Committee to take up takeover code changes this month

The Takeover Regulation Advisory Committee (TRAC), set up by market regulator Securities and Exchange Board of India (Sebi), is likely to meet in the third week of September to discuss the agenda for changes in the takeover code.

According to regulatory sources, some of the important changes would be related to the creeping acquisition clause, the threshold for open offer and pricing norms in the takeover code."The exercise will take over two months, after which a white paper inviting market comments will be put out," said a top Sebi official.

Sebi Chairman CB Bhave had said yesterday that the 12-member committee, headed by C Achuthan, the former presiding officer of the Securities Appellate Tribunal (SAT), would review the entire takeover code soon.

The members of the committee, however, told Business Standard that they were yet to receive any formal correspondence from Sebi.

The members, who did not want to be named, were of the view that since the first takeover code had come into existence in 1997, mergers and acquisitions (M&As) were on the rise, revealing several loopholes in the regulations. "These holes need to be plugged,” they said.

In many cases, promoters got all the benefits while small shareholders got into trouble, they pointed out. The members opined that the level of purchase that triggered an open offer (which currently stands at 15 per cent) for an additional 20 per cent, should be on the higher side. “At the same time, the offer of 20 per cent should be increased,” they added.

The members also expressed reservations over the existing non-compete fees which an acquirer pays to the seller company to avoid any new buyer. On the front of competitive bidding involving counter offers, sources said, the window of counter offer should not be shut as it allowed transparency and fair transactions.