Tender offer: Share transfers directly to Clearing Corp

Sebi today said transfer of shares to shareholders under tender offers would be made directly to the account maintained by the Clearing Corporation, a move aimed reducing systemic risk to investors.
The decision was taken in consultation with the stock exchanges and depositories.
Under the current norms, shareholders submit their bids through stock brokers who transfer the shares to the special account of the Clearing Corporation.
Likewise, the consideration payable to shareholders for the shares accepted in the offer are routed through stock brokers as of now. Also, the shares not accepted in the offer are returned to shareholders through the stock brokers.

Sebi said in a circular that "transfer of shares of shareholders under the tender offers would be made directly to the account maintained by the clearing corporation".
After such transfer of securities, clearing corporation will be allowed to utilise the securities towards the settlement obligations under such offers.

"Further, consideration for the accepted shares in the tender offer and shares tendered but not accepted under such offer would be credited directly to shareholders' bank and demat accounts respectively," it added.
The new procedure would be applicable to all the offers for which public announcement is made on or after January 2.

The new measures will reduce the systematic risk for investors and ease the process of implementation.
Explaining the procedure for placing of orders, Sebi said that depositories --NSDL and CDSL -- would have to provide information to clearing corporations about the shareholder on whose behalf the member has placed sell order. Such information would include investor PAN, beneficiary account as well as bank details.
"The cumulative quantity tendered would be made available online to the market throughout trading session at specific intervals by exchange providing acquisition window during the tendering period on the basis of shares transferred to clearing corporation using early pay-in mechanism," it said.

With regard to execution of trades and settlement, the regulator said once the basis of acceptance is finalised, clearing corporation would transfer unaccepted shares directly to the shareholders account.
In case, securities transfer instruction is rejected in the depository system, due to any issue then such securities will be transferred to the seller broker's depository pool account for onward transfer to the shareholder
"Acquirer will transfer the funds pertaining to the offer to clearing corporations bank account. The corporations will then settle the trades by making direct funds payout to shareholders.
"If shareholders bank account details are not available or if the funds transfer instruction is rejected by RBI/bank due to any issue, then such funds will be transferred to the seller broker's settlement account for onward transfer to shareholder," it added.