Justice P.N.Bhagwati Committee Report
PREFACE
1. Takeover of companies is a well accepted and established strategy for corporate growth. International experience of takeovers and mergers and amalgamations has been varied. Nonetheless, one of its important lessons is that, its appeal as an instrument of corporate growth has usually been the result of an admixture of corporate ethos of a country, shareholding pattern of companies, existence of cross holdings in companies, cultural conditions and the regulatory environment.
2. In India, however, "the market" for takeovers has not yet become significantly active, though following economic reforms, there is now a discernible trend among promoters and established corporate groups towards consolidation of market share, and diversification into new areas, albeit in a limited way through acquisition of companies, but in a more pronounced manner through mergers and amalgamations. The latter course is outside the purview of SEBI and constitutes a subject matter of the Companies Act, 1956, and the courts of law, and there are well laid down procedures for valuation of shares and protection of the rights of investors. This Report and the SEBI Regulations for Substantial Acquisition of Shares and Takeovers do not deal with the subject of mergers and amalgamations.
3. In common parlance, a takeover bid is generally understood to imply the acquisition of shares carrying voting rights in a company in a direct or indirect manner with a view to gaining control over the management of the company. Generally speaking, there cannot be a change in the control of a company simpliciter, unaccompanied by acquisition of shares, though there have been cases before SEBI where management control has changed from one group of persons to another without any overt acquisition of substantial quantities of shares. It would therefore be correct to state that, takeover or gaining control over a company, as opposed to pure investment, is the most common leitmotif for substantial
1. Takeover of companies is a well accepted and established strategy for corporate growth. International experience of takeovers and mergers and amalgamations has been varied. Nonetheless, one of its important lessons is that, its appeal as an instrument of corporate growth has usually been the result of an admixture of corporate ethos of a country, shareholding pattern of companies, existence of cross holdings in companies, cultural conditions and the regulatory environment.
2. In India, however, "the market" for takeovers has not yet become significantly active, though following economic reforms, there is now a discernible trend among promoters and established corporate groups towards consolidation of market share, and diversification into new areas, albeit in a limited way through acquisition of companies, but in a more pronounced manner through mergers and amalgamations. The latter course is outside the purview of SEBI and constitutes a subject matter of the Companies Act, 1956, and the courts of law, and there are well laid down procedures for valuation of shares and protection of the rights of investors. This Report and the SEBI Regulations for Substantial Acquisition of Shares and Takeovers do not deal with the subject of mergers and amalgamations.
3. In common parlance, a takeover bid is generally understood to imply the acquisition of shares carrying voting rights in a company in a direct or indirect manner with a view to gaining control over the management of the company. Generally speaking, there cannot be a change in the control of a company simpliciter, unaccompanied by acquisition of shares, though there have been cases before SEBI where management control has changed from one group of persons to another without any overt acquisition of substantial quantities of shares. It would therefore be correct to state that, takeover or gaining control over a company, as opposed to pure investment, is the most common leitmotif for substantial