Open Offer Procedure and Timeline

An open offer under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 is not a single act but a tightly choreographed sequence that unfolds over roughly fifty-seven working days, every stage of which is fixed by regulation and measured in working days rather than calendar days. From the public announcement that freezes the market the moment the trigger crystallises, through the detailed public statement, the escrow deposit, SEBI's vetting of the letter of offer, the recommendation of the independent directors, the ten-working-day tendering window and the final payment of consideration, each step has a statutory deadline and a consequence for default. This chapter is the procedural backbone of the Code: it walks the entire timeline in order, explains how the windows interlock, and shows why - on the authority of the Supreme Court - an acquirer who has made the public announcement is bound to see the offer through. For the threshold questions of when the obligation arises, see the chapters on the trigger for an open offer and the twenty-five per cent threshold; the conceptual foundations sit at the subject hub.

The open offer as a time-bound machine

The defining feature of Chapter III of the 2011 Regulations is that it converts what would otherwise be a private commercial bargain into a public, calendared process. The logic is investor-protective: when control of a listed company changes, the public shareholders who invested under one management must be told who is taking over and on what terms, and must be given a fair, time-limited window to exit at a regulated price. Each procedural step - announcement, statement, escrow, vetting, recommendation, tendering, payment - exists to deliver either information or an exit, and each is policed by a deadline.

The Supreme Court fixed this purposive lens in Swedish Match AB v. SEBI (2004) 11 SCC 641, treating the takeover regime as a beneficial code framed to protect investors and to be construed to advance that object rather than to be defeated by technical reading. Because the regime is investor-protective, the timelines are not directory niceties: a missed window does not merely slow the process, it generates interest liability and exposes the acquirer to directions from SEBI. The single most important structural consequence flows directly from this - once the public announcement is made, the offer is, for practical purposes, irrevocable, a point this chapter returns to at the end.

Day zero: the manager and the public announcement

Nothing in the sequence can begin until the acquirer has, under Regulation 12(1), appointed a SEBI-registered merchant banker who is not an associate of the acquirer as the manager to the open offer. This appointment must be prior to the public announcement, because Regulation 12(2) requires that the announcement itself be made through the manager. The independence requirement is deliberate: the manager certifies compliance, conducts due diligence and channels every later document to SEBI, and is meant to act as a check on the acquirer rather than as its mouthpiece.

The public announcement (PA) is the short, first-in-time disclosure that an open offer has been triggered. Regulation 13(1) fixes the default timing rule: the PA referred to in Regulations 3 and 4 shall be made on the date of agreeing to acquire shares, voting rights or control - that is, on the date of the binding agreement, not the date of completion, so that disclosure precedes the change of control. The PA is sent to all the stock exchanges where the target's shares are listed and to SEBI and the target on the same day, freezing the price-sensitive information asymmetry at the earliest possible moment. The granular timing rules for market purchases, conversions, disinvestments and indirect acquisitions are set out in the chapter on the letter of offer and public announcement; here the point is simply that the PA is day zero of the timeline.

Within five working days: the detailed public statement

The PA is deliberately thin - it freezes the market but does not give shareholders enough to decide. That function falls to the detailed public statement (DPS). Regulation 14(3) requires the acquirer, through the manager, to publish the DPS in the specified newspapers within five working days of the date of the public announcement. The newspaper publication requirement under Regulation 14 is exacting: at least one English national daily with wide circulation, one Hindi national daily, and one regional-language daily at the place where the registered office of the target is situated and where the shares are most frequently traded.

The DPS carries the substantive terms - the identity of the acquirer and persons acting in concert (PACs), the background to the offer, the offer price computed under Regulation 8, the offer size, the mode of payment, the conditions if any, and the statutory and other approvals required. Its publication date is itself a clock-starting event for the next stages. For indirect acquisitions that do not satisfy the Regulation 5(2) parameters, the DPS must be published within five working days of completion of the primary acquisition - the mechanics of which are taken up in the chapter on indirect acquisition.

What the offer must contain: size and price

The procedural windows surround a substantive core fixed by Regulations 7 and 8. Under Regulation 7(1), the open offer for acquiring shares from the public shareholders must be for at least twenty-six per cent of the total shares of the target, calculated as on the tenth working day from the closure of the tendering period. The twenty-six per cent figure is no accident: it is calibrated so that an acquirer crossing the twenty-five per cent control threshold and acquiring the full offer cannot ordinarily breach the maximum permissible non-public shareholding, leaving room to maintain minimum public shareholding without an automatic delisting.

The offer price is governed by Regulation 8. For a direct acquisition of a frequently traded target, the price cannot be lower than the highest of: the highest negotiated price per share under the triggering agreement; the volume-weighted average price paid by the acquirer and PACs in the preceding fifty-two weeks; the highest price paid in the preceding twenty-six weeks; and the volume-weighted average market price of the shares for the sixty trading days immediately preceding the PA on the exchange of maximum volume. The discipline is that the public shareholders cannot be offered less than the most favourable terms the acquirer itself paid recently or than the market was paying. Pricing of indirect and infrequently-traded acquisitions follows separate Regulation 8 limbs covered in the definitions chapter.

The escrow: securing the consideration before vetting

Before the offer can proceed, the acquirer must put real money behind its promise. Regulation 17 requires the acquirer to create an escrow account not later than two working days prior to the date of the detailed public statement and deposit into it the prescribed amount, computed on the total consideration payable assuming full acceptance of the offer. The escrow tiering is fixed: twenty-five per cent of the consideration up to five hundred crore rupees, plus ten per cent of the balance consideration above five hundred crore rupees.

The escrow may take the form of cash deposited with a scheduled commercial bank, a bank guarantee in favour of the manager, or freely transferable and unencumbered securities with appropriate margin. Critically, where the escrow is by way of a bank guarantee or securities, the acquirer must also keep a cash deposit of at least one per cent of the total consideration in the escrow to meet incidental obligations. The escrow is the regulator's leverage: if the acquirer defaults, the manager is empowered to realise the escrow to fulfil the payment obligations, and the deposit cannot be released until all obligations under the offer are discharged. The escrow requirement is the mechanism that makes the no-withdrawal rule meaningful - the money is committed before SEBI ever sees the letter of offer.

Filing and vetting: the draft letter of offer

With the DPS published and the escrow funded, the acquirer turns to the letter of offer (LOF) - the formal instrument by which shares are actually tendered. Regulation 16(1) requires the acquirer, through the manager, to file a draft letter of offer with SEBI within five working days from the date of the detailed public statement, accompanied by the prescribed fee. The draft LOF is the comprehensive disclosure document: it carries the full terms, the procedure for tendering, the schedule of activities and the disclosures mandated by Schedule II.

SEBI's vetting window is also fixed. Under Regulation 16(4), SEBI may give its comments on the draft letter of offer within fifteen working days of receipt, and the acquirer must incorporate those comments before dispatch. The fifteen-working-day window is a ceiling, not a guarantee of comments: if SEBI offers no comments within that period, the acquirer may proceed as if cleared. SEBI's review is not an approval of the commercial merits - it is a disclosure and compliance check, consistent with the investor-protective purpose articulated in Swedish Match AB v. SEBI. The full anatomy of the LOF is set out in the chapter on the letter of offer and public announcement.

Dispatch: seven working days to reach shareholders

Once SEBI's comments (if any) are received and incorporated, Regulation 18(2) requires the final letter of offer to be dispatched to all shareholders whose names appear on the register as of the identified date not later than seven working days from the date of receipt of comments from SEBI, or - where SEBI offers no comments - within seven working days from the expiry of the fifteen-working-day vetting period. The identified date for determining the shareholders entitled to receive the LOF is itself notified in the DPS, and Regulation 18(7) requires it to be the tenth working day prior to the commencement of the tendering period.

The dispatch obligation is substantive, not formal: every eligible shareholder must receive the LOF and the form of acceptance, and the regulations require that shareholders who do not receive the LOF nonetheless be permitted to participate by downloading the documents or obtaining them from the registrar. A defect in dispatch can taint the entire offer, which is why the seven-working-day window runs from a clearly defined trigger rather than from any discretionary date.

The target's board: recommendation by the independent directors

The Code does not leave the target's shareholders to assess the offer unaided. Regulation 26(6) requires the board of the target to constitute a committee of independent directors to provide written reasoned recommendations on the open offer, and Regulation 26(7) requires those recommendations to be published in the same newspapers where the DPS appeared, at least two working days before the commencement of the tendering period. The committee is also entitled, under Regulation 26(6), to seek external professional advice at the target's expense.

This is a meaningful procedural safeguard: the independent directors must apply their minds to whether the offer price is fair and whether shareholders should tender, and must disclose the voting pattern of the committee. Coupled with Regulation 24, which restricts the conduct of the target's board during the offer period - prohibiting, without shareholder approval by special resolution, actions such as alienating material assets, issuing securities or entering material contracts outside the ordinary course - the framework prevents the incumbent management from frustrating a pending offer. The two-working-day gap before tendering ensures the recommendation is in the shareholders' hands before they must decide.

The tendering period: a ten-working-day window

The tendering period is the heart of the offer - the window in which shareholders actually accept by tendering their shares. Regulation 18(8) provides that the tendering period shall commence not later than twelve working days from the date of receipt of comments from SEBI and shall remain open for ten working days. Combined with the seven-working-day dispatch rule and the two-working-day recommendation gap, this sequencing guarantees that shareholders have the LOF and the independent directors' view in hand before the window opens, and a full ten working days to act.

Tendering is effected through the stock exchange mechanism notified by SEBI, and shares once tendered are held in the clearing system. Importantly, Regulation 18(9) permits a shareholder who has tendered to withdraw the tender only in the limited circumstances allowed - the asymmetry is deliberate, mirroring the acquirer's own inability to walk away. The closing date of the tendering period is the master clock for the back end of the offer: payment, completion and the calculation of the twenty-six per cent offer size are all reckoned from it.

Revision and conditions before the window closes

The terms are not entirely frozen once announced. Regulation 18(4) permits the acquirer to revise the offer price or the number of shares upwards at any time prior to the commencement of the last one working day before the tendering period opens, provided the revision is announced in the same newspapers and the additional escrow is topped up. Revision can only be upward and only beneficial to the public shareholders; the acquirer cannot use revision to dilute its commitment.

An acquirer may also make a conditional offer. Regulation 19(1) allows an open offer to be made conditional as to a minimum level of acceptance, but only where the acquirer and PACs do not themselves acquire shares during the offer period. Regulation 19(2) reinforces this in the agreement context: where an open offer is pursuant to an agreement, that agreement must stipulate that if the desired minimum acceptance is not received, the acquirer will not acquire any shares and the underlying agreement stands cancelled. The conditional-offer mechanism is the narrow, regulated route by which an acquirer can make completion contingent on shareholder appetite - and it is examined in detail in the chapter on the creeping acquisition route and related limbs of the Code.

Completion and payment of consideration

The back end of the timeline is fixed by Regulations 18 and 22. Regulation 18(11) requires the acquirer to complete all procedures relating to the open offer, including payment of consideration to the shareholders who have accepted the offer, within ten working days from the last date of the tendering period. Payment is the moment the public shareholders realise their exit, and the escrow stands as security for it: if the acquirer fails to pay, the manager is bound to realise the escrow to discharge the obligation.

Regulation 22 deals with when the acquirer may take control of the shares it is buying under the underlying agreement. Regulation 22(1) bars the acquirer from completing the acquisition of shares or control attracting the obligation until the offer period expires. The important exception is Regulation 22(2): the acquirer may complete the underlying acquisition after the expiry of twenty-one working days from the date of the detailed public statement, provided it has deposited in a special escrow account ninety per cent of the cash consideration payable under the open offer. Regulation 22(2A), inserted by amendment, further permits completion of the underlying transactions subject to the same safeguards. The twenty-one-working-day rule allows commercial deals to close on a predictable timetable while the public offer runs in parallel, with the ninety per cent cash cushion protecting tendering shareholders.

The cardinal rule: an open offer cannot be withdrawn

The most consequential proposition in the whole procedure is that once the public announcement is made, the open offer is effectively irrevocable. Regulation 23(1) permits withdrawal in only four narrow situations: where statutory approvals refused are a condition precedent and the refusal is final [Reg 23(1)(a)]; where the sole acquirer dies (in the case of a natural person) [Reg 23(1)(b)]; where a condition stipulated in the agreement attracting the obligation is not met for reasons outside the acquirer's reasonable control and the agreement is rescinded [Reg 23(1)(c)]; or such other circumstances as SEBI considers merit withdrawal [Reg 23(1)(d)].

The Supreme Court has read these grounds with marked strictness. In Nirma Industries Ltd. v. SEBI (2013) 8 SCC 20, the acquirer discovered, after its public announcement, large-scale fraud and misappropriation by the target's erstwhile promoters and sought to withdraw. The Court refused, holding that the residuary power under the equivalent provision is to be construed ejusdem generis with the specific grounds - that is, withdrawal is permissible only where performance has become impossible, not merely commercially imprudent or economically disadvantageous. An investing company, the Court observed, is responsible for its own investment decision and must conduct its own diligence before announcing.

That strict reading was extended to voluntary offers in SEBI v. Akshya Infrastructure (P) Ltd. (2014) 11 SCC 112, where the Court held that a voluntary open offer, once publicly announced, is on the same footing as a triggered offer and cannot be withdrawn merely because it has become uneconomical. The principle was reaffirmed in Pramod Jain v. SEBI (2016), where withdrawal of a long-pending offer was again disallowed because permitting it would serve neither the interests of investors nor the development of the securities market. Together these three decisions make the no-withdrawal rule one of the most firmly settled propositions in Indian securities law.

The price of delay: interest and directions

Because the timeline is mandatory, an acquirer who delays the open offer does not escape it - the obligation revives with an interest tail. Where an acquirer makes a belated public announcement, SEBI and the Securities Appellate Tribunal have consistently directed the offer to be made reckoned from the original trigger date, with interest payable to the shareholders for the period of delay. In the matter concerning Luxottica's indirect acquisition of the company holding the Ray-Ban business in India, the acquirer was directed to make the open offer and to pay interest at fifteen per cent per annum calculated from the date the obligation arose until actual payment - the standard remedial template for delayed compliance.

The same approach appears in cases such as Clariant International Ltd. v. SEBI before the SAT, where the tribunal directed the open offer to be made from the original trigger date with interest at fifteen per cent per annum to compensate shareholders for the loss occasioned by the delay. The lesson for aspirants is that the working-day windows are enforced economically: a late PA does not merely postpone the offer, it converts every day of delay into a quantifiable liability owed to the very shareholders the Code is designed to protect.

Persons acting in concert run through every stage

One thread runs through the entire timeline: the obligations attach not only to the acquirer but to all persons acting in concert (PACs) with it. The PA, the DPS, the escrow, the offer size and the offer price are all computed by aggregating the holdings and acquisitions of the acquirer and its PACs, and the no-withdrawal rule binds them jointly. Identifying who is a PAC is therefore a threshold question that conditions the entire procedure.

The Supreme Court examined the concept in Daiichi Sankyo Co. Ltd. v. Jayaram Chigurupati (2010) 7 SCC 449, arising from Daiichi's acquisition of Ranbaxy and the consequential indirect acquisition of Zenotech. The Court held that the relationship of persons acting in concert is not static - it must exist at the relevant point of time with reference to the specific acquisition in question, and a party cannot be deemed a PAC for a transaction that pre-dated the concert. The decision matters procedurally because the composition of the PAC group fixes the aggregation for offer size and price and determines who must be named in the PA and DPS. The mechanics of computing indirect triggers built on this reasoning are developed in the indirect acquisition chapter.