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CS Executive · Capital Market and Securities Laws · Acquisition of Shares and Takeovers - Concepts

Gupta Foods Ltd, a listed company, is acquired in a hostile bid. The acquirer, Varun Enterprises, was required to make a public announcement to acquire shares at a minimum price but failed to do so. Under the SEBI Act, 1992, what is the consequence?

Under Section 15H of the SEBI Act, failing to make the required public announcement at a minimum price attracts a penalty of at least ten lakh rupees, extending to twenty-five crore rupees or three times the profits made, whichever is higher. Hostile bids enjoy no exemption.

  1. ANo consequence, as hostile bids are exempt
  2. BOnly a warning from the stock exchange
  3. CPenalty of not less than ten lakh rupees, extendable to twenty-five crore rupees or three times the profits made, whichever is higherCorrect
  4. DFixed penalty of one lakh rupees

Explanation

Section 15H penalises failure to make a public announcement to acquire shares at a minimum price. The penalty is at least ten lakh rupees and may extend to twenty-five crore rupees or three times the profits from the failure, whichever is higher. The nature of the bid, hostile or friendly, gives no exemption.

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