Other Procedures
Regulation 18. Other Procedures
18(1).
The acquirer prepares a draft letter of offer
This draft is filed with the Securities and Exchange Board of India under regulation 16(1)
At the same time (simultaneously) , the acquirer must send a copy of this draft.
The copy must be sent to:
The target company (at its registered office address).
All stock exchanges where the target company’s shares are listed.
So , filing with SEBI and sending copies to the company and stock exchanges must happen at the same time.
18(2).
The letter of offer is prepared for shareholders
It must be sent to shareholders:
Whose names appear in the register of members as on the identified date
The timing for dispatch depends on SEBI’s response.
If the Securities and Exchange Board of India gives comments:
Then the dispatch within 7 working days from receipt of comments.
If SEBI gives no comments: dispatch within 7 working days from expiry of the specified period under regulation 16(4).
So , shareholders must receive the letter of offer within 7 working days, either after SEBI comments or after the comment period ends
Explanation:
(i).
The letter of offer can be sent electronically.
This must follow the provisions of the Companies Act, 2013.
(ii).
If any shareholder requests a physical copy then the company must provide it.
(iii).
This arrangement (electronic + physical on request) must be clearly disclosed in the letter of offer.
So , electronic dispatch is allowed, but shareholders retain the right to get a physical copy on request, and this must be transparently disclosed
The acquirer has to send the letter of offer to all shareholders
But a special exception is provided for foreign jurisdictions
If sending the letter of offer to a particular country may expose:
the acquirer, or
the target company
to serious legal risks (civil, regulatory, or criminal)
And if shareholders in that country:
hold less than 5% of the voting rights of the target company
Then the acquirer is allowed to not send (refrain from dispatching) the letter of offer to that jurisdiction
This applies when sending the letter without major modifications would create risk
Final takeaway:
the acquirer can skip sending the offer in risky foreign jurisdictions, but only if those shareholders hold less than 5% voting power
The open offer is made to shareholders of the target company
Normally, the letter of offer is sent to shareholders on the identified date
But this provision expands the right to participate
Even if a person:
did not hold shares on the identified date, or
did not receive the letter of offer
Such person is still entitled to participate
He can tender his shares in the open offer
Final takeaway:
eligibility to tender shares is broad—receipt of letter or holding on identified date is not mandatory
18(3).
The acquirer dispatches the letter of offer to shareholders as per sub-regulation (2)
Simultaneously with this dispatch under sub-regulation (2)
The acquirer must also send the letter of offer to:
the custodian of shares
This applies where:
there are depository receipts of the target company
The custodian holds the underlying shares for such depository receipts
Final takeaway:
along with dispatch under sub-regulation (2), the letter must also be sent to the custodian of DR shares at the same time
18(4).
An acquirer makes an open offer
This rule applies even if there is a competing offer
The acquirer is allowed to make upward revisions
These revisions can be in:
the offer price, and
the number of shares proposed to be acquired
However, this is subject to other provisions of the regulations
There is a time limit
Revisions can be made:
any time before the last one working day prior to the commencement of the tendering period
After this point:
no further upward revision is allowed
Final takeaway:
the acquirer can improve the offer (price or quantity), but only up to one working day before the tendering period begins
18(5).
The acquirer revises the open offer
either by increasing the offer price, or
increasing the number of shares (offer size)
When such revision is made, certain obligations arise
(a)
the acquirer must increase the escrow amount accordingly
this increase must match the revised offer (price/size)
the increase must be made before making the revision
this is as per regulation 17
Final takeaway:
whenever the offer improves, the escrow must also be increased first, ensuring full financial backing for the revised offer
When the acquirer revises the open offer (price or size), further steps must be followed
(b)
the acquirer must publish an announcement of the revision
this announcement must be made in all the same newspapers
where the detailed public statement was originally published
(c)
at the same time as making this announcement
the acquirer must inform the following:
the Securities and Exchange Board of India
all stock exchanges where the target company’s shares are listed
the target company (at its registered office)
18(6).
The open offer is ongoing (offer period is running)
During this period, the acquirer or persons acting in concert may buy shares of the target company
Every such acquisition must be disclosed
The disclosure must be made:
in the prescribed form
It must be sent to:
all stock exchanges where the shares are listed
the target company (at its registered office)
Timeline:
within 24 hours of the acquisition
After receiving this information:
the stock exchanges must immediately make it public
Final takeaway:
all acquisitions during the offer period must be quickly disclosed (within 24 hours) and made public for transparency
The acquirer and persons acting in concert can normally trade in shares during the offer period
But this proviso creates a restricted period
The restriction starts:
3 working days before the tendering period begins
The restriction continues:
until the end of the tendering period
During this entire period:
they cannot acquire shares, and
they cannot sell shares of the target company
Final takeaway:
there is a strict no-trading window around the tendering period to ensure fairness and prevent manipulation
18(6A).
An open offer is made by the acquirer
Shareholders are given the option to tender (offer) their shares
The acquirer must ensure that this process is smooth and accessible
The tendering of shares must be done through:
the stock exchange mechanism
The process must follow:
the method specified by the Securities and Exchange Board of India
The acquirer must also ensure proper settlement of shares and payment through this system
Final takeaway:
the entire tendering and settlement process must be done through stock exchanges as per SEBI rules for transparency and efficiency
18(7).
Before the tendering period starts, the acquirer must make a public announcement (advertisement)
Timing:
1 working day before the commencement of the tendering period
The advertisement must be in the prescribed format
It must include the following details:
the schedule of activities for the open offer
the status of statutory and other approvals
whether required for the acquisition or the open offer
details of any unfulfilled conditions
and their current status
the procedure for tendering shares by shareholders
any other material information as specified
Final takeaway:
just before tendering begins, a detailed public update must be given so shareholders are fully informed about timelines, approvals, and how to participate
The acquirer issues an advertisement before the tendering period
This proviso lays down how it must be published and communicated
(a)
the advertisement must be published in all the same newspapers
where the detailed public statement was earlier published
(b)
at the same time (simultaneously), the advertisement must be sent to:
the Securities and Exchange Board of India
all stock exchanges where the target company’s shares are listed
the target company (at its registered office)
Final takeaway:
the advertisement must be widely published and simultaneously communicated to regulators and the company for transparency
18(8).
The tendering period is the time when shareholders can submit their shares
It begins after receiving comments from the Securities and Exchange Board of India under regulation 16(4)
Start timeline:
it must begin within 12 working days from the date of receipt of SEBI’s comments
Duration:
once it starts, it remains open for 10 working days
Final takeaway:
tendering starts within 12 working days after SEBI comments and stays open for 10 working days
18(9).
Shareholders tender their shares in the open offer
Once they submit (accept) the offer:
the acceptance becomes binding
During the tendering period:
they cannot withdraw their tendered shares
There is no option to change their decision during this period
Final takeaway:
once shares are tendered, the decision is final during the tendering period
18(10).
The tendering period ends (last date arrives)
After this, the acquirer has a strict timeline to complete the process
Timeline:
within 10 working days from the last date of the tendering period
Within this period, the acquirer must:
complete all requirements under the regulations
comply with other applicable laws
This includes:
making payment of consideration to shareholders who accepted the open offer
Final takeaway:
after tendering closes, everything (including payment) must be completed within 10 working days
18(11).
The acquirer needs certain statutory approvals to complete the open offer
It is the acquirer’s responsibility to obtain these approvals
The acquirer must actively pursue and follow up on all required approvals
This must be done:
without default
without neglect
without delay
The acquirer must normally pay shareholders within the prescribed time
Sometimes, payment may be delayed due to non-receipt of statutory approvals
In such cases, the Securities and Exchange Board of India can step in
SEBI will check whether:
the delay was not due to willful default, failure, or neglect, and
the acquirer had diligently pursued approvals
If satisfied, SEBI may:
grant an extension of time for making payment
However, this comes with a condition:
the acquirer must pay interest to shareholders for the delay
at a rate specified by SEBI
Final takeaway:
delay due to genuine approval issues may be allowed, but shareholders must be compensated with interest
Sometimes, statutory approvals are required only for some shareholders, not all
This creates a situation where payment cannot be made uniformly
In such cases, the acquirer is given an option
The acquirer may:
go ahead and make payment to those shareholders
for whom no statutory approvals are required
This allows partial completion of the open offer
It avoids unnecessary delay for shareholders who are not affected by approval issues
Final takeaway:
payment can be made selectively to eligible shareholders, even if approvals are pending for others
18(11A).
This provision applies in addition to sub-regulation 11
The acquirer must pay shareholders within the prescribed time
If the acquirer fails to make payment on time
Then a consequence follows automatically
The acquirer must pay interest for the delay
This interest is payable to:
all shareholders whose shares have been accepted in the open offer
Rate of interest:
10% per annum
Final takeaway:
any delay in payment leads to mandatory interest at 10% p.a. for affected shareholders
Normally, if payment is delayed, the acquirer must pay interest (10% p.a.)
But this proviso creates an exception
If the delay is:
not due to any act or fault of the acquirer, or
caused by circumstances beyond the acquirer’s control
Then the Securities and Exchange Board of India can step in
SEBI may:
grant a waiver of interest
Final takeaway:
interest for delay is mandatory, unless SEBI is satisfied that the delay was not the acquirer’s fault
The acquirer may be required to pay interest for delay
This proviso clarifies that:
paying interest does not close the matter
The Securities and Exchange Board of India can still take further action
Such action can be taken:
under regulation 32, or
under the Act
So, interest is only a compensation, not a penalty substitute
Final takeaway:
even after paying interest, the acquirer may still face regulatory action by SEBI
18(12).
After the offer period is completed, the acquirer must make a public disclosure
(a)
the acquirer must issue a post-offer advertisement
timeline:
within 5 working days after the offer period
the advertisement must include details such as:
total number of shares tendered
number of shares accepted
date of payment of consideration
(b)
the advertisement must be properly published and communicated
(i)
it must be published in all the same newspapers
where the detailed public statement was earlier published
(ii)
at the same time, it must be sent to:
the Securities and Exchange Board of India
all stock exchanges where the shares are listed
the target company (at its registered office)
Final takeaway:
after the offer ends, a detailed public update must be issued within 5 days and widely communicated for transparency
