Definition
The acquisition of control of a listed company — by acquiring shares that give the acquirer control (typically over 25% of voting rights) or through an open offer to all public shareholders — regulated by SEBI's Substantial Acquisition of Shares and Takeovers Regulations, 2011.
Takeovers in India are governed by SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SEBI Takeover Code). The key thresholds that trigger mandatory open offer obligations: (a) acquiring 25% or more of voting rights in a listed company; (b) consolidating holdings from between 25% and 75%, by more than 5% in any financial year. When these thresholds are crossed, the acquirer must make an open offer to the remaining public shareholders to acquire at least 26% of total shares. The open offer price must be the highest of: negotiated price, market price (VWAP over last 52 weeks), and acquisition price. Hostile takeovers (without the target board's cooperation) are legally possible in India but relatively rare due to concentrated promoter shareholding.
Statutory Definition
Regulation 3(1), SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011: 'No acquirer shall acquire shares or voting rights in a target company which taken together with shares or voting rights held by him and by persons acting in concert with him in such target company, entitle them to exercise 25% or more of the total voting rights in such target company, unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these Regulations.'
Etymology & Origin
From 'take' + 'over' (to take control, to assume management). A corporate 'takeover' is the 'taking over' of control of a company — acquiring the power to direct its management and operations.
Full Legal Analysis
Takeover: Acquiring Control of a Listed Company
A takeover is the acquisition of corporate control. When an acquirer crosses the 25% threshold in a listed company, the law mandates that they make an offer to all public shareholders — giving them the opportunity to exit at a fair price. This mandatory open offer protects minority shareholders from being trapped in a company whose new controlling shareholder they did not choose.
Mandatory Open Offer: The Core Obligation
The mandatory open offer under the SEBI Takeover Code serves two purposes: (a) Change of control: when an acquirer crosses 25% voting rights, all public shareholders get the right to exit at a fair price — they may not want to remain shareholders under new control. (b) Creeping acquisition: when a shareholder already holding between 25% and 75% acquires more than 5% in a financial year, the open offer prevents gradual 'creeping' to control without giving public shareholders exit rights. The open offer must be for at least 26% of total shares, ensuring that a significant minority can exit if they choose.
Open Offer Price
The open offer price — the price at which the acquirer must offer to buy public shares — must be the highest of: (a) the price negotiated with the selling shareholder; (b) volume-weighted average market price (VWAP) over 52 trading weeks; (c) the price paid for any other acquisition in 26 weeks before the PA; and (d) highest price paid by acquirer and persons acting in concert in 52 weeks. This 'highest of' rule ensures that public shareholders are not offered less than any price the acquirer paid to the promoter or in the market.
“A takeover is the most significant corporate event for public shareholders — the company’s control changes hands, and the new controller will shape the company’s future. The SEBI Takeover Code ensures that when this happens, public shareholders are treated as fairly as the promoter who sells — getting the same price, having the same exit opportunity.”
This Term in Indian Statutes
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, 2011
"No acquirer shall acquire shares or voting rights in a target company which taken together with shares or voting rights held by him entitle them to exercise 25% or more of the total voting rights in such target company, unless the acquirer makes a public announcement of an open offer."
Mandatory open offer: 25% trigger; 26% minimum open offer; highest-of price formula; protects public shareholders on change of control
