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| Edited By: Mandar Bakre |Source: DNA |Updated: Mar 16, 2018, 05:54 AM IST
The Securities and Exchange of India on Tuesday made it mandatory for American depositary share (ADS) and global depository receipt (GDR) holders with voting rights to make an open offer to minority shareholders irrespective of conversion into underlying shares.
Sebi chairman C B Bhave on Tuesday said that earlier, an open offer came into effect only when ADSs and GDRs were converted into shares, but now “the position is if you are holding an ADS or GDR without voting rights, the takeover norms are not applicable. If you are holding an ADS or GDR with voting rights, then you will have to make an open offer.”
Amrish Shah, executive director, PricewaterhouseCoopers, who specialises in mergers & acquisitions said what Sebi has changed is to equate the situation of an acquirer having voting rights on any instrument being required to make an open offer once the threshold is crossed.Usually, Shah said, the ADS/GDR holder does not have a voting right but the depository/custodian of the security has.
“Under this, there are two ways a depository/custodian can act — one, act on its own and vote, or, secondly, take instructions from a holder and vote. My guess is Sebi has covered the loophole in the second case here,” Shah said.
Jayant Thakur, a chartered accountant who specialises in securities law, said in the case of a foreign acquiree of an ADS or GDR, there is normally no voting right unless the acquiree converts the securities into equity shares.
Under the present Sebi Substantial Acquisition of Shares and Takeover Regulations (SAST), open offer will have to be made only upon conversion of ADS/GDR. “What Sebi seems to be saying here is that if you have the voting right, you can’t wait for conversion,” Thakur said.
The move assumes importance in the backdrop of the Securities Appellate Tribunal (SAT) setting aside a plea by a Bharti Airtel Ltd shareholder, Deepak Mehra.
Mehra, who holds around 100 Bharti Airtel shares, had claimed Sebi’s open offer exemption to South African telecom major MTN violated minority shareholder interests.
