Takeovers play a vital role in how companies in India reshape their structure, whether it’s their ownership, operations or finances. They allow businesses to grow, reduce competition or even save struggling companies. In India, takeovers are guided by clear laws, such as those set by the Securities and Exchange Board of India (SEBI), the Companies Act, 2013 and the Competition Act, 2002. These laws ensure that the process is fair and protects the people who own shares in the companies involved. This article explains the rules, types, steps, and real-world impacts of takeovers in corporate restructuring in India, making it easier to understand how they work and why they matter.
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Takeovers in Corporate Restructuring: Laws Governing
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 is the primary regulation for takeovers in India, especially for listed companies. These regulations govern the acquisition of shares, voting rights or control in listed companies. For unlisted companies, takeovers often require compliance along with the Companies Act, 2013, particularly Sections 230 and 236, which address compromises, arrangements and enforcement by the National Company Law Tribunal (NCLT). Additionally, the Competition Act, 2002, regulates transactions to prevent anti-competitive practices, ensuring that takeovers align with market fairness.
1. SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
These rules came into effect since October 22, 2011 and last updated on December 6, 2021, they apply to companies listed on stock exchanges. They cover how shares, voting rights, or control of a company can be acquired, making sure the process is open and fair for everyone, especially shareholders.
2. Companies Act, 2013
In addition to SEBI regulations, other laws play a role in takeovers. Sections 230 and 236 of the companies Act 2013, applies in case of companies which are not listed on stock exchanges. These sections deal with agreements or arrangements, like mergers and are overseen by the National Company Law Tribunal (NCLT), a special court for company matters.
Section 261: Covers plans to revive or rehabilitate struggling companies.
Section 230(11): Deals with compromises or arrangements, like mergers.
Section 250(3): Allows the NCLT to order takeovers of assets or management.
3. Competition Act, 2002
This law ensures that takeovers don’t harm competition in the market. It prevents companies from becoming too powerful in a way that could hurt consumers or other businesses.
The main goal of these laws is to create a clear process for takeovers while protecting shareholders, especially smaller ones who might otherwise be overlooked. This legal setup is essential for companies looking to reorganize through takeovers.
Why Do Companies Use Takeovers in Corporate Restructuring?
Takeovers help companies achieve important business goals. Here are the main reasons they happen:
Growing the Business: A company might buy another to enter new markets or increase its share in existing ones and so it helps it grow larger and stronger.
Reducing Competition: By acquiring a competitor in the same industry, a company can gain more control over the market, making it easier to succeed.
Tax Advantages: Some takeovers are planned to save money on taxes, which is a smart way to improve a company’s financial health.
Saving Struggling Companies: Known as bailout takeovers, these involve a healthy company buying a struggling one to keep it from going out of business. This is often guided by laws like the Sick Industrial Companies (Special Provisions) Act, 1985.
These reasons show how takeovers can help companies become more efficient, competitive or financially stable.
Types of Takeovers in India
Takeovers in India come in different forms, each serving a specific purpose in restructuring. Here’s a breakdown of the main types:
Friendly Takeover: This happens when the company being bought agrees to the takeover. For example, in 2008, Ranbaxy Laboratories was acquired by Daiichi Sankyo with the approval of Ranbaxy’s board, following the Companies Act.
Hostile Takeover: In this case, the company being bought doesn’t agree, and the buyer purchases shares directly from shareholders. A well-known example is Larsen & Toubro’s (L&T) takeover of Mindtree in 2019, where L&T bought 60.6% of Mindtree’s shares, even though Mindtree’s management wasn’t on board.
Reverse Takeover: A private company buys a publicly listed company to get access to the stock market without going through the process of an initial public offering (IPO). An example is the 2002 merger of ICICI with ICICI Bank.
Bailout Takeover: A successful company buys a struggling one to save it from collapse, guided by laws meant to help revive failing businesses.
Horizontal Takeover: This involves buying a company in the same industry to grow stronger or reduce competition. An example is iGate’s acquisition of Patni Computers.
Each type of takeover serves a unique purpose, whether it’s growth, market control or helping a struggling company survive.
How Does the Takeover Process Work?
For listed companies, SEBI has a clear step-by-step process in order to ensure takeovers are fair and well-regulated. This process ensures that takeovers are conducted fairly and align with the company’s restructuring goals. Given below is a breakdown of how it works
1. Disclosure: If someone buys 5% or more of a company’s shares, they must inform SEBI within 2 days to keep things transparent.
2. Open Offer: If someone buys 25% or more of a company’s shares, they must make an offer to buy an additional 26% from other shareholders at a fair price. This gives smaller shareholders a chance to sell their shares if they want to.
3. Detailed Steps
A merchant banker is hired to manage the process.
A triggering event happens, like signing a share purchase agreement or buying shares beyond a certain limit.
A public announcement is made to SEBI and stock exchanges.
An escrow account is set up to secure the transaction.
A detailed public statement is published.
The open offer is announced to shareholders.
The company’s board gives its recommendation.
A letter of offer is filed with SEBI.
SEBI reviews and provides feedback.
The offer document is sent to shareholders.
The offer opens for shareholders to respond.
A post-offer advertisement summarizes the results.
The transaction is settled through the escrow account.
A final report is submitted to SEBI.
Tender Offers
A tender offer is a public, open bid made by an individual, company, or group (called the "bidder") to purchase some or all of shareholders' shares in a corporation. The offer is made at a specific price, usually at a premium over the current market price, and for a limited time. A tender offer is a strategic method used by an acquiring company to gain control over another company (target).
Types of Tender Offers
Tender offers are a key part of takeovers, where shareholders are invited to sell their shares. There are a few types:
Mandatory Tender Offers: These are required when someone buys a significant portion of shares (like 25% or more) and must offer to buy at least 26% more from other shareholders. This protects smaller shareholders by giving them a way to exit.
Voluntary Tender Offers: These are optional offers made by someone who already owns shares or a new buyer. However they can’t buy more shares for the first 52 weeks without triggering a mandatory offer.
Competing Offers: If another buyer makes an offer within 15 business days of the first offer, both are treated equally to ensure fairness.
These tender offers make the takeover process flexible while protecting shareholders.
Summary
Takeovers in corporate restructuring is a powerful tool for companies in India to grow, reduce competition or save struggling businesses. They are carefully regulated by SEBI, the Companies Act, 2013 and the Competition Act, 2002, ensuring fairness and transparency. However the control held by promoters and strict rules can make hostile takeovers challenging. As of 2025 this system continues to guide corporate restructuring and balancing opportunities for businesses with protections for shareholders.
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Takeovers in Corporate Restructuring: FAQs
Q1. What is a takeover in corporate restructuring?
A takeover is when one company buys another to reorganize its structure, expand into new markets, reduce competition, or save a struggling business, all under India’s legal framework.
Q2. What is a takeover and what are its types?
A takeover is when a company gains control of another by buying its shares or voting rights. Types include friendly, hostile, reverse, bailout, and horizontal takeovers.
Q3. What is an example of a takeover?
L&T’s hostile takeover of Mindtree in 2019, where it acquired 60.6% of shares.
Q4. What is a takeover?
A takeover is the purchase of a company’s shares or assets to gain control, often to meet strategic or financial goals.
Q5. What is the process of a takeover?
The process involves disclosing share purchases (5% or more), making an open offer (25% or more), hiring a merchant banker, making public announcements, and following SEBI’s rules for compliance.
