Applicability of the Regulation and Exemptions to its Provisions (Regulation 3)

(1) Nothing contained in Regulations 10, Regulation 11 and Regulation 12 of these regulations shall apply to :

1. allotment in pursuance of an application made to a public issue.

   Provided that if such an allotment is made pursuant to a firm allotment in the public issues, such allotment shall be exempt only if full disclosures are made in the prospectus about the identity of the acquirer who has agreed to acquire the shares, the purpose of acquisition, consequential changes in voting rights, shareholding pattern of the company and in the Board of Directors of the Company, if any, and whether such allotment would result in change in control over the company

2. allotment pursuant to an application made by the shareholder for rights issue,

   1. to the extent of his entitlement; and

   2. upto the percentage specified in Regulation 11:

   Provided that the limit mentioned in sub-clause (ii) will not apply to the acquisition by any person presently in control of the company and who has in the rights letter of offer made disclosures that they intend to acquire additional shares beyond their entitlement if the issue is undersubscribed.

   Provided further that this exemption shall not be available in case the acquisition of securities results in the change of control of management;

3. Deleted

4. allotment to the underwriters pursuant to any underwriting agreement;

5. interse transfer of shares amongst :-

   1. group coming within the definition of group as defined in the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) where persons constituting such group have been shown as group in the last published Annual Report of the target company.

   2. relatives within the meaning of Section 6 of the Companies Act, 1956 (1 of 1956) ;

   3.  

      1. Indian promoters and foreign collaborators who are shareholders;

      2. Promoters:

      Provided that the transferor(s) as well as the transferee(s) have been holding shares in the target company for a period of at least three years prior to the proposed acquisition.

   4. the acquirer and persons acting in concert with him, where such transfer of shares takes place three years after the date of closure of the public offer made by them under these Regulations.

   Explanation:-

   1. The exemption under sub-clauses (iii) and (iv) shall not be available if inter se transfer of shares is at a price exceeding 25% of the price as determined in terms of sub-regulations (4) and (5) of regulation 20.";

   2. The benefit of availing exemption under this clause, from applicability of the Regulations for increasing shareholding or inter se transfer of shareholding shall be subject to such transferor(s) and transferee(s) having complied with Regulation 6, Regulation 7 and Regulation 8."

6. acquisition of shares in the ordinary course of business by,-

   1. a registered stock-broker of a stock exchange on behalf of clients;

   2. a registered market maker of a stock exchange in respect of shares for which he is the market maker, during the course of market making;

   3. by Public Financial Institutions on their own account;

   4. by banks and public financial institutions as pledgees;

   5. the International Finance Corporation, Asian Development Bank, International Bank for Reconstruction and Development, Commonwealth Development Corporation and such other international financial institutions,

   6. a merchant banker or a promoter of the target company pursuant to a scheme of safety net under the provisions of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 in excess of limit specified in sub-regulation (1) of Regulation 11.

   (ff) acquisition of shares by a person in exchange of shares received under a public offer made under these Regulations.

7. acquisition of shares by way of transmission on succession or inheritance;

8. acquisition of shares by government companies within the meaning of Section 617 of the Companies Act, 1956 (1 of 1956) and statutory corporations;

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 18[or the State Government as the case may be] for the purpose of disinvestment."

9. transfer of shares from state level financial institutions, including their subsidiaries, to co-promoter(s) of the company 19[or their successors or assignee(s) or an acquirer who has substituted an erstwhile promoter] pursuant to an agreement between such financial institution and such co-promoter(s);

   (ia) transfer of shares from venture capital funds or foreign venture capital investors registered with the Board to promoters of a venture capital undertaking or venture capital undertaking pursuant to an agreement between such venture capital fund or foreign venture capital investors with such promoters or venture capital undertaking;

10. pursuant to a scheme

    1. framed under Section 18 of the Sick Industrial Companies (Special Provisions) Act,1985;

    2. of arrangement or reconstruction including amalgamation or merger or demerger under any law or regulation, Indian or foreign.

11. acquisition of shares in companies whose shares are not listed on any stock exchange;

    Explanation: The exemption under clause (k) above shall not be applicable if by virtue of acquisition or change of control of any unlisted company, whether in India or abroad, the acquirer acquires shares or voting rights or control over a listed company.

    1. other cases as may be exempted from the applicability of Chapter III by the Board under Regulation 4.

    2. Nothing contained in Chapter III of the Regulations shall apply to the acquisition of Global Depository Receipts or American Depository Receipts so long as they are not converted into shares carrying voting rights.

    3. In respect of acquisitions under clauses (e), (h) and (i) of sub-regulation (1), the stock exchanges where the shares of the company are listed shall, for information of the public, be notified of the details of the proposed transactions at least 4 working days in advance of the date of the proposed acquisition, in case of acquisition exceeding 5% of the voting share capital of the company.

    4. In respect of acquisitions under clauses (a),(b),(e) and (i) of sub-regulation (1), the acquirer shall, within 21 days of the date of acquisition, submit a report along with supporting documents to the Board giving all details in respect of acquisitions which (taken together with shares or voting rights, if any, held by him or by persons acting in concert with him) would entitle such person to exercise 15% or more of the voting rights in a company.

       Explanation - For the purposes of sub-regulations (3) and (4), the relevant date in case of securities which are convertible into shares shall be the date of conversion of such securities.

    5. The acquirer shall, along with the report referred to under sub-regulation (4), pay a fee of Rs.10, 000/- to the Board, either by a bankers cheque or demand draft in favour of the Securities and Exchange Board of India, payable at Mumbai.

1. The Board shall for the purposes of this Regulation constitute a Panel of majority of independent persons from within the categories mentioned in sub-section (5) of Section 4 of the Act.

2. For seeking exemption under clause (l) of sub-regulation (1) of Regulation (3), the acquirer shall file an application supported by a duly sworn affidavit with the Board, giving details of the proposed acquisition and the grounds on which the exemption has been sought.[Format of application]

3. The acquirer shall, along with the application referred to under sub-regulation (2), pay a fee of Rs. 25, 000/- to the Board, either by a bankers cheque or demand draft in favour of the Securities and Exchange Board of India, payable at Mumbai.

4. The Board shall within 5 days of the receipt of an application under sub-regulation (2) forward the application to the Panel.

5. The Panel shall within 15 days from the date of receipt of application make a recommendation on the application to the Board.

6. The Board shall after affording reasonable opportunity to the concerned parties and after considering all the relevant facts including the recommendations, if any, pass a reasoned order on the application under sub-regulation (2) within 30 days thereof.

7. The order of the Board under sub-regulation (6) shall be published by the Board. Power of the Board to grant exemption

Regulation 5

In order to remove any difficulties in the interpretation or application of the provisions of these Regulations, the Board shall have the power to issue directions through guidance notes or circulars:

Provided that where any direction is issued by the Board in a specific case relating to interpretation or application of any provision of these Regulations, it shall be done only after affording a reasonable opportunity to the concerned parties and after recording reasons for the direction.