Thursday, March 17, 2016

SEBI proposes 25 % votings rights as threshold level to trigger 'control' under Takeover Code

Last week, the SEBI, in its board meeting had considered and approved the proposal for initiation of public consultation process regarding the introduction of brightline tests for acquisition of ‘control’ under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ("Takeover Code”). The SEBI noted that multiple regulators apply the test of control from di􀁹erent perspectives and arrive at di􀁹ering results which may lead to ambiguity.

In pursuance of the SEBI Board meeting, a discussion paper has been released seeking public comments for proposals related to Brightline Tests for Acquisition of ‘Control’ under the Takeover Code.

In the discussion paper, the SEBI has proposed to amend the definition of control to define it as: (a) 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.