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Setting aside an order of the SEBI, appellate tribunal SAT today ruled that a company need not pay non-compete fee to the public shareholders.
“The impugned communication (of SEBI)...so far as it directs the appellant to include the non-compete fee in the offer price, is set aside,” the SAT said in an order on an appeal filed by Cayman Island-based E-Land Fashion China Holdings.
Non-compete fee is paid by the acquirer to the promoter of the target company to stay away from the same business.
In the present case, E-Land Fashion proposed to acquire Mudra Lifestyle and the issue was raised whether the acquirer was liable to pay non-compete fee to public shareholders in addition to promoters.
In an order on January 28, the SEBI held that E-Land Fashion Holdings will have to pay non-compete fee to public shareholders and include the amount in the offer price.
The company, however, approached SAT against the order of the market regulator and obtained a ruling in its favour.
“The (non-compete) fee shall not be included in the offer price,” SAT said, and allowed the company to issue the letter of offer to the shareholders within the next two weeks.
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