SEBI | Acquisition violating Takeover Regulations allowed where objective of proposed acquisitions was to streamline succession and promote welfare of Promoter family, no prejudice to interest of public shareholders

Securities and Exchange Board of India (SEBI): G. Mahalingam, (Whole Time Member) disposed of the application allowing exemption from the Takeover Regulations, 2011 when the proposed acquisition was not prejudicial to the public shareholding.

An application seeking exemption from the applicability of, Regulations 3, 4 and 5 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Regulations”) in the matter of proposed acquisition of shares and voting rights in the Target Company, was received by SEBI from Amit Anand on behalf of Anand Drishti Trust (“Acquirer Trust/Proposed Acquirer”) for acquiring APIS India Limited (“Target Company”).

The proposed acquisition involved a transfer of 71.04% equity shares from Prem Anand, Vimal Anand, Amit Anand, Manisha Anand and Sakshi Anand to Anand Drishti Trust. This transaction would result in a direct acquisition of shares by the Acquirer Trust in the Target Company attracting Regulation 3 of the Takeover Regulations 2011 The Acquirer Trust would also acquire shares in the Promoter Companies resulting in an indirect acquisition of shares/control in the Target Company which would also result in an indirect acquisition of shares/control in the Target Company i.e. acquisition by Anand Drishti Trust of 1.07% equity shares held by APIS Naturals Product Private Limited and 2.61% equity shares held by Modern Herbals Private Limited, attracting Regulation 5 of the Takeover Regulations 2011. 

An exemption was sought on the grounds that the proposed acquisition would take place pursuant to a private family arrangement, which was intended at consolidation of shareholding of existing Individual Promoters in APIS in a family trust to facilitate succession planning and welfare of the Anand Family. It is a non–commercial transaction, which will not prejudice the interests of the public shareholders of the Target Company in any manner. 

On a careful perusal of the materials on record, it was found that the Trust was in substance, only a mirror image of the Promoters’ holdings and consequently, there was no change of ownership or control of the shares or voting rights in the Target Company. The Acquirer Trust also submitted the Deed of Amendment executed on October 01, 2019, incorporating changes to the Trust Deed to ensure its compliance with the requirements specified in SEBI Circular dated December 22, 2017, The pre-acquisition and post-acquisition shareholding of the Promoters in the Target Company was to remain the same (except that of the transferors and the transferees in the Direct Acquisition). There was no change in the public shareholding of the Target Company. 

SEBI was of the view that the Target Company would continue to be in compliance with the minimum public shareholding requirements under the Securities Contracts Regulation Rules, 1957 (“SCRR”) and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. 

Accordingly, the Applicant Trust was found eligible for exemption as sought and the same was granted in exercise of the powers conferred upon the member under Section 19 read with Section 11(1) and Section 11(2)(h) of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) and Regulation 11(5) of the Takeover Regulations subject to certain conditions imposed in the interest of investors, wherein on completion of the proposed acquisition, the Proposed Acquirer was asked to file a report with SEBI within a period of 21 days from the date of such acquisition, as provided in the Takeover Regulations. The Proposed Acquirer was also ordered to ensure at all points in time, that Directors appointed in the Promoter Companies, viz. ANPPL and MHPL were either the individual Promoters or their immediate relatives or lineal descendants. 

Such exemption for the acquisition was not be construed as exemption from the disclosure requirements under Chapter V of the aforesaid Regulations; compliance with the SEBI (Prohibition of Insider Trading) Regulations, 2015; Listing Agreement/SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 or any other applicable Acts, Rules and Regulations. [APIS (India) Ltd. v. Anand Drishti Trust, 2019 SCC OnLine SEBI 156 , decided on 04-10-2019]

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