Regulation 23 - General obligations of the board of directors of the target company. - Securities And Exchange Board of India(Substantial Acquisition of Shares And Takeovers) Regulations, 1997

General obligations of the board of directors of the target company. 23. (1) Unless the approval of the general body of shareholders is obtained after the date of the public announcement of offer, the board of directors of the target company shall not, during the offer period,- (a) sell, transfer, encumber or otherwise dispose of or enter into an agreement for sale, transfer, encumbrance or for disposal of assets otherwise, not being sale or disposal of assets in the ordinary course of business, of the company or its subsidiaries; or (b) issue 1 [or allot] any authorised but unissued securities carrying voting rights during the offer period; or (c) enter into any material contracts. 2 [ Explanation .-Restriction on issue of securities under clause (b) of sub-regulation (1) shall not affect- (i) the right of the target company to issue or allot shares carrying voting rights upon conversion of debentures already issued or upon exercise of option against warrants, as per pre-determined terms of conversion or exercise of option; (ii) issue or allotment of shares pursuant to public or rights issue in respect of which the offer document has already been filed with the Registrar of Companies or Stock Exchanges, as the case may be.] (2) The target company shall furnish to the acquirer, within seven days of the request of the acquirer or within seven days from the specified date whichever is later, a list of shareholders or warrant holders or convertible debenture holders as are eligible for participation under Explanation (ii) to sub-regulation (3) of regulation 22 containing names, addresses, shareholding and folio number, and of those persons whose applications for registration of transfer of shares are pending with the company. (3) Once the public announcement has been made, the board of directors of the target company shall not,- (a) appoint as additional director or fill in any casual vacancy on the board of directors, by any person(s) representing or having interest in the acquirer, till the date of certification by the merchant banker as provided under sub-regulation (6) below: Provided that upon closure of the offer and the full amount of consideration payable to the shareholders being deposited in the special account, changes as would give the acquirer representation on the board on control over the company can be made by the target company; (b) allow any person or persons representing or having interest in the acquirer, if he is already a director on the board of the target company before the date of the public announcement, to participate in any matter relating to the offer, including any preparatory steps leading thereto. (4) The board of directors of the target company may, if they so desire, send their unbiased comments and recommendations on the offer(s) to the shareholders, keeping in mind the fiduciary responsibility of the directors to the shareholders and for the purpose seek the opinion of an independent merchant banker or a committee of independent directors: Provided that for any mis-statement or for concealment of material information, the directors shall be liable for action in terms of these regulations and the Act. (5) The board of directors of the target company shall facilitate the acquirer in verification of securities tendered for acceptances. (6) Upon fulfillment of all obligations by the acquirers under the regulations as certified by the merchant banker, the board of directors of the target company shall transfer the securities acquired by the acquirer, whether under the agreement or from open market purchases, in the name of the acquirer and/or allow such changes in the board of directors as would give the acquirer representation on the board or control over the company. (7) The obligations provided for in sub-regulation (16) of regulation 22 shall be complied with by the company in the circumstances specified therein. 3 [(8) The restrictions- (a) for appointment of directors on the Board of the target company by the acquirer under sub-regulation (7) of regulation 22; (b) for acting on agreement for under sub-regulation (16) of regulation 22; (c) for appointment of directors by the target company under clause (a) of sub-regulation (3) of this regulation; and (d) for on transfer of securities or changes in the Board of Directors of the target company under sub-regulation (6) of this regulation, shall not be applicable, in case of sale of shares of a Public Sector Undertaking by the Central Government 4 [or the State Government] and the agreement to sell contains a clause to the effect that in case of non-compliance of any of the provisions of the regulations by the acquirer, transfer of shares or the change of management or control of the Public Sector Undertaking shall vest back with the Central Government 5 [or the State Government] and the acquirer shall be liable to such penalty as may be imposed by the Central Government 6 [or the State Government].] --------------------- Notes:- 1. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. 2. Substituted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. Prior to its substitution, Explanation read as under: Explanation .─ Restriction on issue of securities under clause (b) of sub-regulation (1) shall not affect the right of the target company to issue and allot shares carrying voting rights upon conversion of debentures already issued or upon exercise of option against warrants, as per pre-determined terms of conversion/ exercise of option. 3. Substituted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2001, w.e.f. 12-9-2001. Prior to its substitution, sub-regulations (8) was inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2001, w.e.f. 17-8-2001. 4. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. 5. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002. 6. Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2002, w.e.f. 9-9-2002.