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Fine balacing act of SEBI
August, 01st 2011

The main objective of a code to govern takeovers of listed companies is to ensure that the interests of minority shareholders are protected. This was the key premise on which theAchuthan committee had based its recommendations . There, however, was afeeling that perhaps in a few areas the committee had tended to ignore market realities while trying to protect the minority shareholders.

Take for example the committee's original recommendation that an Open Offer should mandatorily be for 100% of the outstanding shares. The report pointed out that a partial open offer provision allowed for promoters to sell 100% of their holdings in a company. But if this sale triggered an open offer and it was partial, the other shareholders may not get an opportunity for a 100% exit. Though minority investorfriendly , this would have been too onerous and made any control stake acquisition very expensive.

It would have also put Indian acquirers at a disadvantage as they do not get bank funding for takeovers would have found it very difficult to fund 100% open offers. On the other hand, international companies who can raise funds cheaply would have been at an advantage. The committee discussed this point but held that "philosophy of equitable and fair treatment of all shareholders should have a primacy over other considerations." Sebi while deliberating on the issue has taken a more considered approach and taken market realities into account.

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