Priyanka Tiwari
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Suspense crime, Digital Desk : India's market regulator, the Securities and Exchange Board of India (SEBI), has issued a crucial clarification that settles a long-standing ambiguity for company insiders and major investors: for regulatory purposes, the acquisition of shares officially occurs on the trade date, not the day the shares are credited to a demat account.
This guidance resolves a tricky timing issue created by the stock market's T+1 settlement cycle, where shares bought on one day are delivered to the buyer's account on the next business day. The confusion was particularly significant at the end of a financial year. For instance, if a promoter bought a large block of shares on March 31 (the last day of FY25), the shares would only appear in their demat account on April 1 (the first day of FY26). This raised a critical question: in which financial year should the acquisition be counted?
The answer is vital for compliance with SEBI's Takeover Code—formally known as the Substantial Acquisition of Shares and Takeovers (SAST) Regulations. This code mandates that when an entity's shareholding in a company crosses a specific threshold (like 25%), they must make an "open offer" to buy additional shares from the public. Calculating this shareholding accurately at the end of each financial year is therefore essential.
In an informal guidance sought by the law firm Khaitan & Co, SEBI has now made its position crystal clear. The regulator stated that the "date of execution of the trade on the stock exchange platform" is the definitive date of acquisition. The subsequent credit of shares to the demat account is merely a procedural follow-up to the transaction.
This ruling provides much-needed certainty for promoters, key managerial personnel, and other acquirers. It removes any ambiguity about which financial year a transaction belongs to, ensuring that calculations for potential open offer triggers are consistent and transparent. By prioritizing the trade date, SEBI has reinforced a clear and predictable framework for market compliance, preventing any potential loopholes related to the timing of settlements.
