SEBI/WTM/SR/CFD-DCR/09/03/2017. Case: In Re: Proposed Acquisition of Shares and Voting Rights in Gokul Agro Resources Limited Vs. Securities and Exchange Board of India

Case Number:SEBI/WTM/SR/CFD-DCR/09/03/2017
Party Name:In Re: Proposed Acquisition of Shares and Voting Rights in Gokul Agro Resources Limited Vs
Judges:S. Raman, Whole Time Member
Issue:Securities And Exchange Board Of India Act, 1992 - Section 19
Judgement Date:March 03, 2017
Court:Securities and Exchange Board of India
 
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Order:

S. Raman, Whole Time Member

Background-

1.1 Gokul Agro Resources Limited ("Target Company") is a Public Listed Company incorporated under the Companies Act, 1956 ("Companies Act"), on July 3, 2014. The Registered Office of the Target Company is at B-402, Shapath Hexa, Near Ganesh Merediyan, Opp. Gujarat High Court, Sola, Ahmedabad-380060. The shares of the Target Company are listed on BSE Limited ("BSE") and the National Stock Exchange of India Limited ("NSE").

1.2 Vide an application dated March 21, 2016 ("Application"), Shri Kanubhai Jivatram Thakkar ("Proposed Acquirer") sought exemption from the applicability of Regulation 3(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ("Takeover Regulations") in respect of the proposed indirect acquisition and control of the shareholding and voting rights in the Target Company.

1.3 Regulation 3(2) of the Takeover Regulations states-

Substantial acquisition of shares or voting rights.-

3.(2) No acquirer, who together with persons acting in concert with him, has acquired and holds in accordance with these regulations shares or voting rights in a target company entitling them to exercise twenty-five per cent or more of the voting rights in the target company but less than the maximum permissible non-public shareholding, shall acquire within any financial year additional shares or voting rights in such target company entitling them to exercise more than five per cent of the voting rights, unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these regulations:

Provided that such acquirer shall not be entitled to acquire or enter into any agreement to acquire shares or voting rights exceeding such number of shares as would take the aggregate shareholding pursuant to the acquisition above the maximum permissible non-public shareholding.

1.4 From the aforesaid Application, the following is noted-

"i. The Target Company was initially incorporated as a wholly owned subsidiary of Gokul Refoils & Solvents Limited ("GRSL"), a public limited company.

ii. GRSL and the Target Company entered into a Composite Scheme of Arrangement (on July 4, 2014 and July 31, 2014) involving inter alia transfer of Gandhidham Undertaking and Gandhidham Windmill Undertaking of GRSL to the Target Company under Sections 391-394 of the Companies Act.

iii. The Hon'ble Gujarat High Court sanctioned the said Scheme on June 12, 2015. Pursuant to the Scheme becoming effective, the Target Company allotted shares to the shareholders of GRSL as on the record dated i.e. September 19, 2015.

iv. The shareholding of the Target Company post the allotment of shares on September 28, 2015, pursuant to the Scheme is tabulated below:

  1. As on date of this application, the Promoter Group holds 74.47% of the equity shares and voting rights in the Target Company.

    vi. Presently, I (the Acquirer i.e. Shri Kanubhai Jivatram Thakkar - Managing Director of the Target Company) hold 15.81% shares in the Target Company. I intend to acquire shares of the Target Company from the existing shareholders who are part of the Promoters and Promoter Group ("Transferor Shareholders" - Entities at Sr. No. 4-9 of Table A).

    vii. It is proposed that I would acquire shares in a phased manner from each of the existing shareholders who are part of the Promoters and Promoter Group as detailed above by way of block deal on stock exchange in terms of SEBI Circular MRD/DoP/SE/Cir-19/05 dated September 2, 2005, at a price prevailing on the date of acquisition on the stock exchange.

    viii. Pursuant to the proposed transaction, my individual shareholding in the Target Company would increase from 15.81% to 60% of the total share capital of the Target Company. However, total shareholding held by me alongwith the Promoters and Promoter Group shall remain unchanged i.e. 74.47% of the total capital of the Target Company.

    ix. In the instant case, I together with persons acting in concert with me are already holding shares and voting rights of the Target Company in excess of 25%. Hence, as per Regulation 3(2) of the Takeover Regulations, the additional acquisition of shares of the Target Company in excess of 5% in a financial year shall trigger the requirement to make an open offer unless the same is exempted under the Takeover Regulations.

  2. Regulation 10 of the Takeover Regulations provides exemption from the obligation to make an open offer in case of certain prescribed acquisitions. Regulation 10(1)(a)(ii) of the Takeover Regulations exempts acquisitions pursuant to inter-se transfer of shares amongst qualifying persons being promoters provided

    * They are named as Promoters in the shareholding pattern filed by the Target Company in terms of the Listing Agreement or the Takeover Regulations.

    * For not less than three years prior to the proposed acquisition.

    xi. On a more reflective reading, it can be inferred that Regulation 10(1)(a)(ii) of the Takeover Regulations seeks to exempt inter-se transfer of shares between promoters who have been managing and controlling the business of the company for at least 3 years. As a result, even after such inter-se transfer of shares between Promoters, some of the existing Promoters (who have been managing and controlling the business of the company for a long period of time) continue to manage and control business of the company, thereby protecting the interest of the investors of the company.

    xii. In view of the abovementioned grounds, it is...

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