Standstill Agreement Sebi

A Standstill Agreement is a contract between a company and a potential acquirer that prevents the acquirer from making an offer for a specific period. The Securities and Exchange Board of India (SEBI) regulations provide guidelines for Standstill Agreements to protect the interest of the investors and shareholders.

According to SEBI regulations, Standstill Agreements are only allowed in certain situations. The first scenario is when an acquirer is in the process of acquiring shares in a company but does not have enough voting rights to take control of the business. In this situation, the acquirer may enter into a Standstill Agreement to prevent the target company from seeking other buyers or taking any action that could negatively impact the acquirer`s potential acquisition.

The second situation is when an acquirer has already acquired a substantial stake in a company, and the target company wants to prevent a hostile takeover. In this case, the target company may enter into a Standstill Agreement with the acquirer to prevent further acquisition of shares for a specific period.

SEBI has outlined certain conditions that must be followed for Standstill Agreements to be valid. The Standstill Agreement must be reported to the stock exchanges and SEBI within seven working days, and the target company must disclose the details of the agreement to its shareholders.

Additionally, the agreement must specify the duration of the standstill period, which cannot exceed 18 months. The agreement also needs to provide details of the acquirer`s existing shareholding, the number of shares to be acquired, and the price at which the acquisition will occur.

Standstill Agreements can benefit both the acquirer and the target company. For the acquirer, it provides an opportunity to acquire shares in the target company without the risk of competition. For the target company, it can provide protection from hostile takeovers and allow for strategic planning and decision-making without the threat of a takeover.

In conclusion, Standstill Agreements are a valuable tool in the world of mergers and acquisitions. SEBI`s guidelines ensure transparency and protect the interests of shareholders and investors. Companies looking to enter into a Standstill Agreement should consult their legal and financial advisors to ensure compliance with regulatory requirements.

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