Nova Industries Ltd. ('Nova') is an Indian company engaged in the business of manufacturing of Automotive Equipments. The equity shares of the 'Nova' are listed on NSE. Star Investment Ventures Ltd. ('Star') owns 16% sta

CS Executive · Securities Laws and Capital Markets · PYQS · December 2020
Nova Industries Ltd. ('Nova') is an Indian company engaged in the business of manufacturing of Automotive Equipments. The equity shares of the 'Nova' are listed on NSE. Star Investment Ventures Ltd. ('Star') owns 16% stake in the Nova. Moon Investment Company Pvt. Ltd. ('Moon') owns 14% stake in the Nova. Star and Moon have also been classified as promoters of the Nova in its shareholding pattern for over 5 years. As decided by the management of Star and Moon, it is proposed that Moon will be absorbed by Star through a scheme of arrangement, pursuant to which Star's shareholding in the Nova will increase from 16% to 30% as the shares held by Moon will be transferred to Star and vested in Star and their shareholders will become shareholders of Star. The entire consideration for the amalgamation would be discharged by Star by the issue of its shares. The scheme is likely to be completed and approved by the National Company Law Tribunal sometime during the financial year 2019-2020. (ii) Would the transfer and vesting of shares of the Nova in Star, be exempt from open offer obligations ?

Answer & Explanation:

Star is eligible to avail this exemption under Regulation 10(1)(d)(iii) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 since: The acquisition of shares of the Target Company is being made pursuant to a scheme of arrangement sanctioned by the NCLT. The entire consideration is being discharged by Star by issue of its shares, there is no portion of the consideration being paid in terms of cash and cash equivalents. Post-merger, since Star will issue its shares to the shareholders of Moon, such shareholders will hold more than 33% stake in Star.

Topics: Takeovers

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