When Succession Planning Meets The Takeover Code: How Skipping SEBI’s Exemption Route Can Trigger An Open Offer

Family succession through a trust in a listed company can silently become a tripwire that triggers an open offer obligation for the promoter family. Succession planning in a listed company cannot be done the way it is done in an unlisted one.

Skipping SEBI’s prescribed exemption route for transferring promoter shares to a trust entails strict liability for penalties and an open offer obligation that only becomes more complicated over time.

Promoter and listed companies that have already triggered this tripwire may still correct it, but no solution fits all, and the outcome depends on the facts, the corrective steps taken, and how they are taken.

Background

Family trusts have increasingly become a common tool for promoter families of listed companies to plan succession. A trust lets a family consolidate its shareholding in one vehicle, avoid the uncertainties of intestate succession or contested wills, and pass control to the next generation in an orderly way rather than leaving