What How When DELISTING. IN

SEBI(DELISTING OF EQUITY SHARES) REGULATIONS, 2009 SCRA[ SECURITIES CONTRACT( REGULATION ACT) 1956] LISTING AGREEMENT COMPANIES ACT,1956 SEBI ( SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVER) REGULATION, 1997

Delisting To be able to understand the meaning of delisting, one has to first understand the meaning of the word “Listing”. Listing Listing means admission of a Company’s securities to the trading platform of a Stock Exchange, so as to provide marketability and liquidity to the security holders.

“Delisting” is totally the reverse of listing. To delist means permanent removal of securities of a listed company from a stock exchange. As a consequence of delisting, the securities of that company would no longer be tradeable at that stock exchange.

JOURNEY FROM GUIDELINES TO REGULATIONS ………

 SEBI Delisting Guidelines,  SEBI Delisting Guidelines,  SEBI (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.  Not be applicable to sick companies

The companies cannot delist their securities from the Exchanges pursuant to buyback and preferential allotment. 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 concept of Specified Date has been introduced, which shall not be later than 30 working days from the date of the Public Announcement. 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

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. Promoters’ option of not accepting the Offer Price Promoters/ PAC not allowed to participation in bidding:

Guidelines,2003 Definition- The Public shareholding is the shareholding in a company other than by the Promoters, Persons Acting in concert with the Promoter Inapplicability- Not mentioned exclusively and separately. Regulations.,2009 Definition- Along with the Promoters, Persons Acting in concert with the Promoter, holders of Depositors receipts and the custodian thereof are also Included Inapplicability- Separate section is made. The exemption is available to the companies which have been declared sick & their reconstruction scheme provides the delisting including the provisions of the exit option to the shareholders.

Guidelines,2003 Shareholders Resolution - Special resolution to be passed through the shareholders is compulsory. No time limit was prescribed for the exchanges for disposal of the Delisting application filed by the companies. Regulations.,2009 Shareholders Resolution -Now the requirement of special resolution for the delisting without Exit route is deleted. Only public announcement and the disclosure in the first annual report after delisting will suffice the requirement. A 30 days time period after the receipt of Application complete in all respect, given to the exchanges for disposing of the application of delisting.

Guidelines,2003 Small Companies-No special provisions are there for the small companies. Reinstatement of securities- The companies can not be relisted at the exchange for a period of 2 years from the period of delisting. Regulations.,2009 Small Companies-Special provisions under the separate section be given for the small companies and winding up companies. Reinstatement of securities- The companies delisted voluntarily can not be relisted for a period 5 years and the companies compulsorily delisted can not be relisted for a period of 10 years from the date of delisting

Delisting Compulsory Delisting Voluntary Delisting

Delisting Compulsory Delisting Voluntary delisting Voluntary delisting from all the exchanges. Exit opportunity Voluntary delisting from few exchanges but remains listed on at least one stock exchange having nation wide terminals No exit opportunity Small Company (whether listed at any of the Exchanges) No Bidding, but exit opportunity is there

A recognized stock exchange may, by order, delist any equity shares of a company on any ground prescribed in the rules made under section 21A of the Securities Contracts (Regulation) Act, 1956

Decision by panel of experts after considering the various parameters given in the regulations. Public notice by the exchange for inviting the representation by the aggrieved persons. Determination of exit price by the independent valuer appointed by the concerned stock exchange. No requirement of going through the reverse book building process.

Acquisition of shares by the promoters at fair value. Where a company has been compulsorily delisted, the company itself, its whole time directors, its promoters and the companies which are promoted by any of them shall not directly or indirectly access the securities market or seek listing for any equity shares for a period of ten years from the date of such delisting

 The recognized stock exchange can file prosecutions under relevant provisions of the Securities Contracts (Regulation) Act, 1956 or any other law for the time being in force against identifiable promoters and directors of the company for the alleged non-compliances. The recognized stock exchange can also file a petition for winding up the company under section 433 of the Companies Act, 1956 (1 of 1956) or make a request to the Registrar of Companies to strike off the name of the company from the register under section 560 of the said Act.

Voluntary delisting :-  VOLUNTARY DELISTING FROM ALL THE EXCHANGES  VOLUNTARY DELISTING FROM FEW EXCHANGES BUT REMAINS LISTED ON AT LEAST ONE STOCK EXCHANGE HAVING NATION WIDE TERMINALS  VOLUNTARY DELISTING BY THE SMALL COMPANIES

VOLUNTARY DELISTING FROM ALL THE EXCHANGES If after the proposed delisting, the equity shares would not remain listed on any recognized stock exchange having nation wide trading terminals, Exit Opportunity shall be given to all the public shareholders holding the equity shares sought to be delisted. (Regulation 6 (b))

The special resolution to be passed by postal ballot shall be acted upon if and only if the votes cast by public shareholders in favour of the proposal amount to at least two times the number of votes cast by public shareholders against it. The company shall obtain in principle approval from the concerned stock exchange for the proposed delisting of its equity shares.

The promoter appoint a merchant banker. Public announcement by the promoters. Invitation of bids from the public shareholders through letter of offer for determination of final price [ Reverse Book Building] The final offer price shall be determined as the price at which the maximum number of equity shares is tendered by the public shareholders. The offer shall remain open for a minimum period of three working days and a maximum period of five working days during which the public shareholders may tender their bids

Post offer Promoter shareholding should reach to either 90% of total paid up capital or minimum 50% of the public shareholding tendered through offer whichever is high. The final price need not to be accepted by the promoters. Remaining public shareholder may tender their shares to the promoter upto a period of one year from the date of delisting

 Where the equity shares are frequently traded in all the recognized stock exchanges where they are listed, the fair price shall be higher of the following:  A.) the average of the weekly high and low of the closing prices of the equity shares of the company during the twenty six weeks.  OR  B.) two weeks preceding the date on which the recognized stock exchanges were notified of the board meeting in which the delisting proposal was considered, 

VOLUNTARY DELISTING FROM FEW EXCHANGES BUT REMAIN LISTED AT ONE STOCK EXCHANGE HAVING NATION WIDE TRADING TERMINAL If after the proposed delisting from any one or more recognized stock exchanges, the equity shares would remain listed on any recognized stock exchange which has nationwide trading terminals, No Exit Opportunity needs to be given to the public shareholders. (Section 6 (a))

No need to pass Special resolution by members. The company has to give a public notice of the proposed delisting. The company shall disclose the fact of the delisting in the first annual report after delisting.

 Definition  A company having paid-up capital of upto one Crore rupees and its equity shares were not traded on any exchange in the one year immediately preceding the date of decision of delisting; OR (Regulation 27 (1))  A company having upto 300 public shareholders and the paid-up value of the shares held by such shareholders is upto one Crore rupees. (Regulation 27 (2))

The special resolution through postal ballot and be acted upon if and only if the votes cast by public shareholders in favour of the proposal amount to at least two times the number of votes cast by public shareholders against it. The promoters shall determine the exit price in consultation with the Merchant Banker. The company shall obtain in principle approval from the concerned stock exchange for the proposed delisting of its equity shares.

90% public shareholders should give their consent for delisting of the equity shares by not following the reverse book building process. The shareholders should be given a option to remain the shareholders even if the company gets delisted.

Cooling period:- The company that has voluntarily delisted its securities can relist its securities only after a period of 5 years. The company that has been compulsory delisted by the exchange can relist its securities only after a period of 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. The sick companies are exempted from the provision of cooling period.

Non Payment to the shareholders No check by the regulatory authorities on whether the payment has been made to the shareholders or not in case of compulsory delisting. It does not mention the penalties/ consequences in case of defaulting promoters in making the payment of the fixed fair value to the public shareholders. Applicability of regulation 8 in case of small companies The extent of the applicability of regulation 8 is not clearly defined in case of delisting by small companies. No time period for the acquisition of shares from the public shareholders has been prescribed in case of compulsory delisting.