Exempted Acquisition Under SAST: Regulation 10

An exempted acquisition under SAST is a share acquisition that crosses a takeover threshold but does not trigger an open offer, because Regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 lists it as exempt. The exemption is conditional, and the conditions are where the substance sits. It also removes only the open offer: the acquirer still files, on deadlines measured in working days.

What acquisitions does Regulation 10 exempt?

The first and most used limb is inter-se transfer among qualifying persons under Regulation 10(1)(a). The qualifying categories are specific:

• Immediate relatives.
• Persons named as promoters in the shareholding pattern filed by the target company under the listing regulations or the SAST Regulations for not less than three years prior to the proposed acquisition.
• A company and its group: its subsidiaries, its holding company, other subsidiaries of that holding company, persons holding not less than fifty per cent of its equity shares, other companies in which such persons hold not less than fifty per cent, and their subsidiaries, provided control over the qualifying persons is exclusively held by the same persons. An explanation inserted in 2018 clarifies that "company" here includes a body corporate, Indian or foreign.
• Persons acting in concert for not less than three years prior to the proposed acquisition and disclosed as such in filings, and shareholders who have been persons acting in concert for at least three years along with a company wholly owned by them in the same proportion.

The second limb, Regulation 10(1)(b), covers acquisition in the ordinary course of business by named intermediaries: a registered underwriter under an underwriting agreement, a stock broker exercising a lien over shares bought for a client, a merchant banker or nominated investor in market making or subscribing to an unsubscribed portion, a person acquiring under a safety net scheme, and a merchant banker acting as a stabilising agent.

What conditions attach to an inter-se transfer?

Two, and both are stated as provisos to the clause.

A price ceiling. If the shares of the target are frequently traded, the acquisition price per share shall not be higher by more than twenty-five per cent of the volume weighted average market price for a period of sixty trading days preceding the date of issuance of the notice for the proposed inter-se transfer, as traded on the exchange where the maximum volume was recorded. If the shares are infrequently traded, the ceiling is twenty-five per cent above the price determined under Regulation 8(2)(e).

Compliance with Chapter V disclosures. Both the transferor and the transferee must have complied with the applicable disclosure requirements in Chapter V, the same chapter that produces the SAST disclosures you see on the exchange.

That three-year test is the reason the shareholding pattern matters here at all. The filed record, not a claim about who founded the company, is what establishes promoter status for the exemption. See how to read a shareholding pattern and what is a promoter group.

What has to be filed for an exempted acquisition?

Three separate obligations, on three different clocks.

• Advance intimation, Regulation 10(5). For acquisitions under Regulation 10(1)(a) and clauses (e) and (f) of Regulation 10(4), the acquirer must intimate the stock exchanges where the target is listed, in the specified form, at least four working days prior to the proposed acquisition. The exchange disseminates it to the public forthwith.
• Post-acquisition report, Regulation 10(6). For any acquisition made under the exemption, the acquirer files a report with the exchanges in the specified form not later than four working days from the acquisition, again disseminated forthwith.
• Report to SEBI, Regulation 10(7). For a listed set of categories, including Regulation 10(1)(a), the acquirer must within twenty-one working days of the date of acquisition submit a report with supporting documents to SEBI, along with a non-refundable fee of rupees one lakh fifty thousand paid by NEFT, RTGS, IMPS, the SEBI payment gateway or another specified mode.

For convertible securities, an explanation fixes the date of acquisition for all three sub-regulations as the date of conversion.

Exempted acquisition, creeping acquisition and open offer

These get conflated, and they are three different things:

• An open offer is the mandatory offer to public shareholders once Regulation 3 or 4 is triggered.
• Creeping acquisition is the annual headroom that lets an existing holder add up to five per cent without triggering an offer. See creeping acquisition vs open offer.
• An exempted acquisition is a transaction that would have triggered an offer but sits inside Regulation 10.

Regulation 11 sits alongside them: SEBI may, for reasons recorded in writing, grant a case-specific exemption. That is a separate route from the general exemptions in Regulation 10.

How to read an exempted acquisition in the filing record

Because the open offer never happens, the paper trail is the only trail:

• Look for the four-working-day advance intimation on the exchange, which names the parties and the proposed transaction before it occurs.
• Match it against the post-acquisition report, filed within four working days after.
• Check the price against the sixty-trading-day VWAP ceiling, since that is the condition the exemption depends on.
• Check the three-year promoter history in the filed shareholding patterns, and whether the counterparties are persons acting in concert.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.