Growing Octopus

The securities watchdog is looking at expanding the Takeovers & Mergers Code to cover indirect takeovers. The securities watchdog is looking at expanding the Takeovers & Mergers Code to cover indirect takeovers. The Securities & Exchange Commission’s (SEC) powers are presently limited to companies quoted on the Colombo Stock Exchange. Hence its Takeovers & Mergers Code’s reach is also somewhat limited.

Under the code, when a buyer triggers the 30 percent threshold of a target company, the firm has to make a mandatory offer to the remaining shareholders. The code kicks in where such a takeover or merger is between one or more listed companies or where at least one of the parties involved in such a takeover or merger is a listed public company.

"But the issue does not apply to indirect takeovers and this is of much concern in the securities market," notes Solicitor General C P R de Silva PC.

For instance, in an indirect takeover, there are no obligations to make a mandatory offer to the minority shareholders of a target company.

"It's like a situation where a person who does not own any shar