SEBI orders public disclosure at M&A negotiation stage: Compromises deal certainty and amplifies directors’ liabilities

Are you in the middle of exploring a confidential listed M&A deal? If yes, SEBI may have just opened a Pandora’s box by mandating you to disclose the details of the transaction as it unfolds – effectively bidding adieu to deal certainty. In what could be termed as nothing else than an overzealous attempt to protect public shareholders, SEBI recently passed an order (In the matter of Reliance Industries Limited) stating: (a) all ongoing deal negotiations are unpublished price sensitive information (UPSI); (b) if there is a media leak about such negotiations, the listed company should proactively disclose material details of these negotiations; and (c) listed company cannot wait for finalization of deal metrics or execution of definitive documents to make disclosures to the market. 

Key Takeaways:
  • Listed companies forced to publicly disclose deal details pending finalization of negotiations
  • Investors bereft of price and deal certainty, may even face reputational damage
  • Directors of listed companies may be liable for market manipulation and exposed to litigation if they publicly disclose a deal which then falls through
  • Such premature disclosures circumvent SEBI’s intention to ensure information symmetry in the market

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