SEBI issued an informal guidance dated July 29, 2016 in relation to exemption from making an open offer in the matter of Kothari Products Limited, a
company listed on BSE and NSE. One of the promoters, who is also the Chairman and Managing Director (CMD) of KPL sought to transfer his shareholding of 55.55% of the total paid up capital of KPL to his group company, M/s DMK Holdings Pvt. Ltd., at current market price, pursuant to restructuring plans.

The CMD held 33.33% of the equity capital of DMK and had sought an interpretive letter from SEBI regarding whether the transfer of shares from the
CMD to DMK would be exempted under Regulation 10(1)(a)(iii) of the SEBI (SAST) Regulations, 2011. The provision states that in case of acquisition pursuant to transfer of shares amongst the company, its subsidiaries or holding company, persons holding at least 50% of the shares of such company and other companies in which such persons hold at least 50% of the shares, there would be no requirement to make an open offer. Accordingly, SEBI in its informal guidance stated, that the proposed transfer between the CMD and DMK would not be exempt from the obligation to make open offer, since the transferor holding in DMK is only 33.33%, which is less than the 50% threshold prescribed under Regulation 10(1)(a)(iii) of the takeover regulations.