Understanding SEBI (SAST) Regulations 2011 and Inter Se Transfer Exemptions

Overview of SEBI (SAST) Regulations, 2011 and Exemptions for Inter Se Transfers

The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, mandates that an acquirer must make a public announcement to shareholders of a Target Company when they acquire shares or voting rights exceeding stipulated thresholds as outlined in Regulations 3, 4, and 5. However, Regulation 10 provides specific exemptions to these rules under certain conditions.

Qualification for Automatic Exemption under Regulation 10

Automatic Exemption Conditions

Regulation 10(1)(a) specifies an automatic exemption from the open offer requirements under Regulations 3 and 4 when shares are acquired through inter se transfers among qualifying parties, provided the defined conditions are met:

Immediate Relatives:
- Immediate Relatives include an individual's spouse, parents, siblings, and children.
Promoter Transfers:
- Shares transferred between promoters listed in the shareholding pattern as per the Listing Agreement or SEBI regulations for at least three years before the acquisition.
Company Affiliates:
- Transfers of shares among a company and its subsidiaries, holding company, and other entities where the same person controls at least 50% of the equity shares.
Concert Parties:
- Transfers amongst persons acting in concert and disclosed as such for at least three years preceding the acquisition, as stated in the shareholding pattern.
Shareholders Acting in Concert:
- Transfers between shareholders who have acted in concert for a minimum of three years before the acquisition, provided that the acquisition does not impact the proportional voting rights of the concerned parties.

Compliance Criteria for Exemption

To qualify for the exemption, the following conditions must be met:

Pricing Regulations:
- If the shares are frequently traded, the acquisition price should not exceed 25% of the volume-weighted average market price over the last 60 days prior to the notice of the proposed inter se transfer.
- For infrequently traded shares, the price must not exceed 25% of the price determined under Regulation 8(2)(e).
Disclosure Obligations:
- Compliance with Chapter V pertaining to:
  - Regulation 29: Disclosure of acquisition and disposal.
  - Regulation 30: Continuous Disclosure.
  - Regulation 31: Disclosure of encumbered shares.

Reporting Requirements for Inter Se Transfers

Under Regulation 10(1)(a), both pre-acquisition and post-acquisition reporting requirements are established:

Stage	Relevant Regulation	Disclosure Requirement	Timelines	By	To
Pre-Acquisition Reporting	Regulation 10(5)	Intimation of details of the proposed acquisition	At least four working days prior	Acquirer	Stock exchange where the Company is listed
Post-Acquisition Reporting	Regulation 29(2)	Aggregate shareholding and change in shareholding/voting rights exceeding 2%	Within two working days of the change	Acquirer & Seller	1. Company <br> 2. Stock exchange where shares are listed
Post-Acquisition Reporting	Regulation 10(6)	Filing of report	Not later than four working days from acquisition	Acquirer	Stock exchange where the shares of the Company are listed
Post-Acquisition Reporting	Regulation 10(7)	Submission of detailed report with a non-refundable fee of Rs. 150,000	Within twenty-one working days of acquisition	Acquirer	Securities and Exchange Board of India (SEBI)

Additional Disclosure Obligations

Subject to the SEBI (Prohibition of Insider Trading) Regulations, 2015:

Relevant Regulation	Disclosure Requirement	Timelines	By	To
Regulation 7(2)(a)	Number of securities acquired	Within two trading days	Buyer	Company
Regulation 7(2)(a)	Number of securities disposed of	Within two trading days	Seller	Company
Regulation 7(2)(b)	Trading particulars of acquirer and seller	Within two trading days	Company	Stock exchange where shares are listed

Conclusion

The inter se transfer of shares among qualifying parties is exempt from the public offer requirements under SEBI (SAST) Regulations, 2011, provided strict conditions are observed. A thorough understanding of these exemptions and adherence to reporting requirements is essential for stakeholders engaged in such transactions.