The Securities Exchange Board of India (“SEBI”) has modified SEBI circular SEBI/HO/DDHS/DDHS/CIR/P/2020/122 dated July 17, 2020 (“Circular”) vide SEBI circular SEBI/HO/DDHD/DDHD_Div3/P/CIR/2021/639 dated October 5, 2021 (“Modified Circular”), providing the manner and mechanism of giving exit option to dissenting unit holders pursuant to regulation 22(5C) and regulation 22(7) of SEBI (Infrastructure Investment Trusts) Regulations, 2014 (“InvIT Regulations”).
Under clause 1.6 of Annexure-I of the Circular, relevant date was defined as the last day of voting for a resolution under regulation 22(5C) or regulation 22(7) of the InvIT Regulations. The Modified Circular has added a proviso to the said clause which states that in the event of an acquisition, as described under regulation 22(5C) or any change in sponsor or inducted sponsor or change in control of sponsor or inducted sponsor under regulation 22(7) of the InvIT Regulations, is triggered pursuant to an open offer made under the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 (“SAST Regulations”) then the relevant date shall mean the date of public announcement made for the acquisition in terms of the SAST Regulations.
Through the Modified Circular, clause 2.5A has been added to Annexure-I set out under the Circular. This clause provides for activities pertaining to exit option/offer along with prescribed timelines in the event of an acquisition, as described under regulation 22(5C) or any change in sponsor or inducted sponsor or change in control of sponsor or inducted sponsor under regulation 22(7) of the InvIT Regulations, is triggered pursuant to an open offer made under the SAST Regulations. The summary of activities with the timelines has been set out hereunder:
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Activity Description |
Timelines |
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Acquirer to give first notice to investment manager regarding acquisition. |
Along with public announcement made for the acquisition in terms of the SAST Regulations. |
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On receipt of notice, the investment manager shall intimate to stock exchange(s). |
Immediately but not later than 24 (twenty four) hours from the receipt of such notice. |
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Acquirer shall give second notice to the investment manager for the purpose of obtaining approval of the unit holders. The acquirer shall also confirm to the investment manager that it shall give exit option to dissenting unit holders in case approval of the requisite majority is not received. Further, a person being inducted as a sponsor shall give declaration to investment manager with regard to satisfying the eligibility conditions prescribed for a sponsor under the InvIT Regulations. |
Not later than 2 (two) working days from the completion of the acquisition which triggered the provisions of regulation 22(5C) or regulation 22(7) of the InvIT Regulations. |
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On receipt of second notice, investment manager shall intimate to stock exchange(s). |
Immediately but not later than 24 (twenty four) hours from the receipt of such second notice. |
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Investment manager shall convene a meeting of unit holders for voting. |
Voting to be completed not later than 3 (three) working days from the cut-off date and within 21 (twenty one) days from the date of receipt of second notice from the acquirer. |
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Intimation of outcome of the unit holders’ meeting by the investment manager to acquirer and stock exchange(s) along with the number of dissenting unit holders and total number of units held by them as of the cut-off date, as certified by its compliance officer. Investment manager shall provide the list of dissenting unit holders to the lead manager(s). The day of aforesaid intimation by investment manager shall be construed as the Date of Intimation. |
Within 48 (forty eight) hours of the last day of voting. |
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Acquirer through the lead manager(s) shall send the letter of offer to all dissenting unit holders and file a copy of the same with the stock exchange(s). The stock exchange(s) shall disseminate the letter of offer on its website as soon as it receives the same. |
Within 3 (three) working days from the date of Intimation. |
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Acquirer shall create an escrow account wherein the aggregate amount of consideration based on the list of dissenting unit holders provided by the investment manager to lead manager would be deposited in the manner specified in clause 2.6 of Annexure-I. |
At least 2 (two) working days prior to opening of the tendering period. |
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Tender date and tender period for tendering units in exit option. |
7th (seventh) working day from the date of intimation. Tender period shall be 5 (five) working days. |
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Payment of consideration to dissenting unit holders by the acquirer. |
Within a period of 3 (three) working days from the last date of the tendering period. |
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Lead manager shall submit a report to the investment manager that the payment has been duly made to all the dissenting unit holders whose units have been accepted in the exit option. Based on the information received from the lead manager, the investment manager shall update aggregate number of units tendered, accepted, payment of the consideration and the post-exit option unit holding pattern of the InvIT with stock exchange(s). |
Within 2 (two) working days from the date of payment of consideration. |
Through the Modified Circular, clause 3.4 has been added to Annexure-I set out under the Circular. The said clause states the following:
“In case an acquisition described under regulation 22(5C) or change in sponsor or inducted sponsor or change in control of sponsor or inducted sponsor under regulation 22(7) of the InvIT Regulations is triggered pursuant to an open offer under the provisions of the SAST Regulations, the exit option price shall stand enhanced by an amount equal to a sum determined at the rate of 10% (ten percent) per annum for the period between the first notice date and second notice date.”
Please find a copy of the Circular here and a copy of the Modified Circular here.
This update has been contributed by Adity Chaudhury (Partner) and Nipuna Varman (Associate).
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