The Existing Takeover Code

Takeover Code concerns itself with the various regulations that an investor has to follow in case he acquires a substantial stake or control in the company. (Acquiring Control and Acquiring a substantial stake may not necessarily be the same because a substantial acquisition may take place even when there is no change in control. For example an investor acquiring 15% stake in a company (a substantial stake) may still not acquire control because of the presence of another investor with 50% stake). The Code is detailed in SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 1997. These are also called as ‘SAST Regulations’ or ‘Takeover Code’. These govern only the listed companies. Under these regulations, if an investor acquires a substantial stake or control in the company (hereby referred to as ‘Trigger points’), then he is compulsorily required to publicise this information by way of a ‘public announcement’ followed by an ‘open offer’ for buying a certain minimum public holding. The minimum limit of making an open offer stands at about 20%. In other words the acquirer will make a public offer to buy a certain percentage (minimum 20%) of the equity capital of the company.