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Takeover panel, industry discuss new mergers and acquisitions rules
April, 22nd 2011

The Takeover Regulations Advisory Committee , chaired by chief economic advisor Kaushik Basu , met industry representatives on Thursday to discuss the amendments in the new mergers and acquisitions code as proposed by the C Achuthan-led Sebi panel.

"We have received comments from all parties. The government will now review these recommendations. If required we may hold another meeting before finalising the new norms," said a senior government official. The meeting was also attended by senior officials from the Ministry of Corporate Affairs and Securities and Exchange Board of India .

While industry bodies, such as FICCI, have supported raising of the initial acquisition threshold to 25% from the current trigger of 15%, the cost accounting body ICAI has suggested that the limit should be kept at 15%. "We have argued that this will lead to hostile takeover threat to listed companies with lower promoter shareholding," said Vinod Jain, chairman of the committee on financial markets and investor protection, ICAI.

CII opposed the proposal which requires board of directors of a target company to appoint a committee of independent directors to provide recommendations to the shareholders on the open offer .

"Increased liabilities for independent directors may have the effect of further discouraging competent and experienced individuals from assuming (the post of) independent directors of listed companies, which would be detrimental to the overall interests of corporate governance," said CII in its presentation.

There were also divergent views on allowing open offer for 100% of the shares with ICAI opposing the move on grounds that this will result in more companies getting delisted. This will reduce the market cap of Indian companies and investors will have lesser investment opportunities.

All participants also suggested to the government that there should be clearer definition of 'control' and the need to harmonise the new Takeover Code with the requirements of merger regulation under the Competition Law.

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