SEBI, by its publication dated 10th June 2009 in the Official Gazette, brought into effect the much awaited SECURITIES AND EXCHANGE BOARD OF INDIA (DELISTING OF EQUITY SHARES) REGULATIONS, 2009.
MAJOR HIGHLIGHTS OF SECURITIES AND EXCHANGE BOARD OF INDIA (DELISTING OF EQUITY SHARES) REGULATIONS, 2009:
- Public shareholders have been defined as the holders of equity shares other than the a) Promoters and b) holders of depository receipts issued overseas against underlying shares.
- Non applicability: These Regulations shall not be applicable to sick companies and whose reconstruction/ revival scheme provides for the delisting and an exit option to the public shareholders be given.
- Non permissibility of delisting: The companies cannot delist their securities from the Exchanges pursuant to buyback and preferential allotment. Any instruments pending conversion into equity shares can not be delisted.
- No shareholders approval, in case the company continues to remain listed at any of the exchanges having Nationwide trading terminal i.e. BSE and/ or NSE or any other Exchange specified in this behalf.
- The Stock Exchanges have also been held liable for speedy and timely disposal of applications. The exchanges have to dispose off the application seeking delisting/ inprincipal approval within 30 working days from the date of receipt of application complete in all respect.
- In Principle Approval: In cases where an Exit Opportunity is required to be given to the Public Shareholders (i.e. where the company is seeking delisting from the all the exchanges or in a case, where after delisting the company will not remain listed at the exchanges having nationwide trading terminal), the Company will have to now take the in principal approval from the concerned Exchange(s).
- Specified Date: The concept of Specified Date has been introduced, which shall not be later than 30 working days from the date of the Public Announcement.
- Validity of the Special Resolution: The special resolution passed for the delisting giving exit option to the shareholders will be valid for a period of 1 year within which the final application will be required to be made to the exchange for delisting.
- Special Resolution by way of Postal Ballot: The shareholders approval should be sought from the shareholders via postal ballot in case the exit opportunity be given to the shareholders. The votes cast by the public shareholders in favour of the delisting proposal should be atleast 2 times of numbers cast against it.
- Offer Document & Offer Period: The Opening Date of the Offer should not be later than 55 working days from the Public Announcement. The Offer should remain open for a minimum period of 3 working days and a maximum of 5 working days.
- Promoters/ PAC not allowed to participation in bidding: Promoters/ PAC/ GDR/ ADR/ Receipt Holders can not participate in the delisting bid. If Depository Receipt holders wish to participate then they have to first convert them into Equity shares.
- Promoters’ option of not accepting the Offer Price: Under the Regulations, the Promoters are not bound to accept the Offer Price, as may be determined by the Book Building Process. If the Promoters do not accept the price arising out of bidding, then the promoter will be responsible to comply with the clause 40A of the Listing agreement within 6 months of closing of bidding process.
- Successful Exit Offer: Under the Regulations, to get delisted, post offer, the Promoter holding should reach the higher of the following:
- 90% of total issued shares of that class; or
- (pre offer promoter holding +50% of the Offer Size), otherwise the offer shall be deemed to have failed.
- Validity period of the Exit Price: Under the Regulations, the final exit price to remain open for a period of 1 year from the date of delisting, for the remaining shareholders who have not exercised the option at the time the offer is open.
- Valuation under the Compulsory Delisting: Under the Regulations, the Exchanges are required to constitute a Panel for taking decisions regarding the compulsory delisting and also to appoint an Independent Valuer for determining the fair value of such compulsorily delisted shares, at which the promoters of the company have to accept the shares of the public shareholders.
- Repercussions of Compulsory Delisting: The promoters, the whole time directors, and the companies which are promoted by any of them shall not directly or indirectly access the securities market or seek listing for 10 years.
- Special Exemptions for Small Companies: Small companies having a paid up capital of upto Rs. 1 crore or having less than equal to 300 shareholders and holding not more than Rs.1 crore, they need not to follow Reverse book building process.
- Cooling period for Relisting:
- In case of voluntary delisting: 5 years; and
- In case of Compulsory Delisting: 10 years
- Relisting of sick companies: In case of Delisted companies who were sick in the past, can be given opportunity of listing through Restructuring scheme passed by BIFR..
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