Introduction
Pursuant to the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 2011 ('SAST'), shares taken by way
of encumbrance are treated as an acquisition. The scope of the term
encumbrance was sharply brought into light by a recent adjudication
order by Securities and Exchange Board of India ('SEBI')
involving 2 promoter entities of Yes Bank Limited ('YBL')
in March 2020. Whilst this case was decided in the context of an
earlier version of SAST, the order has implications on drafting
transaction documents and disclosing an encumbrance by promoter
entities in financing transactions.
Disclosure Based Regime
In 2010, the Takeover Regulations Advisory Committee
('Advisory Committee'), required promoters to disclose
acquisitions and encumbrances, by whatever name called, on a
periodic as well as transaction specific basis, to stock exchanges
and the target company. Historically, 'encumbrance' was
defined as "a pledge, lien or any such
