sebi:WTM/PS/186/CFD-DCR/MAR/2016

SEBI · SEBI · 2014-08-15 · Prashant Saran, Whole Time Member

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Exemption granted

Provisions invoked

• s. 19

Regulations

• Reg. 11
• Reg. 3
• Reg. 3(1)
• Reg. 2(1)(q)
• Reg. 11(5)

Holding

Exemption was granted to Mrugesh Jaykrishna Family Trust-2 from complying with Regulation 3 of the Takeover Regulations with respect to its proposed acquisition of 31,64,820 shares (43.28%) of AksharChem (India) Limited from Ms. Paru M. Jaykrishna and Mr. Gokul Jaykrishna, subject to conditions.

Full text

Page 2 of 10 3. The application dated August 15, 2014, inter alia stated the following: a. The Target Company was incorporated on July 04, 1989 as Audichem (India) Private Limited. It became a public limited company vide certificate dated February 25, 1994 and later the name was changed to AksherChem (India) Limited on March 21, 2003. b. The promoter group of the Target Company holds 73.68% of the equity share capital of the Target Company. The Target Company has filed a ‘scheme of arrangement’ before the Hon’ble High Court of Gujarat at Ahmedabad. The scheme of arrangement involves de- merger and transfer of ‘CPC Green Division’ of Asahi Songwon Colors Limited to the Target Company. On sanction of the ‘scheme of arrangement’ by the Hon’ble High Court, the Target Company will issue further shares to the shareholders of Asahi Songwon Colors Limited. As a result of such further issue of shares post scheme of arrangement, the shareholding of promoters and promoter group in Target Company will reduce to 70%. c. The total paid-up equity share capital of the Target Company, as on the date of the application was ₹4,95,28,500 divided into 49,52,850 fully paid up shares of ₹10 each. Post further issue of shares by the Target Company on sanction of the ‘scheme of arrangement’ by the Hon’ble High Court, the total paid-up equity capital of the Target Company would be ₹7,31,29,000 divided into 73,12,900 fully paid up shares of ₹10 each. d. The Acquirer is a private family trust. The trust

Page 3 of 10 h. The control over the Target Company will continue to remain with the promoter group and there will be no change in control or management of the company.

Page 4 of 10 5. As SEBI had certain concerns regarding the enforceability, transparency, control, benefit to investors, inheritance tax, when the Acquirer is a trust. It sought the comments of the applicant on the same vide e-mail dated March 20, 2015. The Acquirer vide e-mail dated March 27, 2015, submitted following comments: a. Trustees of the Trust are individuals who always represent the Trust and all regulations can be enforced on the trustees in their individual capacity. Accordingly, there is no difficulty as regards enforceability if the shares of the listed companies are held by the trustees for the benefit of the beneficiaries. b. The Trust is a private family trust. Its trustees and ultimate beneficiaries are individuals from the Jaykrishna family. These individuals are promoters and are in control of the listed companies. The structure in no way results in lack of transparency and does not impact the interest of investors. c. There is no change in control/ beneficial ownership of the Target Company. Any change in the trustees/ beneficiaries in future would have implications under the applicable Takeover Regulations. d. As there is no change in control/ ownership of the Target Company, therefore, there is also no question of giving an opportunity to the investors to exit. e. The transfer to the Trust is for efficient succession planning and more than that to hold the controlling interest in the listed company in one entity rather than spreading the holding amongst

Source: SecMarx — sebi:WTM/PS/186/CFD-DCR/MAR/2016. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.