Takeovers, Buy-backs and Corporate Restructuring
Scope
This domain tests the boundary between control transactions and ordinary corporate actions. You must know the SAST open-offer triggers, buy-back methods and limits, and the restructuring routes that change capital structure.
Core rules
- Under the SEBI (SAST) Regulations, 2011, an acquirer crossing 25% of voting rights must make an open offer for at least 26% of the voting capital. A person holding 25% or more may make creeping acquisitions of up to 5% in a financial year without triggering a fresh open offer, subject to the maximum permissible non-public shareholding.
- An open offer follows a public announcement, letter of offer, escrow and price discovery under the SAST price formula. Exemptions exist for certain inter se transfers, restructuring and government-directed transactions.
- Buy-back by a listed company is governed by the Companies Act, 2013 and SEBI Buy-back Regulations. Methods include tender offer, open-market purchase and book-building. Limits, shareholder approval, escrow and post-buy-back obligations apply.
- Restructuring includes merger, demerger, capital reduction and scheme-based arrangements; SEBI’s LODR and ICDR disclosure and pricing rules apply.
Worked example
An acquirer holds 20% of a listed company. It buys another 6%. It has crossed 25%, so it must make a public announcement and an open offer for at least 26% of the voting capital. It cannot rely on the 5% creeping route because it was below 25% before the purchase. If it had already held 27% and bought 4% in the same financial year, creeping acquisition within the 5% limit could avoid a fresh open offer, assuming no other trigger.
Traps
Do not confuse the 25% trigger with the 26% offer size. Do not apply creeping acquisition to an acquirer below 25%. Do not treat a buy-back as a takeover offer. Do not ignore the maximum non-public shareholding cap.