TechGlobal Corp is a multinational technology company, it decided to acquire a significant stake in a promising Indian start-up, RecreateX Ltd, but it is a listed company with NSE. To avoid market disruption and potentia
CS Executive · Capital Market and Securities Laws · PYQS · December 2024
TechGlobal Corp is a multinational technology company, it decided to acquire a significant stake in a promising Indian start-up, RecreateX Ltd, but it is a listed company with NSE. To avoid market disruption and potential price fluctuations, TechGlobal and RecreateX negotiated and entered into a bulk deal. The transaction involves TechGlobal purchasing 50% of RecreateX's equity shares. This transaction includes, shareholding held by one of its shareholder Mr. X as 5% and another shareholder Mr. Y as 0.5% of RecreateX's total outstanding shares. The brokering Firm, ABC Ltd. facilitated the transaction. But once the deal was completed, ABC Ltd. failed to report the details to the National Stock Exchange (NSE), where RecreateX's shares are listed. Under these scenarios, answer the following: Is these three transactions [50% including 5% and 0.5%] constitutes a bulk deal on a stock exchange? What is the reporting timing, when a bulk deal happens through a single trade or multiple trades? Who is required to disclose the details of a bulk deal to the stock exchange?
Answer & Explanation:
Constitution of a bulk deal: A bulk deal is a transaction where the total quantity bought or sold is more than 0.5% of the number of equity shares of a listed company on the exchange. The first transaction is 44.5% (50% - 5% - 0.5%) and the second one is 5%. Hence both are bulk trades. The third transaction is of 0.5% between the buyer and seller and therefore, totalling to more than 0.5% and hence qualifies as a bulk trade transaction. Reporting timing for a bulk deal: The execution of a bulk deal should be notified to the exchange immediately upon the execution of the trade order. If it happens through multiple trades, it should be notified to the exchange within one hour from the closure of the trading. Who is required to disclose the details of a bulk deal: The stock broker, ABC Ltd., who facilitates the trade, is required to reveal to the stock exchange about the bulk deals on a daily basis.
Topics: SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; SEBI (Prohibition of Insider Trading) Regulations, 2015
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