Doing Business in India - RSM Austria

4.7 Audit Committees
For better corporate governance constitution of an audit committee in case public
companies (listed and unlisted) having paid-up capital of not less than
Rs. 50 million (US$ 1.11 million) has been prescribed. Audit Committee should consist
of not less than three directors and such number of other directors as the Board
may determine. Two-thirds of the total number of the members of the committee
should be directors, other than managing or whole-time director. The
recommendations of the Audit Committee on any matter relating to financial
management including the audit report, are binding on the Board of Directors. In
case the Board of Directors do not accept the recommendation of the Audit
Committee, it shall record the reasons thereof and communicate such reasons to
the shareholders.
4.8 Producer Companies
A new concept has been introduced in the Companies Act, 1956 enabling
incorporation of co-operative societies as producer companies and conversion of
existing cooperatives into companies, on optional basis.
4.9 Takeovers
The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 1997,
popularly known as the Takeover Code, contains the guidelines to be followed by the
acquirers of controlling stakes in a listed company. The key features of the Takeover
Code are:
Any person, who along with persons acting in concert, acquires 15% or
more of the equity shares of a listed company, is required to make an open
offer to the public shareholders to acquire at least 20% more equity
shares.
The price at which the open offer is made has to be the highest of:
The negotiated price at which the 15% block has been purchased.
The price paid by the acquirer or persons acting in concert with him
for acquisition, if any, including by way of allotment in a public or
rights or preferential issue during the twenty-six week period prior to
the date of public announcement, which ever is higher.
The price computed on the basis of the average of the weekly high
and low of the closing prices of the shares of the target company as
quoted on the stock exchange where the shares of the company are
most frequently traded during the twenty-six weeks or the average of
the daily high and low of the closing prices of the shares as quoted on
the stock exchange where the shares of the company are most
frequently traded during the two weeks preceding the date of public
announcement, whichever is higher:
An open offer is also required in cases where the acquisition leads to
change of control over the target company, irrespective of the quantum of
stake acquired. This provision also gets triggered in case of indirect
acquisitions, ie where there is change of control over an Indian company
44
DOING BUSINESS IN INDIA