This is the one topic on the site that does not come from the Companies Act, 2017. Takeovers and substantial share acquisitions in listed companies are governed by Part IX (Sections 108–126) of the Securities Act, 2015, together with the Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2017 (S.R.O. 749(I)/2017, as amended, most recently by S.R.O. 68(I)/2024 of 24 January 2024) — both are summarised on this page.

Who this applies to

The rules apply to an acquirer — any person who, directly or indirectly, acquires or intends to acquire voting shares, voting rights, or control in a target company (a listed company, or the holding company of a listed company), whether alone or through persons acting in concert with them.

Persons acting in concert — holdings are aggregated

Anyone who, under an agreement or understanding (formal or informal), co-operates directly or indirectly to acquire shares or control is treated as acting in concert with the acquirer, and their holdings are added together for every threshold below. The Act also deems the following to be acting in concert with one another, unless the contrary is established:

  • a company, its holding company, its subsidiaries, and any company under the same management or control;
  • a company, its promoters/sponsors or directors, and anyone entrusted with managing the company;
  • directors of those companies and their associates (a relative; a trust of which the person or relative is trustee; a partnership in which either is a partner; or a private company in which either is a director or member);
  • relatives of the acquirer or of persons acting in concert with the acquirer;
  • a securities manager and its client, where the client is the acquirer; and
  • banks, financial advisors, and securities brokers of the acquirer or its group — except a bank whose only role is ordinary commercial banking services to the acquirer.

The three trigger points

  • More than 10% (aggregated with associates & concert parties) — disclose the aggregate shareholding to the target company, the securities exchange on which it is listed, and the Commission, within 2 working days of the allotment intimation or the acquisition (Section 110). Once this disclosure is made, up to a further 30% may be acquired within the following 12 months without a fresh disclosure.
  • More than 30%, or any further acquisition once holding between 30% and 51%, or acquiring control of a listed company — none of these may be done without first making a public offer to all shareholders under this Part (Section 111), subject to the exemptions below. An acquirer who has already made a public offer is not required to make a fresh one for further acquisitions within 12 months, provided they stay under 51%.

Transactions exempt from the public-offer requirement

Section 109 excuses the following from triggering a mandatory public offer (though the acquirer must still disclose the acquisition afterward):

  • a rights issue allotted proportionately to existing members;
  • shares allotted to a licensed underwriter under an underwriting agreement;
  • a bank or financial institution acquiring shares in the ordinary course of business, enforcing security;
  • acquisition by succession or inheritance;
  • a scheme of arrangement, reconstruction, amalgamation, merger, or de-merger under any law;
  • a bank/financial institution exercising a conversion option under a loan agreement;
  • sale of shares as a consequence of privatization of a unit or its management rights;
  • inter se transfers among a defined set of qualifying persons — relatives; promoters/sponsors named in the target’s Memorandum holding at least 25% of its equity securities; a company and its subsidiaries/holding company/fellow subsidiaries; or major shareholders (each holding more than 20% of voting shares) who have collectively exercised management control for a continuous 3 years; and
  • a scheme of rehabilitation approved under any law.

The offer process, in outline

  1. Appoint a manager to the offer — under the Regulations, a “Consultant to the Issue” duly licensed by the Commission — independent of both the acquirer and the target company (Securities Act Section 113; Regulation 6(1)).
  2. Make a public announcement of intention to acquire (Section 114), followed within 180 days (extendable by 90 days on notice to the Commission and exchange) by the public announcement of public offer itself and the offer letter, sent to every shareholder on the target’s register as of the date of book closure (Section 117; Regulations 6–9). Neither document may contain misleading material (Section 115).
  3. The offer may be made conditional on a minimum level of acceptances, and must be backed by the prescribed security for performance (Sections 116, 123) — see the pricing, size, and security detail below.
  4. A competitive bid from someone else may be made within 21 days of the first public announcement, at a higher price and for at least the same number of shares (Section 120); the original acquirer may make an upward revision to their own offer up to 7 working days before closure (Section 121).
  5. A public offer, once made, generally cannot be withdrawn — the narrow exceptions are a competing bid, the acquirer (company) going into liquidation or being declared bankrupt, an individual acquirer being declared an undischarged insolvent, or being declared a defaulter on loan repayment by a competent court (Section 122; Regulation 22).

For the practical sequence with each step spelled out, see the Task Guide: Making a Public Offer to Acquire a Listed Company.

The offer timetable (Schedule IX)

The Regulations fix every milestone to T, the date of the public announcement of the public offer:

  • Prior to T — public announcement of intention, any target-company disclosures, appointment of the manager to the offer, and any share purchase agreement are already in place.
  • T−2 days — a copy of the proposed public offer announcement goes to the Commission, target company, and exchange.
  • T — public announcement of the public offer is published; this is also the final date to create the required security.
  • T+21 days — last date for a competitive bid.
  • T+22 days — target company gives notice of book closure to the exchange.
  • T+36 to T+42 days — the target’s books are closed for 7 days to fix who is eligible to receive an offer letter.
  • T+43 days — target company provides the certified shareholder list to the acquirer.
  • T+45 days — acquirer issues offer letters to all eligible shareholders (and GDR/ADR custodians, convertible security holders).
  • T+46 days — newspaper advertisement announcing the start of the acceptance period.
  • T+47 days — last date for an upward revision of the offer price.
  • T+48 days — the acceptance period begins.
  • T+54 days — the public offer closes — the last day shareholders can tender acceptances.
  • T+56 days — last date to open the special payment bank account.
  • T+64 days — last date to complete all public-offer procedures, including paying consideration to accepting shareholders.
  • T+74 days — last date for the manager to the offer to certify the acquirer’s obligations are fulfilled and report to the Commission.
  • T+76 days — the target’s board may transfer the acquired securities to the acquirer.

Publishing an addendum or corrigendum to the public offer announcement restarts the offer period from the date of that publication.

Offer pricing (Regulation 13)

Whether a target’s shares are frequently traded matters for pricing. Shares count as frequently traded if, in the 180 days before the public offer announcement, they traded on at least 80% of trading days and their average daily traded volume was at least 0.5% of free float or 100,000 shares, whichever is higher.

  • Frequently traded shares — the offer price must be the highest of: the negotiated weighted average price under any share purchase agreement (including settled liabilities and non-cash consideration); the highest price the acquirer paid for the target’s shares in the preceding 180 days; the weighted average exchange price over the preceding 180 days; and the weighted average exchange price over the 28 trading days preceding the public announcement of intention.
  • Infrequently traded shares — the offer price must be the highest of: the same negotiated weighted average SPA price; the highest price paid by the acquirer in the preceding 180 days; and a net-asset-value-based price certified by a chartered accountant firm from audited or half-yearly-reviewed financial statements no older than six months, with any fixed assets separately valued by a registered valuer under the Companies (Further Issue of Shares) Regulations, 2020.

Minimum size of the offer (Regulation 14)

Once section 111 is triggered, the public offer must be for at least 50% of the target company’s remaining voting shares (the shares not already held or agreed to be acquired by the acquirer). If the offer is made conditional on a minimum level of acceptances, that minimum cannot exceed 35% of the remaining voting shares.

Illustration: an acquirer already holding 10% agrees to buy a further 20% — the public offer must then be made for 50% of the remaining 70%, i.e. 35% of the total; if conditional, the minimum acceptance level cannot exceed 35% of that 70% (24.5% of the total).

Security the acquirer must furnish (Regulation 15)

On or before the date of the public offer announcement, the acquirer must lodge security with the manager to the offer, in one form or a combination of:

  • cash in an escrow account with a commercial bank rated at least “A”, operated by the manager to the offer;
  • treasury bills or short-term sukuks (original maturity of 12 months or less) with a 5% margin, or other government debt securities with a 10% margin;
  • a bank guarantee from an “A”-rated commercial bank, valid until the manager to the offer certifies all obligations fulfilled; or
  • margin-trading-system-eligible shares with a 30% haircut on current market value, marked to market weekly by the manager to the offer.

The security is released within 7 days of all shareholder payments and obligations being completed (or, on withdrawal, once the manager to the offer certifies the withdrawal was valid) — if the manager to the offer misses that 7-day window, it owes a surcharge of 6-month KIBOR + 4%. Any upward revision of the offer increases the security proportionately.

The target company board’s hands are tied during the offer

From the public announcement of intention until the offer period ends, the target’s board must not: sell, transfer, encumber, or dispose of the undertaking or a sizeable part of it (outside the ordinary course of business); encumber any asset of the company or its subsidiary; issue further shares; enter into any material contract; or appoint anyone representing or interested in the acquirer as an additional director or to fill a casual vacancy (Section 119). Once the acquisition completes, the target must instead allow the board composition to change to give the acquirer proportionate representation — and if it doesn’t happen naturally, the acquirer can force fresh elections within 30 days by notice to the company and the Commission.

Penalties for getting it wrong

The Commission may, after a hearing: debar the acquirer and any persons acting in concert with them from acquiring voting shares of a listed company for 3 years, if a public offer is wrongly withdrawn or any provision of this Part is contravened; disqualify a complicit director, chief executive, CFO, or company secretary from holding such office in a listed company for 2 years; and impose a penalty of up to Rs. 100 million for refusing to furnish required information, failing to comply with an order or direction, or otherwise contravening this Part (Section 126). Separately, the Regulations themselves require equal treatment of all shareholders of the same class and prohibit oppression of minority or non-controlling shareholders (Regulations 28–29).

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