An NCLT scheme that results in the acquisition of control or a substantial stake in a listed company triggers the mandatory open offer obligation under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. Regulation 10(1)(d)(ii) exempts an acquisition that is made pursuant to a scheme of arrangement “by an order of a court or a tribunal” from the open offer requirement. The exemption is the principal relief for an NCLT-approved scheme, but it is not available for every scheme.
The Scope of the Exemption
The exemption applies where the acquisition is made by an order of a court or a tribunal. The NCLT is a tribunal within the meaning of the regulation, and an NCLT-sanctioned scheme therefore qualifies. The exemption is not automatic; the acquirer must file an application with SEBI, and SEBI may grant the exemption subject to conditions.
The Fast-Track Gap
The exemption does not extend to a scheme approved by the Regional Director under Section 233. The Regional Director is not a court or a tribunal; it is an administrative authority. A fast-track merger that results in a change of control therefore does not qualify for the Regulation 10(1)(d)(ii) exemption, and the acquirer may be required to make an open offer. This is a critical distinction that a company considering the fast-track route must factor into its planning.
The Application
The exemption application must be filed with SEBI before the scheme is implemented. The application must set out the scheme, the acquisition, the change of control, and the grounds for the exemption. SEBI may seek clarifications and may impose conditions. The exemption order is a condition precedent to the scheme’s implementation.
A technically sound scheme includes a takeover code analysis at the structuring stage, and it determines whether the exemption is available or whether the transaction must be structured to avoid the open offer trigger.
Call to Action
Anuj Desai & Associates advises listed companies and acquirers on the SEBI Takeover Code aspects of an NCLT scheme—from the Regulation 10(1)(d)(ii) exemption and the SEBI application to the fast-track gap and the open offer planning. If your scheme involves a change of control, we can help you secure the exemption.
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