SECURITIES AND EXCHANGE BOARD OF INDIA

(SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS)

REGULATIONS, 1997

“Acquirer”
Means any person who, directly or indirectly, acquires or agrees to acquire shares or voting
rights in the target company, or acquires or agrees to acquire control over the target company,
either by himself or with any person acting in concert with the acquirer

“Control”
Shall include the right to appoint majority of the directors or to control the management or
policy decisions exercisable by a person or persons acting individually or in concert,
directly or indirectly, including by virtue of their shareholding or management rights or
shareholders agreements or voting agreements or in any other manner.

“Disinvestment”
Means the sale by the Central Government [or by the State Government as the case may
be] of its shares or voting rights and/or control, in a listed Public Sector Undertaking;]

“Investigating officer”
Means any person appointed by the Board under regulation 38;

“Person acting in concert”

(1) Persons who, for a common objective or purpose of substantial acquisition of shares or
voting rights or gaining control over the target company, pursuant to an agreement or
understanding (formal or informal), directly or indirectly co-operate by acquiring or
agreeing to acquire shares or voting rights in the target company or control over the
target company.
(2) Without prejudice to the generality of this definition, the following persons will be
 deemed to be persons acting in concert with other persons in the same category,
unless the contrary is established :
(i) A company, its holding company, or subsidiary or such company or company under
the same management either individually or together with each other;
(ii) A company with any of its directors, or any person entrusted with the management of the
funds of the company;
(iii) Directors of companies referred to in sub-clause (i) of clause
(2) And their associates;
(iv) Mutual fund with sponsor or trustee or asset management company;
(v) Foreign institutional investors with sub-account(s);
(vi) Merchant bankers with their client(s) as acquirer;

Analysis

Offer period

During 1997 – Means the period between the date of public announcement of the first offer and
the date of closer of that offer.

During 2002 – Means the period between the date of entering in the Memorandum of
undertaking or the public announcement.

New Insertion

The Stock Exchange where shares of the company are listed shall for the information of the
public, be notified of the details of the proposed transactions at least four working days in
advance of the date of the proposed acquisition, in the case acquisition exceeding some
percentage of voting share capital of the company.
 Years %age
1998 2%
2002 5%

Public Share holding

During 1997 – Means share holding held by persons other than promoters.

During 2002 – Means share holding in the hand of persons other than the acquirer and persons
acting in concert with him.

Omissions (2002)

Allotment pursuant to an application made by the share holder for the right issue:-

Preferential Allotment made in pursuance of a resolution passed under section 81 (1A) of the
companies act 1956.

Provided that:-

I. Board Resolution of the proposed preferential allotment if send to all the stock exchanges
on which company’s shares are listed.
II. Full disclosure of the identity of the class of the proposed allottee is made and if is to be
allotted such number of shares as would increase his holding to 5% or more of the post
issued Capital, the price if allotment, the persons identity, purpose for the allotment and
consequential control, change in management are all to be disclosed in the notice of the
general meeting.

Application to Regulation

During 1992 – The transfer as well as transferee in clause (A & B) as the qualify promoters
should have been holding individual or collectively not less than 5% shares in the target
company for a period of at least 3 years prior to the proposed acquisition.

During 2002 – The transferor and the Transferee have been holding shares in the target company
for a period of at least 3 years prior to the proposed acquisition.
 Years Rules & Regulation before Years Amended Rules & Regulation
Scams offer Scams
A 1997 Not less than 10 % but more than 1998 15% or more but less than 55%
51% of holdings of holdings
B 1997 10% of the voting right 2002 5% of the voting right
C 1997 In any period of 12 months 2002 In any financial period ending
31st March
D 1997 75% share holdings 2005 55% share holdings

Underwriter

New Insertion
An underwriter or any of his employee shall not render directly or indirectly any investment
advice about any security in the publicly accessibly media, weather real time or non real time,
unless a disclosure of his interest including his long or short position in the said security has been
made.

Mode of Payment

During 1992 – The fees specified, shall be payable by cheque or a draft in the favor of “The
Securities & Exchange Board of India” at Bombay or at any respective regional office.

During 1995 – The fees specified, shall be payable by a draft in the favor of “The Securities &
Exchange Board of India” at Bombay or at any respective regional office.

Payment of Fees

During 1993 – Every underwriter shall for registration or renewal of registration pay registration
fee as :-

 Rupees two lakh as first installment for the first year from the date of initial grand of
certificate
 Rupees two lakh as second installment for second year.
 Rupees one lakh for third for third installment for the third year.
 Renewal Fee rupees twenty thousand

During 1995 – Every underwriter shall for registration or renewal of registration pay registration
fee as :-

 Every underwriter shall pay a some of rupees five lakh as registration fee at the time of
grand of certificate by the board.
 Every underwriter to keep registration in force shall pay renewal fees of rupees two lakh
every year from the fourth year from the date of initial registration.
 The fee referred above shall be paid in fifteen days

1992 1995
Registration Fee 200000 500000
Renewal Fee 20000 200000
Procedure for action in case of default

During 1992 – An underwriter or a stock broker or a merchant banker entitled to carry on

business of underwriting without obtaining a separate certificate under rule 3 who :-

 Fail to comply with any condition subjected to which certificate has been granted.
 Contravenes any of the provision shall liable to:-
 suspension of registration
 Cancellation of Registration

During 2002 – An underwriter or a stock broker or a merchant banker entitled to carry on

business of underwriting without obtaining a separate certificate under rule 3 who:-

 Fail to comply with any condition subjected to which certificate has been granted.
 Contravenes any of the provisions of the act shall be in the mannered provided under
“The Securities & Exchange Board of India” regulation 2002.

Collective Investment Schemes

Consideration of application for grant of provisional registration (70)

Amendments

The Board after being satisfied that the conditions specifies in the regulation (70) are fulfilled
may grant provisional registration to the applicant subject to the following conditions:-

S. No. Regulations Years Amendments

1992 2002
1. The Applicant shall get the existing schemes 1 2
rated by the credit rating agency, from the date
of grant of provisional registration
2. The Applicant shall get the existing schemes 1 2
audited by the auditor, from the date of grant
of provisional registration.
3. The Applicant shall get the existing schemes 1 2
appraised by appraising agency, from the date
of grant of provisional registration.
4. The Applicant shall create a trust and appoint 1 2
trustee in the manner specified in chapter IV of
these regulation, from the date of grant of
provisional registration.
5. The Applicant shall comply with accounting 1 2
and valuation norms in respect of schemes
floated before the commencement of these
regulations

Prohibition of fraudulent

New Insertion 2002

Clause 11 (A) – A summon or noticed issued by the board under these regulation may be serves
in the manner provided in regulation 22 of SEBI.

Stock Broker

Definitions.
(aa) "certificate" means a certificate of registration issued by the Board;
(ab) "change of status or constitution" in relation to a stock broker or a sub-broker
means any change in its status or constitution of whatsoever nature and
includes—
(i) in case of a body corporate—
(A) Amalgamation, demerger, consolidation or any other kind of corporate
restructuring falling within the scope of section 391 of the Companies
Act, 1956 (1 of 1956) or the corresponding provision of any other law
for the time being in force;
(B) Change in its managing director, whole-time director or director
appointed in compliance with clause (v) of sub-rule (4A) of rule 8 of the
Securities Contracts (Regulation) Rules, 1957; and
(C) Any change in control over the body corporate;

(d) "stock exchange" means a stock exchange which is for the time being recognised by the
Central Government under Section 4 of the Securities Contracts (Regulation) Act, 1956 (42 of
1956);

(e) "Stock broker" means a member of a stock exchange;

(f) "Sub-broker" means any person not being a member of a stock exchange who acts on behalf
of a stock-broker as an agent or otherwise for assisting the investors in buying, selling or dealing
in securities through such stock-brokers;

(g) "Regulations" means the Securities and Exchange Board of India (Stock Brokers and Sub-
Brokers) Regulations, 1992.

New Insertion

The board on being satisfied that stock broker is eligible, shall grant a certificate D –

Provided that, subjected to the conditions, a stock broker holding a certificate of registration
eligible for trading on SME plate form established without obtaining a separate certificate of
registration for trading on SME plate form.

Application for Registration of sub-broker:-

 The Applicant is a fit and proper person

 The Applicant has the necessary infrastructure like adequate office space, equipment and
man power to effectively discharge his activities.
During 2003 – The Applicant has the necessary infrastructure like adequate office space,
equipment and man power to effectively discharge his activities.

Application Form

During 1998- The stock exchange shall forward the applications who comply with all the
requirement of the board as soon as possible but not later than 30 days from the date of receipt.

During 2003 – The stock exchange shall forwarded the application form B of such applicant
along with recommendation letter in form C issued by stock broker with whom he is affiliated
and also the recognition letter in form A issued by security exchange within 30 days.

Merchant Banker

Registration Fee

Every Merchant Banker shall pay some as a registration fee at the time of certificate by the
board.

Years Amount
1992 500000
2006 1000000

Renewable Fee

A merchant banker to keep a registration in force shall pay a renewable fee every 3 years from
the fourth year from the date of initial registration.

Years Amount
1992 250000
2006 500000

New Insertion
During 2006 – The non-refundable fee payable along with an application for registration under
section 1 A of regulation 3 or an application for renewable of a registration shall be a some of
twenty-five thousands rupees.

Years New Insertion Amount

2006 Registration fee and Renewable fee 25000

Omission

The number of lead merchant banker may not exceed in case of any issue of size of issue number
of merchant banker.

S. No. Amount Number

1. >50 crore Two
2. 50 crore <_ 100 crore Three
3. 100 crore <_ 200 crore Four
4. 200 crore <_ 400 crore Five
5. 400 crore and above As agreed by board

Disclosure to the Board

New insertion

A merchant banker shall disclose to the board, as and when required the following information
namely:-

I. His responsibility with regard to the management of the issue.

II. Any change in the information or particulars previously furnished which have a bearing
on the certificate on granted to it.
III. The name of the body corporate who issues has managed or has been associated with.
IV. The particular relating to the breach of the capital adequacy requirement as specified.
V. Relating to his activities as a manager, underwriter, consultants or advisor to an issue.
Issue of capital and disclosure requirement

New Insertion – “Qualified Institution buyers include” insurance fund setup and managed by
army, navy or air force of the union.

The average market capitalization of the public share holding of the issuer is at least.

Year Amount
2009 10000 crore
2010 5000 crore

New Insertion :- The annual trading turnover of the equity share of the issuer of the during six
calendar months immediately proceeding the month of the reference data and been at least 2% of
the weighted average number of equity share listed during six month period: provided that for
issuer, who’s public share holding is less equity shares has been at least 2% of the weighted
average number of the equity share available as free floating during such six months period.

Allotment Procedure and the basis of Allotment

The allotment of specified securities to the applicant other than anchor investors shall be on
proportionate basis with the specified investors categories and the numbers of securities allotted
shall be rounded off to the nearest integer, subject to minimum allotment been equal to the
minimum to the application size as determined and disclosed by the issuer:-

Provided that value of sub regulation I A Clause (A) of sub regulation.

Of Regulation 42 shall not exceed one lakh rupees

Reservation for employee along with right issues

Subject to another applicable provision to these regulation the issuer may make reservation for
its employees along with right issue subjected to the condition that value of allotment to any
employees shall not exceed one lakh rupees.
Port Folio Manager

Registration Fee:- Port Folio Manager shall pay 5 lakh on granting certificate of registration.

Renewal Fee:- To keep up registration 2 to 5 lakh every three year in 4th initial year.

Initial fees within 15 days from the receipt of intimation.

Mode of Payment

Fee should be pay thought demand draft in favor of “Securities & Exchange Board of India”.

New Insertion 2000, 16 A

Port Folio Manager may manage funds raised or collected or brought from outside India in
accordance with SEBI (Foreign Institutional Investors).

2006 -

 Regulation 6 (2) Clause (d)

Principal Officer means employees of the port folio manager who has been designated
by the port folio manager.
 In regulation 6 (2) Clause ( c )
 A professional qualification in finance, law, accountancy or business management from a
university or an institution recognized by a ventral government or a state government or a
foreign university.

Appointment of Custodian 16 (b) every port folio manager shall appoint a custodian in respect of
security managed or administrated by it nothing contained in this regulation shall applied to the
port folio manager –

 Who has total assets under management of value less than 500 crore rupees.
 Who perform purely advisory function.

Holding Enquiry by Enquiry officer and imposing penalty

Communication of finding etc to the port folio manager:-

 The board shall after consideration of the inspection report communicate the finding to
the port folio manager.
 The board shall after consideration of the inception report communicate the findings to
the port folio manager to give him opportunity of being heard before any action is being
taken by the board on the finding s of the inspecting authority