Must harmonise takeover code with competition law, industry tells FinMin

The industry on Thursday said there was a need to harmonise the new takeover code with merger regulations under the competition law. In a meeting with finance ministry officials, industry representatives said the takeover panel’s recommendations were broadly in the right direction, but increasing liabilities for independent directors on a company board would affect the overall interests of corporate governance.

The industry said the Achuthan panel’s recommendations on raising the open offer trigger to 25 per cent from the current 15 per cent and raising the statutory open offer size to 100 per cent were welcome. It, however, sought more clarity on these areas in the meeting chaired by Kaushik Basu, Chief Economic Advisor in the Ministry of Finance.

The Institute of Chartered Accountants, however, said an increase in the open offer size to 100 per cent would make takeover activity more difficult. It said this was against the Securities Contract (Regulation) Act, 1956 requiring a minimum 25 per cent public holding in a spread out manner, and that proportionate acceptance of the offer could be a solution.

The Confederation of Indian Industries (CII) said the issue of arriving at a broad definition of ‘control’ needed the finance ministry’s attention, as did those of harmonising the code with the requirements of merger regulations under the competition law, and the reinstatement of exemptions provided at present from the requirement of making an open offer.

“Considering the need to support the growth of M&A activity in the country, CII looks forward to fair, transparent and forward looking regulations for takeovers and substantial acquisition of shares of listed companies,” it said. The Federation of Indian Chambers of Commerce and Industry (Ficci) said the increase in the open offer size was in line with the international practice. It said this would be demonstrative of the seriousness of the acquirer and at the same time equitable to the interests of the minority shareholders, but there were a few issues in its implementation.

The finance ministry wanted to take the views of the industry on the revised takeover code before giving its opinion to the Securities & Exchange Board of India (Sebi) on it.

Sebi was to take up the revised takeover code at the last board meeting under previous chairman CB Bhave in February, but the issue was deferred as the finance ministry wanted to have detailed discussions on the issue first. The matter is likely to come up in Sebi’s next board meeting.