The Automatic Exemption
Regulation 10(1)(d)(iii) is the primary route for scheme acquisitions. It exempts an acquisition pursuant to a scheme of arrangement or amalgamation sanctioned by a competent tribunal from the open offer obligation. The exemption is available without a SEBI application, provided the acquisition is genuinely pursuant to the scheme and the Regulation 10(6) disclosure is filed.
The Regulation 11 Route
Where the acquisition does not fall within the automatic exemption—for example, because the scheme involves an acquisition by a person who is not a party to the scheme, or because the acquisition is structured in a way that does not fit the Regulation 10(1)(d)(iii) language—the acquirer must apply to SEBI under Regulation 11 for a specific exemption. The application should set out the reasons for the exemption, the acquisition’s terms, and the impact on the public shareholders.
The Conditions
SEBI grants the Regulation 11 exemption on conditions, including the public announcement of the acquisition, the independent directors’ recommendation, and the shareholders’ approval where required. The conditions are designed to protect the public shareholders’ exit rights, and the acquirer should build them into the scheme’s implementation plan.
The Timing
The Regulation 11 application must be made before the acquisition, not after. A post-facto application is generally rejected, and the acquirer may face an open offer obligation that it cannot satisfy. The application should be filed well before the NCLT’s sanction order, so that the exemption is in place when the scheme becomes effective.
The Documentation
The file should contain: the exemption application; SEBI’s order; the conditions imposed; the compliance evidence; and the Regulation 10(6) disclosure (if applicable). A scheme file that relies on the automatic exemption without verifying its applicability is exposed to a SAST enforcement action.
Call to Action: For SAST exemption application drafting, Regulation 11 strategy, or SEBI coordination, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.