In the event of non-compliance of the provisions of SEBI (Substantial Acquisition of Shares & Takeover) Regulations, 1997, commonly known as Takeover Code, the acquirer is liable for the penal provisions contained in the code itself. Regulation 45 of SEBI (Substantial Acquisition of Shares & Takeover) Regulations, 1997 is dealing with the penal provisions for the non-compliance of the obligations contained in the Regulations.
As per regulation 45 of the Regulations, for failure to carry out obligations under the regulations, following consequences may follow:
The acquirer faces the consequences of the escrow amount being forfeited besides penalties.
The Board of Target Company shall be liable for action in terms of regulation and Act.
The intermediary would face suspension or cancellation of registration.
The penalties stated above may include:
Criminal prosecution under section 24 of the SEBI Act.
In addition to any award of penalty by the Adjudicating Officer under the Act, if any person contravenes or attempts to contravene or abets the contravention of the provisions of this Act or of any rules or regulations thereof, he shall be punishable with imprisonment for a term which may extend to ten years, or with fine, which may extend to twenty-five crore rupees or with both. Further, non compliance of the directions of the Adjudicating Officer shall be punishable with imprisonment for a term which shall not be less than one month, but which may extend to ten years, or with fine, which may extend to twenty-five crore rupees or with both.
Monetary penalties under section 15H of the SEBI Act.
If a person fails to disclose the aggregate of his shareholding in the body corporate before he acquires any shares of that body corporate, or make a public announcement to acquire shares at a minimum price, he shall be liable to a penalty of twenty-five crore rupees or three times the amount of profits made out of such failure, whichever is higher
Directions under section 11B of the SEBI Act.
The Board may, in the interest of securities market, give directions, without prejudice to its right to prosecute under section 24 of the SEBI Act including:
a.) Directing the person concerned not to further deal in securities.
b.) Prohibiting disposal of securities acquired in violation of these regulations.
c.) Direct sale of securities acquired in violation of these regulations.
Directions under section 11(4) of the Act;
The authority may give the directions to the person in default & the directions may include the following:
Suspend the trading of any security in a recognised stock exchange;
Restrain persons from accessing the securities market and prohibit any person associated with securities market to buy, sell or deal in securities;
Suspend any office-bearer of any stock exchange or self-regulatory organisation from holding such position;
Impound and retain the proceeds or securities in respect of any transaction which is under investigation
Attach bank accounts of persons involved in violation for a period not exceeding one month.
Direct any intermediary or any person associated with the securities market in any manner not to dispose of or alienate an asset forming part of any transaction which is under investigation
Cease and desist order in proceedings under section 11D of the Act;
A Cease and desist order can also be passed under section 11D of the SEBI Act from committing or causing any violation of the SEBI (Substantial Acquisition of Shares & Takeover) Regulations, 1997.
Adjudication proceedings under section 15HB of the Act.
A residual clause has been provided in the Act, wherein it is mentioned that if any violation act is not specifically covered under the provisions, then the person may be held liable for a penalty which may extend to one crores rupees.
Further, the acquirer or directors of the acquirer company, directors of the target company, the merchant banker(s) would be liable for action for any misstatement or concealment of material information required to be disclosed to the shareholders.