The Securities and Exchange Board of India has proposed that the exit offer to dissenting shareholders should be allowed only if a certain percentage, say 10 per cent, of the shareholders disagreed with the objectives for which they had raised money from investors.
SEBI has also said the exit opportunity should be given only if the amount utilised is less than a specified percentage of the total amount raised for the objects of the issue, say, 75 per cent.
“There may be instances wherein a company has already utilised a higher percentage of the amount raised and intends to change the objects to some extent due to certain reasons. In such cases, the promoters or persons in control should give exit opportunity only if the amount utilised is less than a specified percentage of the total amount raised for the objects of the issue, e.g. 75 per cent,” SEBI said while issuing a discussion paper on the issue.
The exit price should be the highest of the volume weighted average price (VWAP) for the last 52 weeks, the highest price paid for an acquisition during the 26 weeks preceding the date of announcement or VWAP for the last 60 days before the announcement date, proposed SEBI. Companies with no identifiable promoters or shareholders having control can be exempt from this requirement.
Exemption has been mooted in case a mandatory open offer is triggered owing to promoter/promoter group shareholding breaching the 25 per cent limit due to shareholder exit. This is also applicable in case the creeping acquisition limit is breached. In such instances, it has been proposed to provide one year to achieve the minimum public shareholding level of 25 per cent.
Creeping acquisition refers to the five per cent limit allowed for promoters to increase their stake in the company every year. This is subject to a maximum stake of 75 per cent.
SEBI has also suggested the manner in which such an exit opportunity can be provided.
On Monday, the SEBI board had approved the proposal to initiate a public consultation process regarding exit opportunity to dissenting shareholders in case of changes in the objectives for which the company had raised money from investors.