JUSTIFICATIONS FOR HAVING A TAKEOVER CODE IN INDIA

Abstract

Takeover of a listed company is not all about the target company being keen to get the highest possible price for its shares, while the acquirer going for the least possible financial and regulatory burden, rather it has impact on a host of stakeholders, such as, the acquirer, the target company, the management and the public shareholders. So, a precise, fair, unambiguous, equitable, transparent and predictable legal framework is desirable for balancing multiple, and at times, conflicting interests of stakeholders. Regulating the substantial acquisition of shares, in an organized manner and takeover of a company, whose shares are listed on a stock exchange is the legislative intention behind framing of Takeover code (herein after referred as the code). Before codifying the code and entering into the discussion of evolution of takeover laws and how the system works it is important to know what takeover is.

Five people have six views. Though there is no universal definition of takeover but the definition given by M.A. Weinberg is close to the concept accepted in legal regime. He defined takeover as “a transaction or series of transactions whereby a person (individual, groups of individuals or company) acquires control over the assets of a company, either directly by becoming the owner of those assets or indirectly by obtaining control of the management of the company. Where shares are closely held (i.e. by a small number of persons), a takeover will generally be affected, by agreement with the holders of the majority of the share capital of the company being acquired. Where the shares are held by the public generally, the takeover may be effected, (1) by agreement between the acquirer and the controllers of the acquired company; (2) by purchase of a on the Stock Exchange; or (3) by means of a „takeover bid.