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

Orion Steels Ltd is listed. An acquirer made a public offer by sending a letter of offer, and several shareholders tendered shares, but the acquirer did not pay them the consideration. Which assessment under the SEBI Act, 1992 is most accurate?

Failing to pay consideration to shareholders who sold under a letter of offer is an independent ground for penalty under Section 15H(iv). Sending the letter does not protect the acquirer, and the penalty ranges from ten lakh rupees up to twenty-five crore rupees or three times profits, whichever is higher.

  1. ANon-payment to shareholders who sold under the letter of offer is itself a ground for penalty under Section 15HCorrect
  2. BNo penalty applies once the letter of offer has been sent
  3. CPenalty applies only if the acquirer also failed to disclose prior shareholding
  4. DPenalty is limited to ten lakh rupees as a fixed amount

Explanation

Section 15H(iv) penalises failure to pay consideration to shareholders who sold their shares pursuant to the letter of offer. It is an independent limb, so sending the letter does not shield the acquirer, and no prior disclosure failure is needed. The penalty is a range with a minimum of ten lakh rupees, not a fixed cap.

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