RECENT SECURITIES AND EXCHANGE BOARD OF INDIA IN CONNECTION WITH MERGER AND CONSOLIDATION
Mumbai, the 29th day of January 2002
SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) (AMENDMENT) REGULATIONS, 2002
S. O. 127 (E). - In exercise of the powers conferred by sub-section (1) of section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to amend the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
In the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the Regulations) -
In Regulation 3, in sub-regulation (1), in clause (h), the following provison shall be inserted, namely :-
"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 for the purpose of disinvestment."
In Regulation 20, -
In sub-regulation (2), in the Explanation, for the words"(after receiving the cabinet approval) announces the name of successful bidder" the words "opens the financial bid" shall be substituted.
In sub-regulation (3),-
i) in the Explanation (ia), for the words "after receiving the cabinet approval, announces the name of the successful bidder" the words "opens the financial bid" shall be substituted.
After sub-regulation (3), the following sub-regulation shall be inserted, namely:-
"(3A) Notwithstanding anything contained in sub-regulation (3), in case of disinvestment of a Public Sector Undertaking, whose shares are infrequently traded, the minimum offer price shall be the price paid by the successful bidder to the Central Government, arrived at after the process of competitive bidding of the Central Government for the purpose of disinvestment."
d) In sub-regulation (6), in Explanation 1, the words "or cum -dividend" shall be inserted after the word "cum-bonus".
Consolidation of Schemes
For the information of all mutual funds, it is clarified that such consolidations shall be viewed as changes in fundamental attributes of the related schemes and the mutual funds shall comply with the requirements laid down in the SEBI (Mutual Funds) Regulations, 1996, for the purpose.
Further, with a view to ensure that all important disclosures are made to the investors of the concerned schemes and their interests are protected in such cases, the mutual funds shall take the following steps:
Approval by Boards of AMCs and Trustees
The proposal and modalities of the merger or consolidation of schemes shall be approved by the Boards of the AMC and Trustees after their ensuring that the interests of the unitholders of all concerned schemes have been protected.
After approval by the Boards of AMCs and Trustees, the mutual funds shall file such proposals with SEBI, alongwith the draft offer document and requisite fees in case a new scheme emerges after merger or consolidation and the draft letter to the unitholders, in line with the procedural requirements prescribed vide SEBI Circular No. MFD/CIR No. 22/2311/03 dated January 30, 2003.
The letter to the unitholders, giving them option to exit at prevailing NAV without exit load, shall disclose all relevant information enabling them to take well informed decisions, including information on the following aspects:
(i) information on the investment objective, asset allocation and the main features of the new consolidated scheme
(ii) basis of allocation of new units by way of a numerical illustration
(iii) percentage of total NPAs and percentage of total illiquid assets to net assets of the individual schemes as well as in the consolidated scheme
(iv) the tax impact of the consolidation of schemes on the unitholders
(v) any other disclosures as specified by trustees
(vi) any other disclosures as directed by SEBI
Maintenance of Records
The AMCs shall maintain records of dispatch of the letters to the unit holders giving them the option to exit at prevailing NAVs without exit loads and the responses received from them. A report in this regard giving information on total number of unitholders in the schemes and their net assets, number of unit holders who opted to exit and net assets held by them, and number of unit holders and net assets in the consolidated scheme, shall be filed with SEBI.
These clarifications and guidelines are issued in accordance with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996.