As per Reg 3 of SEBI (Prohibition  of  Insider  Trading) Regulations, 2015, when can unpublished price-sensitive information be communicated in connection with a transaction that does not attract the obligation to make an open offer?

Solution

As per Reg 3-Notwithstanding anything contained in this regulation, an unpublished price sensitive information may be communicated, provided, allowed access to or procured, in connection with a transaction that would:– (i)entail an obligation to make an open offer under the takeover regulations where the board of directors of the 12[listed] company is of informed opinion that [sharing of such information]is in the best interests of the company; NOTE:It is intended to acknowledge the necessity of communicating, providing, allowing access to or procuring UPSI for substantial transactions such as takeovers,mergers and acquisitions involving trading in securities and change of control to assess a potential investment. In an open offer under the takeover regulations, not only would the same price be made available to all shareholders of the company but also all information necessary to enable an informed divestment or retention decision by the public shareholders is required to be made available to all shareholders in the letter of offer under those regulations. (ii)not attract the obligation to make an open offer under the takeover regulations but where the board of directors of the [listed] company is of informed opinion [that sharing of such information]is in the best interests of the company and the information that constitute unpublished price sensitive information is disseminated to be made generally available at least two trading days prior to the proposed transaction being effected in such form as the board of directors may determine16[to be adequate and fair to cover all relevant and material facts]. NOTE:It is intended to permit communicating, providing, allowing access to or procuring UPSI also in transactions that do not entail an open offer obligation under the takeover regulations 17[when authorized by the board of directors if sharing of such information]is in the best interests of the company. The board of directors, however, would cause public disclosures of such unpublished price sensitive information well before the proposed transaction to rule out any information asymmetry in the market.