Penalizes Acquirer for non-compliance of Takeover & Insider Trading Regulations, rejects 'ignorance' defense
SEBI imposes penalty on acquirer co. ('Noticee') for acquiring shares in target company and failing to make requisite disclosures under Takeover Regulations and Insider Trading Regulations; Notes the fact the Noticee was allotted 4.5 Crores equity shares of the target co. upon conversion of convertible warrants, constituting 14.06% of target co.'s issued share capital; Rejects Noticee's contention that it is a small private limited co. operating through a limited amount of personnel and was not aware such disclosure requirements and that it was under impression that target co. was required to make disclosures to stock exchange, holds "ignorance of law is not an excuse and does not exclude any person from the penalty for the breach of it"(refers to Latin maxim: "Ignorantia juris non excusat'); Observes that failure to make requisite disclosures within prescribed time under the said Regulations has deprived disclosure and dissemination of valuable information at relevant point of time, states that "securities market operates on disclosure-based regime and hence true and timely disclosure of information is an important regulatory tool intended to serve a public purpose"; Relies on SAT ruling in Bindal Synthetics Private Limited V. SEBI, states "the disclosure made under Insider Trading Regulations is not substitute for the disclosure to be made under Takeover Regulations"; Also relies on SAT rulings in Premchand Shah and Others Vs SEBI, Ambaji Papers Pvt. Ltd. Vs Adjudicating Officer, SEBI and SC ruling in SEBI Vs Shriram Mutual Fund:SEBI
Order was passed by S. V. Krishnamohan, SEBI, Chief General Manager & Adjudicating Officer
LSI Note:
Regulation 7(1) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 states that any acquirer, who acquires shares or voting rights which (taken together with shares or voting rights, if any, held by him) would entitle him to more than 5% or 10% or 14% or 54% or 74% shares or voting rights in a company, in any manner whatsoever, shall disclose at every stage the aggregate of his shareholding or voting rights in that company to the company and to the stock exchanges where shares of the target company are listed.
Regulation 13(1) of SEBI (Prohibition of Insider Trading) Regulations, 1992 states that any person who holds more than 5% shares or voting rights in any listed company, is under an obligation to disclose to the company in prescribed Form the number of shares or voting rights held by such person on becoming the holder within 2 working days of the receipt of allotment of shares or acquisition of shares or voting rights.
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