a result, a shareholder’s percentage voting rights may increase automatically.
Such increase may cross the threshold under Regulation 3(1) (triggering open offer).
However, this increase is exempt from open offer obligation, subject to a condition.
Condition:
The shareholder must reduce his shareholding.
This reduction to be such that his voting rights fall below the threshold limit.
Time limit: This reduction must be done within 90 days.
The 90 days is Counted from the date of closure of the buy-back offer.
If the shareholder fails to reduce within 90 days then the exemption is lost, and open offer obligation may arise.
10(4).
The following acquisitions shall be exempt from the obligation to make an open offer under Regulation 3(2):
(a).
Acquisition under rights issue (within entitlement)
A shareholder is allowed to acquire shares up to his entitled portion in a rights issue.
Such acquisition does not trigger an open offer, even if his voting rights increase.
Reason: The shareholder is only maintaining his proportionate ownership, not gaining additional control.
Important limitation:
The exemption applies only up to entitlement.
Any acquisition beyond entitlement is not covered under this clause.
Entitlement means the proportion of shares a shareholder has the right to subscribe to in a rights issue.
This is based on his existing shareholding (e.g., 1 new share for every 4 shares held).
It is pre-determined by the company and offered equally to all existing shareholders to maintain their percentage holding.
Subscribing within this limit would amount to entitlement.
Anything applied for beyond this limit is additional (not entitlement).
(b).
Acquisition beyond entitlement in a rights issue under Regulation 3(2).
Normally , If a shareholder subscribes more than his entitlement, his voting rights may increase and trigger an open offer.
However, exemption is available subject to conditions.
(i).
No renunciation of entitlement - The acquirer must not renounce (give up) any part of his rights entitlement.
So , he must fully subscribe to all the shares he is entitled to.
Only after that, he can apply for additional shares (beyond entitlement).
If he renounces even a part of his entitlement , the exemption will not apply.
(ii).
Pricing condition for exemption
The exemption (for acquiring beyond entitlement in a rights issue) is allowed only if:
The rights issue price is NOT higher than the ex-rights price (ERP) of the shares.
What is Ex-Rights Price (ERP)?
ERP is a blended/fair price of shares after the rights issue.
It is calculated as the sum of two components: (A) + (B)
A. Market Price Component.
B. Rights Issue Price Component
(A). Market Price Component (VWAP-based)
Step 1: Determine the Volume Weighted Average Price (VWAP)
Take VWAP of shares for 60 trading days.
The Time Period ends on the day before the date of determination of rights issue price
Step 2: Choose the correct stock exchange
Use the exchange where maximum trading volume in the shares occurred during this period
Step 3: Multiply
VWAP × number of shares outstanding before the rights issue
Step 4: Divide
Divide the above result by the total number of shares outstanding after the rights issue
This gives you Component (A) of the ex-rights price.
The VWAP (Volume Weighted Average Price) must not be taken randomly or averaged across exchanges.
It must be calculated only on one specific stock exchange.
The stock exchange should bewhere:
The maximum volume of trading in the shares of the target company has occurred during the 60 trading day period.
(B) Rights Issue Price Component
This is the second part of the Ex-Rights Price (ERP) calculation.
While (A) captures the market value of existing shares (B) captures the value of new shares issued in the rights issue.
Step 1: Take the rights issue price
This is the price at which new shares are offered to shareholders in the rights issue.
Step 2: Multiply
Rights issue price × number of shares offered in the rights issue.
Step 3: Divide
Divide the above amount by the total number of shares outstanding after the rights issue
It gives the weighted contribution of the newly issued shares to the overall share value after the issue.
Since rights shares are usually issued at a discount, this component helps bring down the overall blended price (ERP).
Example:
A company has 100 shares in total, and the acquirer already holds 10 shares.
The company announces a rights issue in the ratio of 1:1, so the acquirer is entitled to 10 shares.
The acquirer first takes all 10 shares of his entitlement and does not renounce any part of it.
After that, he also applies for 10 additional shares, which are beyond his entitlement.
So, in total, he applies for 20 shares.
Now, the law checks whether this extra acquisition can be exempt from open offer obligations.
The first condition is satisfied because the acquirer did not renounce his entitlement.
Next, the price condition is examined.
The volume weighted average market price (VWAP) of the shares is ₹100.
The rights issue price is ₹80.
The company had 100 shares before the issue and will have 200 shares after the issue.
The ex-rights price is calculated as follows:
Ex-rights price=(100×100)+(80×100)200 = 90.
The ex-rights price comes to ₹90.
Now, the comparison is made.
The rights issue price (₹80) is not higher than the ex-rights price (₹90).
So, the second condition is also satisfied.
Since both conditions are fulfilled:
No renunciation of entitlement, and
Rights issue price not exceeding ex-rights price.
The acquirer is allowed to buy shares beyond his entitlement.
As a result, even though his shareholding increases, No open offer is required under the Securities and Exchange Board of India takeover regulations.
If he had renounced his entitlement, or if the rights issue price was higher than ₹90,
The exemption would not apply, and open offer obligations could be triggered.
(c).
When a company buys back its shares:
The total share capital reduces.
Existing shareholders’ percentage holding may increase automatically.
Such increase may cross limits under Regulation 3(2), but exemption is allowed, subject to conditions.
The conditions are as follows and all the conditions must be satisfied.
Section 68 is the legal provision that governs buy-back of shares by a company.
It lays down:
How a company can buy back its own shares.
Conditions, limits, approvals, and procedure for buy-back.
A company can buy back its shares:
From free reserves, securities premium, or proceeds of earlier issue
Subject to prescribed limits (like 25% of paid-up capital & free reserves)
The approval should be obtained either by Board resolution (for smaller buy-backs), or Special resolution of shareholders (for larger buy-backs
The conditions are:
(i). No voting in favour of buy-back
The shareholder must not have voted in favour of the buy-back resolution.
This applies to resolutions under Section 68 of the Companies Act, 2013.
So , The shareholder must remain neutral or abstain.
If he supports the buy-back then the exemption is not available.
(ii). Voting must be through postal ballot
If shareholder approval is required: The resolution must be passed through postal ballot.
(iii): No approval at board level (if shareholder is a director)
If the shareholder is also director, or an interested director.
Then he must not vote in favour of the board resolution approving the buy-back.
The objective is to make sure he does not influence the decision at management level.
(iv): No acquisition of control
The increase in voting rights must not result in acquisition of control over the target company.
Even if all other conditions are satisfied:
If the shareholder gains control (direct or indirect) then the exemption is not available.
What happens if one of the conditions is not satisfied?
Suppose , the shareholder’s voting rights increased due to buy-back.
BUT he failed to meet one or more earlier conditions, such as:
He voted in favour of buy-back, or
He was involved at board level, or
Any other condition not complied with.
Then this would trigger open offer obligation.
But , The law still gives a chance to avoid open offer.
In order to fix the non-compliance:
The shareholder must reduce (sell/dilute) his shareholding.
Such reduction must ensure that:
His voting rights fall below the threshold.
i.e., below the level which triggers open offer under Regulation 3(2) (creeping acquisition limit).
This reduction must be done within 90 days
The 90 days are counted from: Date of closure of the buy-back offer.
If the shareholder successfully reduces within 90 days: He will still get the exemption from open offer.
If he fails to reduce within 90 days: Open offer obligation will arise.
(d).
Acquisition by way of share exchange during an open offer is exempted.
Suppose , An open offer is made for a target company (Company A) under takeover regulations.
Shareholders of Company A are invited to tender their shares.
Instead of paying only cash, the acquirer may offer:
Shares of another target company (Company B) as consideration.
This is called a share swap / exchange mechanism.
In such cases , the acquirer receives shares of Company A.
In return, he gives shares of Company B.
So technically , he is acquiring shares in Company A.
Such acquisition could increase voting rights and trigger open offer obligation again under Regulation 3(2).
But No fresh open offer is required for such acquisition because:
The acquisition is already part of an existing open offer process.
It is only a mode of consideration (shares instead of cash).
Not an independent or strategic acquisition.
The exchange must be:
Pursuant to a valid open offer under the regulations,
Not a separate private arrangement.
(e).
Acquisition from state-level financial institutions is exempted.
Suppose , the Shares of the target company are being transferred.
Such transfer is not from public shareholders, but from specific institutional entities.
The sellers/transferors must be:
State-level financial institutions, or
Their subsidiaries, or
Companies promoted by such institutions
The buyer must be Promoters of the target company.
The acquisition must be pursuant to an agreement between the institution (seller) and the promoter (buyer).
Such acquisition could increase voting rights and trigger open offer obligation again under Regulation 3(2).
But such acquisitions are exempted without triggering an open offer.
Reason:
These institutions are typically:
Financial investors (not controlling owners)
They often exit investments over time.
Transfer to promoters does not introduce a new controlling shareholders.
It is considered as a shift within known/control group.
The transaction must be:
Genuine and contractual (agreement-based).
Not a disguised acquisition from public shareholders.
(f).
Acquisition from VC / AIF / FVCI by promoters is exempted
Suppose , shares of the target company are being transferred.
Such transfer is from investment entities (not public shareholders) to promoters.
The sellers must be any of the following:
A venture capital fund (VCF).
A Category I Alternative Investment Fund (AIF).
A foreign venture capital investor (FVCI) registered with the Securities and Exchange Board of India.
The buyer must be promoters of the target company.
Such acquisition must be done pursuant to an agreement between the fund/investor and the promoters.
Such acquisition may:
Increase promoter shareholding.
Cross thresholds under Regulation 3(2).
This would normally trigger an open offer obligation.
Such acquisition is exempted without requiring an open offer.
Reason:
These entities (VCF / AIF / FVCI) are typically:
Financial/early-stage investors.
They invest to exit later for returns.
Transfer to promoters:
Is part of a planned exit strategy ans does not introduce a new external controller.
It only represents a shift back to promoters.
Provided that , The transaction must be Agreement-based (formal arrangement) and not a market purchase or indirect acquisition.
10(5).
There is a prior disclosure requirement for certain exempt acquisitions.
These acquisitions are mentioned under:
Inter se transfers among qualifying persons - 10(1)(a)
Promoters acquiring from state financial institutions - 10(4)(e)
Promoters acquiring from VC / AIF / FVCI = 10(4)(f).
The acquirer must:
Intimate the stock exchanges where the target company is listed.
Provide details of the proposed acquisition.
Use the prescribed format (as specified by SEBI/stock exchange).
The intimation must be made at least 4 working days BEFORE the proposed acquisition.
This is a pre-acquisition disclosure (very important distinction from post-reporting).
Once the stock exchange receives the information:
It must forthwith (immediately) Disseminate the information to the public.
Even though these transactions are exempt from open offer:
The law ensures transparency.
Investors get advance notice of significant shareholding changes.
10(6).
There is a post-acquisition disclosure requirement for all exempt transactions.
It applies to any acquisition made under exemptions in this regulation.
Unlike 10(5), this is not limited to specific clauses, it is broad and covers all exemptions.
The acquirer must:
File a report with the stock exchanges where the target company is listed.
Provide full details of the acquisition.
Use the prescribed format.
The report must be filed within 4 working days from the date of acquisition.
This is a post-acquisition reporting requirement.
After receiving the report:
The stock exchange must forthwith (immediately) , disseminate the information to the public.
Even though the transaction is exempt from open offer:
It ensures market transparency after execution.
Investors are informed of actual changes in shareholding.
10(7).
There is detailed reporting obligation to the regulator (SEBI) for certain exempt acquisitions.
It applies only to specific exempt acquisitions/increase in voting rights, namely under:
Inter se transfers - 10(1)(a).
Acquisitions arising out of scheme of arrangement - 10(1)(d)(iii)
Voting rights arising by law - 10(1)(h)
Share Voting Rights conversion / buy-back situations - 10(2)(3).
Buy-back (creeping acquisition context) - 10(4)(c).
Rights issue / VC-AIF exits - 10(4)(a)(b)(f).
With respect to these transactions: The acquirer must submit a report to the Securities and Exchange Board of India.
The report must include:
Complete details of the acquisition.
All relevant supporting documents.
It must be in the prescribed format.
The report must be submitted within 21 working days from the date of acquisition.
A non-refundable fee of ₹1,50,000 must be paid.
Payment modes allowed:
NEFT / RTGS / IMPS.
SEBI Payment Gateway (online).
Any other mode specified by SEBI.
This is a more detailed compliance compared to: Stock exchange reporting (within 4 days).
Explanation:
For the purposes of 10(5), 10(6) and 10(7) in the case of convertible securities:
The date of the acquisition shall be the date of conversion of such securities.
Regulation 11. Exemption by the Board
11(1).
The Board (Securities and Exchange Board of India) has discretionary power to grant exemptions.
The exemption is granted from the obligation to make an open offer under takeover regulations.
Conditions for granting exemption:
The Board must record reasons in writing.
The exemption may be subject to conditions, as deemed appropriate by the Board
Provided that such exemption must be in the interest of investors, and ensure integrity of the securities market
The exemption is granted on a case-by-case basis and is not automatic.
In order to avail exemption , there should be proper applicaion and justification.
11(2).
The SEBI has the power to grant relaxation from strict compliance with procedural requirements under:
Chapter III (Substantial Acquisition of Shares / Open Offer obligations).
Chapter IV (Open Offer Process and Procedures).
This power is:
Discretionary in nature.
Exercised only after recording reasons in writing.
Subject to conditions imposed by SEBI.
Guided by the interests of investors and the securities market.
The Securities and Exchange Board of India has the power to grant relaxation from strict compliance with procedural requirements under:
Chapter III (Substantial Acquisition of Shares / Open Offer obligations)
Chapter IV (Open Offer Process and Procedures)
This power is:
Discretionary in nature
Exercised only after recording reasons in writing
Subject to conditions imposed by SEBI
Guided by the interests of investors and the securities market
SEBI must be positively satisfied that the conditions mentioned in clause (a) and clause (b) are fulfilled.
(a). Special Situation – Government/Authority Superseded Board
The relaxation applies only where:
The board of directors of the target company has been superseded by:
Central Government, or
State Government, or
Any other regulatory authority.
Such supersession must be done under a law in force.
A new board of directors has been appointed by such authority.
Mandatory Conditions for the New Board’s Plan
The newly appointed board must formulate a plan, and ALL of the following conditions must be satisfied:
(i). Transparent, Open and Competitive Process
The plan must ensure:
A transparent process.
An open process.
A competitive process.
The objective must be acquisition of shares, voting rights, or control over the target company.
The purpose must be to ensure smooth and continued operation of the company
The plan must be to protect the interests of all stakeholders (not just shareholders, but creditors, employees, etc.)
It must NOT be structured to benefit or favor any specific acquirer.
(ii). Fairness of Conditions
The conditions and requirements of the competitive process must be reasonable, and fair.
This ensures:
No arbitrary or biased eligibility criteria.
Equal opportunity for all potential acquirers.
(iii). Detailed Implementation Framework
The plan must clearly provide:
Timing of the open offer (when it will be made).
Timeline for completion of the open offer.
Manner in which change in control will occur.
(b). Procedural Provisions Acting as Impediment
SEBI must also be satisfied that the provisions of Chapter III and Chapter IV are likely to act as an impediment (i.e., obstacle or hindrance)
And that:
Granting relaxation from one or more procedural requirements is:
In the public interest, and
In the interest of investors, and
In the interest of the securities market.
11(3).
The acquirer shall file an application with the SEBI for seeking exemption under 11(1).
The target company shall file an application with the Securities and Exchange Board of India for seeking relaxation under 11(2).
The application shall be supported by a duly sworn affidavit.
The application shall contain details of the proposed acquisition.
The application shall clearly state the grounds on which the exemption or relaxation is sought.
11(4).
The acquirer or the target company, as applicable, shall pay a fee along with the application.
The fee payable is ₹5,00,000 (five lakh rupees).
The fee is non-refundable, regardless of the outcome of the application.
The payment must be made to Securities and Exchange Board of India.
The fee can be paid through the following modes:
Direct credit into SEBI’s bank account.
NEFT / RTGS / IMPS.
Online payment through SEBI Payment Gateway.
Any other mode as specified by SEBI from time to time.
11(5).
The SEBI of India shall provide a reasonable opportunity of being heard to the applicant before making a decision.
SEBI shall consider all relevant facts and circumstances relating to the application.
After such consideration, SEBI shall pass a reasoned order.
The order may:
Grant the exemption or relaxation, or
Reject the application.
The decision shall be made as expeditiously as possible.
Reference to Expert Panel for Exemption Applications
The Securities and Exchange Board of India may constitute a panel of experts.
This panel is formed to assist in evaluating exemption applications.
SEBI may, if it considers necessary, refer an application for exemption under 11(1) to this panel.
The expert panel will examine the application, and provide recommendations to SEBI.
The final decision remains with SEBI, and is not binding on the recommendations of the panel.
11(6).
The order passed under 11 (5) must be made public.
The SEBI shall host the order on its official website.
This applies to orders granting exemption/relaxation, or rejecting the application.
