When the 25% threshold is crossed, the open-offer obligation is absolute. AMLEGALS advises on trigger analysis, open-offer execution, exemption structuring and the defence of enforcement proceedings for alleged non-compliance.
The SEBI Takeover Code draws a bright line: an acquisition that crosses the 25% threshold or the 5% creeping-acquisition limit triggers a mandatory open offer, and there is no discretion. The acquirer must make a public announcement, deposit the escrow, file the letter of offer and complete the process within the prescribed timelines. Failure to do so invites SEBI enforcement action that can include disgorgement, divestiture, debarment and monetary penalties.
The complexity lies not in the trigger itself but in whether the trigger has actually been crossed — especially in indirect acquisitions, where the acquirer obtains control or voting rights through a chain of holdings; in concert-party situations, where the aggregation of holdings must account for persons acting in concert under Regulation 2(1)(q); and in transactions that are structured to fall within an exemption. AMLEGALS advises across the full spectrum, from pre-transaction structuring to open-offer execution to enforcement defence.
Analysing whether a proposed acquisition triggers the open-offer obligation under Regulations 3 or 4, including concert-party and indirect-acquisition analysis.
Advising on the public announcement, letter of offer, escrow, open-offer price computation and SEBI filings.
Structuring transactions to fall within legitimate exemptions under Regulation 10 or applying for specific exemptions under Regulation 11.
Advising the board and independent directors of the target company on their obligations, the committee of independent directors and the reasoned recommendation.
Advising acquirers and target companies on competing-offer dynamics, price revision and shareholder communication.
Defending against SEBI proceedings for alleged non-compliance with the Takeover Code, including penalty and disgorgement proceedings.
Under Regulation 3(1) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011, an acquirer who, together with persons acting in concert, acquires shares or voting rights entitling them to exercise 25% or more of the voting rights in a target company must make an open offer. A creeping-acquisition trigger arises under Regulation 3(2) when an acquirer already holding 25% acquires more than 5% of voting rights in any financial year.
Regulation 10 lists exemptions including inter se transfers among promoters (with shareholder approval), acquisitions pursuant to a scheme under Section 230–232 of the Companies Act 2013 (with certain conditions), buybacks, rights issues, allotment under SEBI (ICDR) Regulations where the acquirer is not a promoter, and acquisitions in the ordinary course of business by underwriters, market-makers or stock brokers. Each exemption has specific conditions and SEBI may grant additional exemptions under Regulation 11.
The minimum open-offer price is the highest of: (a) the negotiated price per share, (b) the volume-weighted average market price for 60 trading days preceding the public announcement, and (c) the highest price paid by the acquirer for any acquisition during the 52 weeks preceding the public announcement. For frequently traded shares, the price cannot be below the volume-weighted average price. For infrequently traded shares, the fair value is determined by the acquirer’s valuer.
Under Regulation 20, a competing offer can be made within 15 working days of the first public announcement. The competing acquirer must offer a price higher than the first offer price. Both offers then remain open simultaneously, and the shareholders choose. The first acquirer may revise the offer price upward. The competition terminates when both offer prices are final, and the better offer prevails in terms of shareholder acceptance.
Failure to make an open offer when triggered attracts SEBI enforcement action under Section 11B, including directions to divest shares, disgorgement, debarment and monetary penalties under Section 15H of the SEBI Act. SEBI may also pass interim orders freezing the acquirer’s voting rights. The SAT and the Supreme Court have consistently upheld strict compliance with the open-offer obligation.
No. No engagement is treated as accepted until conflicts, scope and terms are confirmed in writing.
Share the acquisition details or SEBI notice for a confidential assessment.