The M&As, game in India may change for ever with Sebi, appointed panel likely to raise the shareholding threshold that triggers open offers from 15% to 35%. According to two people close to the development, the panel is inclined to do this though it has received some suggestions to make it 30%. The panel has been assessing the feedback from Indian companies and law firms since October and a final report on its recommendations is likely to be ready by the end of April. The first draft will be ready this week but will not be made public.

At present, if a company acquires a stake of at least 15% in another firm, it is required to make a mandatory open offer to buy at least another 20% of the second company’s shares from the market. With the increase in the threshold to 35%, the mandatory open offer limit too will be raised. The open offer could be for the entire stake of the target firm. If that happens, it will significantly increase the cost of acquisitions in India.

India has the lowest threshold for triggering an open offer in the world. If the threshold is increased from the existing 15% to more than 25%, from a corporate law perspective, it would mean that the acquirer would get statutory rights to block special resolution matters without triggering an open offer. According to the Companies Act, 1956, the passing of a special resolution requires a minimum of 75% shareholding. Therefore, the new threshold will help strategic investors to acquire powers to block a resolution. At present, they get these rights contractually by getting into shareholder agreements; now these powers will be statutory once they acquire a stake of 26%.

Globally, the threshold for open offers is higher in most of the countries. For instance, in Hong Kong, Singapore, Russia and the UK it is 30% and for Malaysia it is 33% and Norway 33.33%. The guidelines in most of these countries are less rigid owing to the more evolved character of the markets.