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Authored by Aishwarya Lakshmi VM

Regulation 11 of SEBI (SAST) Regulations, 2011 [hereinafter, SAST Regulations], empowers SEBI to grant specific exemptions from the requirement of making an open offer, if the same gets triggered under Regulations 3, 4 and 5 of SAST Regulations. Here we present an analysis of the exemptions that were granted by SEBI during the calendar year 2020.

Tracing the Trajectory of Exemption Orders in 2020:

Split up of Exemption Orders granted by SEBI in the Calendar Year 2020
Exemption Orders to Family Trusts or Foundations 25
Exemption Orders to other entities 2
Total number of Exemption Order 27


The two exemptions that were granted to other entities were to:

1. The Government of Jammu and Kashmir for acquiring the stake in Jammu and Kashmir Bank Limited, and

2. To Greenway Advisors Private Limited for acquiring the stake in Sturdy Industries Limited.

Both these exemption orders were based on the recommendations of the Takeover Panel.

Exemption in Jammu and Kashmir Bank Ltd.

In the Jammu and Kashmir Bank Limited matter, the Government of Jammu & Kashmir proposed to infuse Rs.500 Crores as capital towards the recapitalisation of the Target Company and to maintain the Capital Adequacy Ratio as per RBI Guidelines. Towards this transaction, shares were proposed to be issued on a preferential basis. Post preferential allotment, the J&K Government’s shareholding was to increase by more than 5% thereby attracting Regulation 3(2) of the Takeover Regulations. Since there was to be no change in the control of the Target Company, and the minimum public shareholding requirement was also not getting affected, the same was approved by an exemption order.

Exemption in Sturdy Industries Ltd.

In the Sturdy Industries matter, Punjab National Bank and Allahabad Bank had acquired 51% of the equity share capital in the Target Company.  In accordance with the Strategic Debt Restructuring (SDR) Scheme the lender banks were to disinvest at least 26% of the equity shares held by them and this was proposed to be undertaken by transferring the shares to Greenway Advisor Private Ltd., the Acquirer. The transaction was approved by the Target Company and by the lenders since it was pursuant to RBI directions. There was a delay in documentation process from Allahabad Bank and hence a portion of the transfer was pending, while the portion from Punjab National Bank was completed before due date. Hence, exemption was granted to the acquirer to acquire the shares from Allahabad bank without having to go through the rigors of open offer and public announcement.

Notable exemptions granted to Family Trusts

Some of the exemptions granted to Family Trusts include the exemption for acquiring:

a. Alembic Pharmaceuticals Ltd., Alembic Limited and Paushak Limited (all three by CRA Family Trust),

b. Lux Industries Ltd. (by Ashok Todi Family Trust and 3 other Family Trusts),

c. Vadilal Industries Ltd. (by Shree Devarsh Trust and IVG Family Trust),

d. Borosil Glass Works Ltd. (by Pradeep Kumar Family Trust and Bajrang Lal Family Trust),

e. Globus Spiritus Limited (by Yamuna Family Trust),

f. Motilal Oswal Financial Services Limited (by Motilal Oswal Family Trust) and

g. IndiaBulls Housing Finance Limited (by Sameer Gehlot IBH Trust).

Why family trusts?

The rationale of granting such exemption to Family Trusts is that it streamlines succession planning making it easier for the promoter group to not undergo the rigours of a public announcement of an open offer. Promoters often choose Family Trust as a haven considering the possible reintroduction of estate taxation and to keep creditors at bay for personal guarantees given by the promoters for the company’s debts. It is interesting to note that even in 2020 SEBI received most applications for exemption orders from Family Trusts in accordance with the 2017 General Circular.

2017 General Circular of SEBI:

 SEBI vide General Circular No. SEBI/HO/CFD/DCR1/CIR/P/2017/131 dated 22nd December 2017 provided a standard format with instructions for the Acquirers to make an application under Regulation 11(1). In the Schedule of the said General Circular, SEBI had outlined additional compliance requirements for Family Trusts based on the recommendations of the Takeover Panel of SEBI. Exemption Orders had been granted only if the Trust Deed expressly mentions that:

1. The Trust in its substance is only a mirror image of the promoter’s holdings.

2. Only individual promoters, their relatives and lineal descendants are part of the trustees and beneficiaries.

3. The beneficial interest is not in any way be transferred / encumbered / alienated / pledged / mortgaged / assigned in the future.

4. In case of the dissolution of the Trust, the assets will be distributed only to the beneficiaries of the Trust or their legal heirs.

5. The Trustees are not entitled to delegate / transfer their powers to anyone except one among themselves.

In addition, there should not be any layering in terms of Trustees / Beneficiaries. The Trusts also ought to give undertakings relating to annual disclosure to SEBI regarding its compliance status, event-based disclosure if there arises any change in the trustees / beneficiaries and any change in ownership or control of shares or voting rights held by Trust within 2 days.


Internal re-alignment of holdings which are non-commercial in nature such that the resultant shareholding pattern will neither in any way change the overall promoter or promoter group holding nor reduce the public shareholding or prejudicially affect their interests were granted exemption by SEBI under Regulation 11(1) of the SAST Regulations, and the family trusts based structures have only found favour from SEBI for grant of exemptions.

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