Dear Reader,

The Securities Appellate Tribunal in an order passed on 28 January 2015 ( http://www.sebi.gov.in/cms/sebi_data/attachdocs/1422522990970.pdf) has held/made following observations in connection with the disclosure requirements prescribed under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ("Takeover Regulations") and SEBI (Prohibition of Insider Trading) Regulations, 1992 ("PIT Regulations"):

  1. Under the provisions of Regulation 29(2) r/w Regulation 29(3) of the Takeover Regulations, 2011 and Regulation 13(3) r/w Regulation 13(5) of the PIT Regulations, the requirement of disclosure is within two days of transactions for acquisition to concerned stock exchanges and target company, and as per Regulation 13(3) r/w Regulation 13(5) of the PIT Regulations read with Regulation 13(1) of PIT Regulations – the requirement for acquisition and disposal is within two days to target company only, and hence these requirements are of intimation i.e. putting down the same in requisite form and posting the same within two days and not for reaching the company/stock exchange within two days of occurrence – for which additional time, over and above two days, for reaching the intimation by post to target company or stock exchange, as the case may, is permitted.
  2. The opening line of Regulation 13(3) of PIT Regulations states – "Any person who holds more than 5% of shares for voting right.....", which does not make much sense, but read with Regulation 13(5)(b) – the acquisition or sale of shares or voting rights – may be constructed to mean "for" in Regulation 13(3) should read "or".
  3. Regulation 29(3) of the Takeover Regulations is not in consonance with Regulation 29(2), since Regulation 29(2) of the Takeover Regulation requires intimation for every acquisition or disposal, but Regulation 29(3) requires such disclosure "to be made within two days of receipt of intimation of allotment of shares or the acquisition of shares or voting rights in the target company", and there is no time limit for disclosure of disposal of shares or voting rights, although there is a requirement under Regulation 29(2).

COMMENT:

The order of the SAT [clause (a) and (b) above] may have some implication on the manner in which the concerned parties were hitherto complying with the provisions relating to disclosure of change in their shareholding under the Takeover Regulations and the PIT Regulations, and it may also to an extent have some implications on the manner in which these disclosures are being scrutinised.

Observation of SAT at clause (c) above, relating to Regulation 29(2) of the Takeover Regulations is pertinent, since although Regulation 29(2) has been amended with effect from 26 March 2013, which post the amendment deals with disclosures of shares/voting rights held and change thereof, Regulation 29(3) of the Takeover Regulation provides for disclosure within two working days of "allotment or acquisition" and does not deal with "disposal".

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