Exit opportunity to dissenting shareholders

SEBI has vide its press release dated 11th January, 2016 clarified that exit opportunity has to be given to the dissenting shareholders wherever the company is passing a special resolution to change its objects for which it raised the public money and which company still has some unutilised moneys left. The operative of the said press release is given below:

Companies Act, 2013 provides that a company, which has raised money from public through prospectus and still has any un-utilised amount out of the money so raised, shall not change its objects for which it raised the money through prospectus or vary the terms of a contract referred to in the prospectus unless a special resolution is passed by the company. The Act also provides that dissenting shareholders, shall be those shareholders who have not agreed to the proposal and they shall be given an exit opportunity by promoters and shareholders having control over the company, in such manner and conditions as may be specified by SEBI by making regulations in this behalf. Accordingly, following a consultative process, the Board approved the proposal to amend the SEBI (ICDR) Regulations, 2009 for laying down the framework in this regard. The salient features of the said framework are:

(i)            The provisions shall be applicable on a prospective basis i.e. for issues which opened after the commencement of the related provisions in the Companies Act, 2013, i.e. April 01, 2014.

(ii)          It would be applicable in those cases where the proposal is dissented by at least 10% of the shareholders and if the amount to be utilized for the objects for which the prospectus was issued is less than 75% of the amount raised (including the amount earmarked for general corporate purposes as disclosed in the offer document).

(iii)         Investors holding shares as on the date of the board meeting in which the proposal to change the objects is approved and those who cast their vote against the resolution shall be eligible to avail of the exit opportunity under this provision.

(iv)         The exit price shall be based on the pricing parameters applicable in case of exit offer given to the existing shareholders in terms of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, which is applicable for both frequently and infrequently traded shares. The relevant date for pricing shall be the date of the board meeting in which the proposal for change in objects is approved.

(v)          Companies with no identifiable promoters or shareholders having control would be exempted from this requirement.

(vi)         Further, the acquisition under this framework shall be exempted from the applicability of following regulatory provisions:

  1. Mandatory open offer obligations stipulated under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
  2. Restriction on acquiring shares beyond 75% under the provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 subject to compliance with minimum public shareholding requirements within a period of twelve months in terms of Rule 19A(2) of Securities Contracts (Regulation) Rules, 1957;
  3. Contra trade restrictions on promoters / controlling shareholders / dissenting shareholders, under the SEBI (Prohibition of Insider Trading) Regulations, 2015.

(vii)        The procedural details such as appointment of merchant banker, determination of price, tendering of shares, submission of compliance certificate etc. shall be specified in the regulations. 

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