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

Hamsa Textiles Ltd's shares are listed on a recognised stock exchange. An investor, Rohan, plans to buy shares of the company so that he gains control of it. Under Section 12A of the SEBI Act, 1992, what does the Act say about acquiring control or securities beyond a percentage of equity share capital?

Section 12A(f) prohibits acquiring control or securities above a stated percentage of equity share capital of a listed or proposed-to-be-listed company only where this is done in contravention of SEBI regulations. Acquisitions made in compliance with those regulations are not barred.

  1. AIt is barred only when done in contravention of the regulations made under the ActCorrect
  2. BIt is barred in every case, whatever the regulations provide
  3. CIt is barred only if the company is unlisted
  4. DIt is barred only if the acquirer is a registered intermediary

Explanation

Clause (f) of Section 12A bars a person from acquiring control of a company, or securities above a stated percentage of its equity capital, where the securities are listed or proposed to be listed, in contravention of the regulations made under the Act. The bar is therefore tied to the regulations, so acquisition in compliance with them is not prohibited. The Act does not ban it in every case, and it does not depend on the acquirer being an intermediary.

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