MCQ Practice Set — SAST Regulations 2011

Topic 55 — 60 Exam-Standard MCQs with Answers & Explanations | SEBI Law Officer & Judiciary Exams

This MCQ Practice Set covers all topics from Topics 44–54 (SAST Regulations 2011). Questions span three difficulty levels — Foundation (F), Intermediate (I), and Advanced (A). Each answer has a detailed explanation. Work through all questions after completing the study notes for maximum examination benefit.

Section A — Foundation Level (Questions 1–10)

1. Under which provision of the SEBI Act are the SAST Regulations, 2011 enacted?

(A) Section 11B
(B) Section 12A
(C) Section 30
(D) Section 24

Answer: (C) SAST Regulations 2011 were enacted under Section 30 of the SEBI Act (regulation-making power with prior CG approval) — the same basis as all SEBI Regulations.

2. The SAST Regulations, 2011 were framed on the basis of the recommendations of which committee?

(A) P.N. Bhagwati Committee
(B) C. Achuthan Committee
(C) M.J. Pherwani Committee
(D) A.D. Gorwala Committee

Answer: (B) The C. Achuthan Committee (2010) reviewed the 1997 Takeover Code and recommended the key changes incorporated in the SAST Regulations, 2011 — including the 25% trigger, 26% offer size, and abolition of non-compete fees.

3. Under Regulation 3(1) of the SAST Regulations 2011, the threshold shareholding percentage that triggers a mandatory open offer obligation is:

(A) 10%
(B) 15%
(C) 20%
(D) 25%

Answer: (D) Regulation 3(1) of SAST 2011 provides that acquisition of shares/voting rights that, together with PAC holdings, reaches or crosses 25% triggers the mandatory open offer obligation. Note: 1997 Code had a 15% trigger.

4. Under the SAST Regulations 2011, the minimum size of a mandatory open offer is:

(A) 10% of total shares
(B) 20% of total shares
(C) 25% of total shares
(D) 26% of total shares

Answer: (D) Regulation 7(1) prescribes minimum 26% of total shares for a mandatory open offer — increased from 20% under the 1997 Code. Voluntary open offer minimum is 10% (Regulation 6(2)).

5. A voluntary open offer under Regulation 6 of SAST 2011 is available to a person holding:

(A) Less than 5%
(B) 5% to 25%
(C) 25% to 74.99%
(D) 75% or more

Answer: (C) Regulation 6(1): voluntary open offer is ONLY available to persons already holding 25% to 74.99% (with PAC). Not available to persons below 25% or at/above 75%.

6. Under Regulation 6(2), the minimum offer size for a voluntary open offer is:

(A) 5% of total shares
(B) 10% of total shares
(C) 20% of total shares
(D) 26% of total shares

Answer: (B) Regulation 6(2): voluntary open offer minimum = 10% of total shares. Compare: mandatory open offer minimum = 26%.

7. Under the SAST Regulations 2011, the Public Announcement (PA) of an open offer must be made within:

(A) 1 working day
(B) 2 working days
(C) 5 working days
(D) 7 working days

Answer: (B) Regulation 13(1): PA must be made within 2 WORKING DAYS of the triggering event (SPA execution, board approval, etc.).

8. Under Regulation 6(3) of SAST 2011, an acquirer who wants to make a voluntary open offer must not have made any acquisition in the target company in the preceding:

(A) 26 weeks
(B) 52 weeks
(C) 1 year
(D) 3 years

Answer: (B) Regulation 6(3): 52-WEEK look-back restriction — the acquirer (and any PAC) must not have acquired any shares in the target in the 52 weeks before the voluntary PA.

9. Under Regulation 3(2) of SAST 2011, a person holding between 25% and 74.99% may acquire additional shares without triggering an open offer, subject to a maximum of:

(A) 2% per financial year
(B) 5% per financial year
(C) 10% per financial year
(D) 15% per financial year

Answer: (B) Regulation 3(2): creeping acquisition limit = 5% per financial year (April 1 – March 31), through open market purchases only.

10. The offer price in a mandatory open offer under Regulation 8(1) is determined as the:

(A) Average of the four price parameters
(B) Lowest of the four price parameters
(C) Highest of the four price parameters
(D) Negotiated price only

Answer: (C) Regulation 8(1): offer price = HIGHEST of the four parameters: (a) negotiated price; (b) 52-week VWAP of prior acquisitions; (c) highest price in last 26 weeks; (d) 60-day market VWAP.

Section B — Intermediate Level (Questions 11–20)

11. An acquirer holds 30% in a listed company. He acquires 4% through open market purchases in April, 0.8% in July, and 0.3% in March of the same financial year. Has he violated Regulation 3(2)?

(A) No — total is 5.1% which is within limit
(B) Yes — total is 5.1% which exceeds 5% per financial year
(C) No — each tranche is below 5%
(D) Cannot be determined without knowing offer price

Answer: (B) Total acquisitions in the FY = 4% + 0.8% + 0.3% = 5.1% — exceeds the 5% per financial year creeping acquisition limit under Regulation 3(2). All tranches in the same FY are aggregated.

12. Under Regulation 8(1) of SAST 2011, the four price benchmarks for determining the minimum offer price do NOT include:

(A) VWAP of acquisitions over last 52 weeks
(B) Highest price paid in any acquisition in last 26 weeks
(C) 60-day VWAP of market trading
(D) Book value per share of the target company

Answer: (D) Book value per share is NOT one of the four Regulation 8(1) parameters. The four are: (a) negotiated price; (b) 52-week acquisition VWAP; (c) highest price in 26 weeks; (d) 60-day market VWAP.

13. Which of the following acquisitions is EXEMPT from the mandatory open offer obligation under Regulation 10 of SAST 2011?

(A) Strategic investor buying 30% in a listed company
(B) Promoter A transferring 15% to Promoter B (held for 4 years, among promoter group)
(C) A foreign company acquiring control through a direct share purchase
(D) A PE fund acquiring 28% through a block deal

Answer: (B) Regulation 10(1)(a): inter-se transfer between qualifying persons (promoter group) who have held shares for at least 3 years is exempt. Options A, C, D would trigger mandatory open offer.

14. Under Regulation 10(1)(h) of SAST 2011, which of the following is exempt from mandatory open offer?

(A) Acquisition of shares through a block deal
(B) Acquisition of shares through conversion of convertible debentures at pre-disclosed terms
(C) Acquisition of shares from a foreign investor through private negotiation
(D) Acquisition of shares through creeping acquisition exceeding 5% in a year

Answer: (B) Regulation 10(1)(h): Conversion of convertible instruments (debentures, preference shares, warrants) into equity shares at pre-disclosed terms is exempt — no fresh economic acquisition.

15. Under the SAST Regulations 2011, the non-compete fee that may be paid to the seller over and above the open offer price is:

(A) Allowed up to 25% of offer price
(B) Allowed up to 15% of offer price
(C) Allowed for listed companies only
(D) Abolished — must be included in offer price

Answer: (D) The 2011 Regulations abolished the non-compete fee as a separate payment. Under Regulation 8(3), any consideration paid including non-compete fees must be included in the offer price calculation — ensuring all shareholders receive the same effective price.

16. A Detailed Public Statement (DPS) must be published within how many working days of the Public Announcement?

(A) 2 working days
(B) 5 working days
(C) 7 working days
(D) 15 working days

Answer: (B) Regulation 14: DPS must be published within 5 WORKING DAYS of the PA (not 7 — a common trap in exams). DPS is published in the same newspapers as the PA.

17. Under Regulation 20 of SAST 2011, a competing open offer must be announced within:

(A) 7 working days
(B) 10 working days
(C) 15 working days
(D) 21 working days

Answer: (C) Regulation 20(1): Competing offer must be announced within 15 WORKING DAYS of the original acquirer's PA. After 15 WD, no competing offer can be made.

18. Under Regulation 8(4) of SAST 2011, the offer price in an open offer may be revised:

(A) Both upward and downward at any time
(B) Upward only, up to 3 working days before tendering period
(C) Downward only if SEBI approves
(D) Upward or downward up to 5 working days before tendering period

Answer: (B) Regulation 8(4): offer price may be revised UPWARD ONLY — up to 3 working days before commencement of the tendering period. Downward revision is never permitted.

19. Under Regulation 29(2) of SAST 2011, a holder of 5% or more in a target company must disclose any change in shareholding exceeding:

(A) 1%
(B) 2%
(C) 3%
(D) 5%

Answer: (B) Regulation 29(2): Any 2% or more change (upward or downward) in holdings above 5% must be disclosed within 2 working days.

20. Under the SAST Regulations, annual disclosures under Regulation 28 must be made by:

(A) March 31
(B) April 7
(C) April 15
(D) April 30

Answer: (B) Regulation 28(1): Annual disclosures must be filed by April 7 (within 7 working days of March 31 — the end of the financial year).

Section C — Advanced Level (Questions 21–25)

21. ABC Ltd. (an acquirer) holds 40% in Target Ltd. (listed). In one financial year, ABC Ltd. acquires: 2% in May through NSE open market purchase; 1.5% in September through a block deal; and 1% in January through a rights issue (which is its full entitlement). Which of these acquisitions requires ABC Ltd. to make a mandatory open offer?

(A) The block deal only
(B) The rights issue only
(C) The block deal — because block deals are not permitted for creeping acquisition
(D) Neither, because total is 4.5% (below 5%)

Answer: (C) Under Regulation 3(2), creeping acquisition must be through OPEN MARKET PURCHASES ONLY. Block deals are NOT open market purchases — they are off-market negotiated transactions. Therefore the 1.5% block deal triggers the mandatory open offer obligation (regardless of amount). The open market purchase (2%) is valid creeping. The rights issue (1%) is exempt under Regulation 10(1)(i). The block deal alone is the violation.

22. In the SAST Regulations 2011 context, which of the following statements about 'control' is INCORRECT?

(A) Control includes the right to appoint majority of the directors
(B) Control includes control over management or policy decisions
(C) Holding 26% or more of shares automatically constitutes control
(D) Control may be exercised through shareholder agreements or voting agreements

Answer: (C) Holding 26% or more does NOT automatically constitute 'control' under SAST. Control is a functional concept — it requires the ability to determine management/policy decisions, not merely a shareholding percentage. In Subhkam Ventures v. SEBI (SAT 2010), SAT confirmed that control is not determined by shareholding percentage alone.

23. Under Regulation 23 of SAST 2011, which of the following is a VALID ground for withdrawal of an open offer by the acquirer?

(A) The acquirer's stock price has fallen below the open offer price
(B) A competing offer has been announced at a higher price
(C) CCI approval required for the acquisition has been refused
(D) The target company's financial performance has deteriorated

Answer: (C) Regulation 23(1): Valid grounds for withdrawal include: statutory approval refused (such as CCI/FEMA refusal); a specified condition in the PA is not fulfilled; or circumstances SEBI recognises as meriting withdrawal. Stock price fall, competing offer, or target performance deterioration are NOT valid grounds.

24. Company P holds 55% in Target Q (listed). Company P wants to acquire an additional 8% of Target Q. Which of the following CORRECTLY describes the regulatory position?

(A) P can acquire 8% through creeping acquisition since it is under 10% in two years
(B) P can acquire only 5% through open market in this financial year without triggering an open offer; the additional 3% would require a mandatory open offer or voluntary offer
(C) P can acquire 8% freely since it already holds majority control
(D) P requires CCI approval for any acquisition above 5%

Answer: (B) Regulation 3(2): Creeping acquisition limit is 5% PER FINANCIAL YEAR for persons holding 25%-74.99%. P can acquire up to 5% through open market without an open offer. The additional 3% beyond the 5% limit would trigger a mandatory open offer obligation. A voluntary offer under Regulation 6 for 10% minimum could also be used.

25. Under Regulation 8(1) of SAST 2011, calculate the minimum offer price given: (a) SPA negotiated price = ₹150; (b) VWAP of acquisitions in last 52 weeks = ₹145; (c) Highest single price paid in last 26 weeks = ₹160; (d) 60-day market VWAP on NSE = ₹155. The minimum offer price is:

(A) ₹145
(B) ₹150
(C) ₹155
(D) ₹160

Answer: (D) Regulation 8(1): offer price = HIGHEST of the four parameters. (a) ₹150, (b) ₹145, (c) ₹160, (d) ₹155 — the HIGHEST is ₹160 (parameter c: highest single price paid in the last 26 weeks).

🎯 QUICK ANSWER KEY — SAST MCQ Set (Topics 44-54)

1-C 2-B 3-D 4-D 5-C
6-B 7-B 8-B 9-B 10-C
11-B 12-D 13-B 14-B 15-D
16-B 17-C 18-B 19-B 20-B
21-C 22-C 23-C 24-B 25-D

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