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SEBI amends takeover norms -- `Acquirer of PSU can appoint directors'

K.R. Srivats

NEW DELHI, Sept. 17

THE Securities and Exchange Board of India (SEBI) has amended its takeover regulations to allow an acquirer of shares of a public sector undertaking (PSU) from the Central Government to appoint directors on the board of directors of the target company du ring the open offer period.

Sources said that the existing restriction on appointment of directors on the board of the target company by the acquirer during an offer period would not be applicable in the case of sale of shares of a PSU by the Central Government.

This restriction, specified under regulation 22 (7) of the takeover code, would be waived as long as the agreement to sell contains a clause to the effect that in case of non-compliance of any of the provisions of the takeover regulations by the acquirer , the transfer of shares or change of management or control of PSU would vest back with the Central Government.

Currently, sub-regulation (7) of regulation 22 of the takeover code specifies: ``During the offer period, the acquirer or persons acting in concert with him shall not be entitled to be appointed on the board of directors of the target company.''

A proviso is now being added to this sub-regulation to provide that in case of acquisition of shares or voting rights or control of a PSU pursuant to a public announcement made under the proviso to sub-regulation (1) of regulation (14), the provisions of sub-regulation (8) of regulation 23 shall be applicable.

The newly substituted sub-regulation (8) in regulation (23) states: ``The restrictions for appointment of directors on the board of the target company by the acquirer under the sub-regulation (7) of regulation 22 shall not be applicable in the case of sa le of shares of a PSU by the Central Government.''

Similarly, the restrictions for acting on agreement for under sub-regulation (16) of regulation 22; for appointment of directors by the target company under clause (a) of sub-regulation (3) of regulation 23 and for on transfer of securities or changes in the board of directors of the target company under sub-regulation (6) of regulation (23) will not be applicable in case of sale of shares of a PSU by the Central Government.

The SEBI has also modified the existing sub-regulation (2A) of regulation 25 to provide that, ``No public announcement for a competitive bid shall be made after an acquirer has already made the public announcement under the proviso to sub-regulation (1) of regulation 14 pursuant to entering into a share purchase or shareholders' agreement with the Central Government for acquisition of shares or voting rights or control of a PSU.''

The market regulator had in mid-August this year inserted a sub-regulation (2A) in regulation 25 to provide that ``No public announcement for an offer or competitive bid shall be made after the Central Government has entered into a share purchase or shar eholders' agreement with the acquirer who has made the public announcement for acquisition of shares or voting rights or control of a PSU.''