Brightline Tests for Acquisition of ‘Control’ under SEBI Takeover Regulations
The Board considered and approved the proposal for initiation of public consultation process regarding Brightline Tests for Acquisition of ‘Control’ under the SEBI (SAST) Regulations, 2011.
Assessment of ‘Control’ as defined under the SEBI (SAST) Regulations, 2011 requires consideration of facts and circumstances of each case. This results in a multitude of opinions. Further, multiple regulators apply the test of control from different perspectives and may arrive at differing results which may lead to ambiguity.
In view of the need to identify bright lines for ‘Control’ as defined under the SEBI (SAST) Regulations, 2011, the following proposals may be considered:
1: Framework for protective rights
An illustrative list of protective rights which would not amount to acquisition of control may be issued. Grant of such protective rights to an investor may be subject to obtaining the public shareholders’ approval (majority of minority).
2: Adopting a numerical threshold
Considering the international practices and the current regulatory environment in India, the definition of control may be amended such that control is defined as (a) the right or entitlement to exercise at least 25% of voting rights of a company irrespective of whether such holding gives de facto control and/or (b) the right to appoint majority of the non-independent directors of a company.
Or, any other option as may be decided after consultation.
The discussion paper inviting comments will be placed on SEBI website for seeking public comments.
Source SEBI Board Meeting Dated 12.3.2016