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Monday, May 13, 2002

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Retain creeping acquisition limit till March 2004: Panel

K.R. Srivats


PROMOTERS and promoter groups looking at opportunities for quicker consolidation of holdings may have a cause for cheer, with the SEBI-appointed Justice P.N. Bhagwati Committee for reviewing takeover code recommending the retention of the existing creeping acquisition limit of 10 per cent up to March 2004.

The present takeover regulations permit consolidation of holdings up to 10 per cent in any period of 12 months. The creeping acquisition limit of 10 per cent was earlier allowed up to March 2002, but later extended up to September 2002.

One of the important reasons that has influenced the committee in recommending the retention of the 10 per cent limit up to March 2004 is the changes that the domestic industry is expected to go through on account of the various obligations and commitments under the agreements of the World Trade Organisation (WTO).

The Bhagwati committee has, in its report submitted to SEBI recently, also recommended that the creeping acquisition limit may be reckoned with respect to financial year ending March 31. This clarification comes in the wake of doubts raised on how the 12-month period should be measured.

Further, the committee has turned down suggestions that creeping acquisition may not be permitted in professionally managed companies with no identifiable promoter group.

It has also noted that foreign companies (excluding NRIs, OCBs) are permitted to avail themselves of creeping acquisition limit only with the specific approval of the board of the target company and the Government. It has also made a recommendation that the requirement of approval of the board of target company/Government for any acquisition by foreign companies (excluding NRI/OCBs) may be included in the takeover regulations.

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