Regulation 3 - Applicability of the Regulation. - SECURITIES AND EXCHANGE BOARD OF INDIA(SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997

Applicability of the regulation. 3. (1) Nothing contained in regulations 10, 11 and 12 of these regulations shall apply to: (a) allotment in pursuance of an application made to a public issue: Provided that if such an allotment is made pursuant to a firm allotment in the public issues, such allotment shall be exempt only if full disclosures are made in the prospectus about the identity of the acquirer who has agreed to acquire the shares, the purpose of acquisition, consequential changes in voting rights, shareholding pattern of the company and in the board of directors of the company, if any, and whether such allotment would result in change in control over the company; (b) allotment pursuant to an application made by the shareholder for rights issue, (i) to the extent of his entitlement; and (ii) up to the percentage specified in regulation 11: Provided that the limit mentioned in sub-clause (ii) will not apply to the acquisition by any person, presently in control of the company and who has in the rights letter of offer made disclosures that they intend to acquire additional shares beyond their entitlement, if the issue is undersubscribed: Provided further that this exemption shall not be available in case the acquisition of securities results in the change of control of management; (c) 1 [***] (d) allotment to the underwriters pursuant to any underwriting agreement; (e) inter se transfer of shares amongst- 2 [(i) group coming within the definition of group as defined in the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) where persons constituting such group have been shown as group in the last published Annual Report of the target company;] (ii) relatives within the meaning of section 6 of the Companies Act, 1956 (1 of 1956); (iii) (a) 3 [Qualifying Indian promoters] and foreign collaborators who are shareholders; (b) 4 [qualifying promoters]: 5 [Provided that the transferor(s) as well as the transferee(s) have been holding shares in the target company for a period of at least three years prior to the proposed acquisition.] 6 [Explanation. ─ For the purpose of the exemption under sub-clause (iii) the term 7 [ qualifying promoter ] means- (i) any person who is directly or indirectly in control of the company; or (ii) any person named as promoter in any document for offer of securities to the public or existing shareholders or in the shareholding pattern disclosed by the company under the provisions of the Listing Agreement, whichever is later; and includes, (a) where the 8 [qualifying promoter] is an individual,- (1) a relative of the 9 [qualifying promoter] within the meaning of section 6 of the Companies Act, 1956 (1 of 1956); (2) any firm or company, directly or indirectly, controlled by the 10 [qualifying promoter] or a relative of the 11 [qualifying promoter] or a firm or Hindu undivided family in which the 12 [qualifying promoter] or his relative is a partner or a coparcener or a combination thereof : Provided that, in case of a partnership firm, the share of the 13 [qualifying promoter] or his relative, as the case may be, in such firm should not be less than fifty per cent (50%); (b) where the 14 [qualifying promoter] is a body corporate,- (1) a subsidiary or holding company of that body; or (2) any firm or company, directly or indirectly, controlled by the 15 [qualifying promoter] of that body corporate or by his relative or a firm or Hindu undivided family in which the 16 [qualifying promoter] or his relative is a partner or coparcener or a combination thereof: Provided that, in case of a partnership firm, the share of such 17 [qualifying promoter] or his relative, as the case may be, in such firm should not be less than fifty per cent (50%);] 18 [(iv) the acquirer and persons acting in concert with him, where such transfer of shares takes place three years after the date of closure of the public offer made by them under these regulations.] 19 [ Explanation .-( 1) The exemption under sub-clauses (iii) and (iv) shall not be available if inter se transfer of shares is at a price exceeding 25% of the price as determined in terms of sub-regulations (4) and (5) of regulation 20. (2) The benefit of availing exemption under this clause, from applicability of the regulations for increasing shareholding or inter se transfer of shareholding shall be subject to such transferor(s) and transferee(s) having complied with regulation 6, regulation 7 and regulation 8;] (f) acquisition of shares in the ordinary course of business by,- (i) a registered stock-broker of a stock exchange on behalf of clients; (ii) a registered market maker of a stock exchange in respect of shares for which he is the market maker, during the course of market making; (iii) by Public Financial Institutions on their own account; (iv) by banks and public financial institutions as pledgees; 20 [(v) the International Finance Corporation, Asian Development Bank, International Bank for Reconstruction and Development, Commonwealth Development Corporation and such other international financial institutions; (vi) a merchant banker or a promoter of the target company pursuant to a scheme of safety net under the provisions of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 in excess of limit specified in sub-regulation (1) of regulation 11;] 21 [(vii) a merchant banker or nominated investor in the process of market making and subscription by the nominated investor to the unsubscribed portion of issue, in terms of Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009: Provided that benefit of exception provided in sub-clause (vii) shall not be available if the acquisition of securities in the process of market making or subscription to the unsubscribed portion of issue results in change in control over the target company, directly or indirectly.] 22 [(ff) acquisition of shares by a person in exchange of shares received under a public offer made under these regulations;] (g) acquisition of shares by way of transmission on succession or inheritance; (h) acquisition of shares by Government companies within the meaning of section 617 of the Companies Act, 1956 (1 of 1956), and statutory corporations: 23 [Provided that this exemption shall not be applicable if a Government company acquires shares or voting rights or control of a listed Public Sector Undertaking through the competitive bidding process of the Central Government 24 [or the State Government as the case may be,] for the purpose of disinvestment;] (i) transfer of shares from State level financial institutions, including their subsidiaries, to co-promoter(s) of the company 25 [or their successors or assignee(s) or an acquirer who has substituted an erstwhile promoter] pursuant to an agreement between such financial institution and such co-promoter(s); 26 [(ia)transfer of shares from venture capital funds or foreign venture capital investors registered with the Board to promoters of a venture capital undertaking or venture capital undertaking pursuant to an agreement between such venture capital fund or foreign venture capital investors with such promoters or venture capital undertaking;] (j) pursuant to a scheme: (i) framed under section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986); (ii) of arrangement or reconstruction including amalgamation or merger or demerger under any law or regulation, Indian or foreign; 27 [(ja)change in control by takeover of management of the borrower target company by the secured creditor or by restoration of management to the said target company by the said secured creditor in terms of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);] (k) acquisition of shares in companies whose shares are not listed on any stock exchange. Explanation.- The exemption under clause (k) above shall not be applicable if by virtue of acquisition or change of control of any unlisted company, whether in India or abroad, the acquirer acquires shares or voting rights or control over a listed company; 28 [(ka)acquisition of shares in terms of guidelines or regulations regarding delisting of securities specified or framed by the Board;] (l) 29 [***] other cases as may be exempted from the applicability of Chapter III by the Board under regulation 4. 30 [(1A) For the removal of doubt, it is clarified that nothing contained in sub-regulation (1) shall affect the applicability of the listing requirements.] 31 [(2) Nothing contained in regulation 10, regulation 11 and regulation 12 of these regulations shall apply to the acquisition of Global Depository Receipts or American Depository Receipts unless the holders thereof, - (a) become entitled to exercise voting rights, in any manner whatsoever, on the underlying shares; or (b) exchange such Depository Receipts with the underlying shares carrying voting rights.] (3) In respect of acquisitions under clauses 32 [***] (e), (h) and (i) of sub-regulation (1), the stock exchanges where the shares of the company are listed shall, for information of the public, be notified of the details of the proposed transactions at least 4 working days in advance of the date of the proposed acquisition, in case of acquisition exceeding 33 [5] per cent of the voting share capital of the company. (4) In respect of acquisitions under clauses (a), (b), 34 [***] (e) and (i) of sub-regulation (1), the acquirer shall, within 21 days of the date of acquisition, submit a report along with supporting documents to the Board giving all details in respect of acquisitions which (taken together with shares or voting rights, if any, held by him or by persons acting in concert with him) would entitle such person to exercise 35 [15] per cent or more of the voting rights in a company. 36 [ Explanation .-For the purposes of sub-regulations (3) and (4), the relevant date in case of securities which are convertible into shares shall be the date of conversion of such securities.] (5) The acquirer shall, along with the report referred to under sub-regulation (4), pay a fee of 37 [twenty five thousand rupees] to the Board, either by a banker s cheque or demand draft in favour of the Securities and Exchange Board of India, payable at Mumbai. ----------------- Notes:- 1. Omitted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. Prior to its omission, clause (c) read as under: (c) preferential allotment, made in pursuance of a resolution passed under Section 81 (1A) of the Companies Act, 1956 (1 of 1956): Provided that, (i) Board Resolution in respect of the proposed preferential allotment is sent to all the stock exchanges on which the shares of the company are listed for being notified on the notice board; (ii) full disclosures of the identity of the class of the proposed allottee (s) is made, and if any of the proposed allottee (s) is to be allotted such number of shares as would increase his holding to 5% or more of the post issued capital, then in such cases, the price at which the allotment is proposed, the identity of such person(s), the purpose of and reason for such allotment, consequential changes, if any, in the board of directors of the company and in voting rights, the shareholding pattern of the company, and whether such allotment would result in change in control over the company are all disclosed in the notice of the General Meeting called for the purpose of consideration of the preferential allotment. 2. 2 Substituted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. Prior to its substitution sub-clause (i) read as under: (i) group companies, coming within the definition of group as defined in the Monopolies and Restrictive Trade Practices Act, 1969 (25 of 1969) . 3. Substituted for the words Indian promoters by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2006, w.e.f. 26-5-2006. 4. Substituted for the word promoters , ibid. 5. Substituted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. Prior to its substitution, the proviso read as: Provided that the transferor(s) as well as the transferee(s) in sub-clauses (a) and (b) have been holding individually or collectively not less than 5% shares in the target company for a period of at least three years prior to the proposed acquisition. 6. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2005, w.e.f. 3-1-2005. 7. Substituted for the word promoter by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2006, w.e.f. 26-5-2006. 8. Substituted for the word promoter by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2006, w.e.f. 26-5-2006. 9. Substituted for the word promoter by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2006, w.e.f. 26-5-2006. 10. Substituted for the word promoter by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2006, w.e.f. 26-5-2006. 11. Substituted for the word promoter by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2006, w.e.f. 26-5-2006. 12. Substituted for the word promoter by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2006, w.e.f. 26-5-2006. 13. Substituted for the word promoter by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2006, w.e.f. 26-5-2006. 14. Substituted for the word promoter by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2006, w.e.f. 26-5-2006. 15. Substituted for the word promoter by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2006, w.e.f. 26-5-2006. 16. Substituted for the word promoter by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2006, w.e.f. 26-5-2006. 17. Substituted for the word promoter by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2006, w.e.f. 26-5-2006. 18. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. 19. Substituted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. Prior to its substitution, Explanation read as follows: Explanation .─ The benefit of availing of exemption from applicability of Regulations for increasing shareholding or inter se transfer of shareholding among group companies, relatives and promoters shall be subject to such group companies or relatives or promoters filing statements concerning group and individual shareholding as required under Regulations 6, Regulation 7 and Regulation 8. 20. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. 21. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2010, w.e.f. 13.04.2010. 22. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. 23. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2002, w.e.f. 29-1-2002. 24. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. 25. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. 26. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2000, w.e.f. 30-12-2000. 27. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2004, w.e.f. 3-9-2004. 28. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2005, w.e.f. 3-1-2005. 29. The word such omitted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. 30. Substituted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2006, w.e.f 26-5-2006. Prior to its substitution, sub-regulation (1A), as amended by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2005, w.e.f. 3-1-2005, read as under: (1A) The benefit of availing exemption under the relevant clauses of sub-regulation (1), shall be subject to compliance with requirement specified in sub-regulation (2A) of regulation 11. 31. Substituted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Third Amendment) Regulations, 2009, w.e.f. 6-11-2009. Prior to this substitution, sub-regulation (2) of regulation 3 read as under: (2) Nothing contained in Chapter III of the regulations shall apply to the acquisition of Global Depository Receipts or American Depository Receipts so long as they are not converted into shares carrying voting rights. 32. The brackets and the word (c) omitted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. 33. Substituted for 2% by the SEBI (Substantial Acquisition of Shares and Takeovers (Amendment) Regulations, 1998, w.e.f. 28-10-1998. 34. The brackets and the word (c) omitted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. 35. Substituted for 10% by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 1998, w.e.f. 28-10-1998. 36. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. 37. Substituted for Rs 10,000/- by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2006, w.e.f. 21-8-2006.