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Securities and Exchange Board of India: The Board comprising G. Mahalingam as Whole Time Member, allowed a consortium of port trusts exemption from making a public announcement of open offer for acquiring shares of a mini-ratna public sector undertaking (PSU), opining that the takeover would cause no change in ultimate control of the said PSU.

Cabinet Committee on Economic Affairs gave in-principle approval for strategic disinvestment of shares held by President of India in Dredging Corporation of India Limited (‘Target Company’) – a Mini-Ratna PSU – by four acquirers being – Visakhapatnam Port Trust, Paradip Port Trust, Jawaharlal Nehru Port Trust, and Deendayal Port Trust (‘Acquirers’). The Acquirers collectively filed an application seeking exemption from applicability of Regulations 3 and 4 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, which mandates public announcement of open offer for acquiring shares.

Acquirers submitted that they are port trusts constituted by the Government of India (‘GOI’) under Major Port Trusts Act, 1963 (‘MPT Act’) as autonomous entities to administer and manage major ports. Disinvestment of 73.47 per cent of shares of Target Company in their favour would give them direct control of the Target Company, but its ultimate supervisory control would rest with the GOI (since the Acquirers are under direct control of GOI in accordance with MPT Act).

It was submitted that Regulation 10(1)(a)(iii) of Takeover Regulations exempts inter-se transfer of shares amongst certain qualifying persons being a company subject to control over such qualifying persons being exclusively held by the same persons. Though Regulation 10(1)(a)(iii) may not strictly apply for the proposed acquisition, the same shall apply in spirit since GOI will continue to have ultimate supervisory control over the Target Company post proposed acquisition.

The Board opined that proposed acquisition would not be covered under automatic exemption available under Regulation 10(1)(a)(iii) of the Takeover Regulations since it would change the nature of control exercised by GOI over Target Company from direct to indirect control. However, there would be no change in control of Target Company, from a takeover perspective, since GOI shall continue to exercise supervisory control over Target Company through the Acquirers. In view thereof, exemption sought in the application was granted.

[Dredging Corporation of India Ltd. v. Visakhapatnam Port Trust, 2019 SCC OnLine SEBI 23, Order dated 28-02-2019]

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Securities and Exchange Board of India (SEBI): G. Mahalingam, whole time Member, in this order granted exemption from application of Section 3(2) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

An application was filed under Section 11(1) and Section 11(2)(h) of the SEBI Act read with Regulation 11(5) of the SAST Regulations, 2011 seeking exemption from application of Section 3(2) of the SAST Act on acquiring of shares and voting rights in the target company. The matter before the Board was that the promoters were willing to transfer by way of gift all the equity shares of the Target Company to the acquirer trusts. The transferor submitted the grounds on which they seek an exemption. Major grounds being the objective with which the transfer is proposed that is seamless intergenerational transfer of the trust fund in view of the fact that the beneficiaries are family members being non-commercial transaction. The other ground being that the ownership or control of the target company had not been affected. Also, pre and post-acquisition shareholding of promoter group would remain same. The acquirer/transferee confirmed that they have adhered to the Guidelines outlined in the Schedule to the SEBI Circular. Board noted all the grounds and ordered that the Target Company shall continue to be in compliance with the minimum public shareholding requirements under the Securities Contracts Regulation Rules, 1957 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Board was of the view that the exemption prayed by the applicants should be granted with certain conditions which the transferor and transferee needs to fulfill. Therefore, exemption from application of Section 3(2) was granted. [Proposed Acquisition of Shares and Voting Rights in Target Company FDC Ltd., In re,2018 SCC OnLine SEBI 156, order dated 21-08-2018]