acquisition of shares – exemption

SEBI vide its order dated 10th February, 2020 exempted MOFT from the applicability of regulations 3 & 5 of SEBI (SAST) Regulations 2011 on the ground that the inter se transfer of shares was between connected persons, there is no change in the shareholding of the company, public interest is not affected etc. SEBI granted the exemption. Gist of the case is given below

  • Target Company : MOFSL
  • Acquirer : MOFT(trust)
  • As per the application made to SEBI it indicates that Motilal Oswal holds 50% shares in PIMPL which constitutes 56.78% of MOFSL.
  • MOFSL is a subsidiary of PIMPL.
  • Motilal Oswal intends to gift its shareholding in PIMPL to MOFT by a registered deed dated on 15 Oct, 2019.
  • The propose acquisition of 50% shares of PIMPL will results into indirect acquisition of control over the target company.
  • Grounds on which the application was made to grant exemption is as under:-
    • The transfer of shares of Motilal Oswal to the acquirer is to its own family trust members and to any third party.
    • Also regulation 10 provides for exemption from making an open offer in case of such type of acquisition.
    • Proposed indirect acquisition is a non commercial transaction which will not affect the interest of public shareholding of Target Company.
    • MOFT will be considered as part of promoter group of PIMPL after the said acquisition as well as of the Target Company.
    • Also the said acquisition will not alter the board of directors of Target Company.
    • There shall be no change of control of PIMPL and Target Company through acquirer.
    • The propose transfer is just an internal reorganization of target company. Further such transfer would not results into any increase or decrease in the holding of transferor in PIMPL and Target Company.
  • Acquirer has made an application to SEBI and confirmed to comply with the guidelines mention in SEBI circular dated on 22 Dec, 2017.
  • After the acquisition the acquirer will hold total 50% of equity capital in PIMPL.
  • It is noted that there is no change in in the public shareholding and control of Target Company after the acquisition.
  • But the Target Company shall continue to be in compliance with the minimum public shareholding as required.
  • After considering the application made to SEBI and considering the above facts the SEBI has granted exemption under regulation 11 subject to certain conditions which are as follows:-
    • The proposed acquisition shall be in accordance with the requirements of Companies Act, 2013.
    • After the post-acquisition the acquirer shall file a report within 21 days.
    • The acquirer shall comply with the provisions of SEBI Circular dated on 22 Dec, 2017.
    • It is to be noted that the exemption granted as above shall be limited to the requirements of making open offer and shall not be construed as exemption from the disclosure requirements as per SEBI Regulations.

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