What How When

DELISTING. IN

DELISTING – REGULATORY FRAMEWORK

SEBI(DELISTING OF EQUITY SHARES) REGULATIONS, 2009

SCRA[ SECURITIES CONTRACT( REGULATION ACT) 1956]

LISTING AGREEMENTCOMPANIES ACT,1956SEBI ( SUBSTANTIAL ACQUISITION OF

SHARES AND TAKEOVER) REGULATION, 1997

WHAT IS DELISTING?

• Delisting

To be able to understand the meaning of delisting,

one has to first understand the meaning of the word

“Listing”.

DELISTING

“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………

JOURNEY……….

SEBI Delisting Guidelines, 1998.

SEBI Delisting Guidelines, 2003.

SEBI (Delisting of Equity Shares ) Regulations, 2009.

THE SALIENT FEATURES OF REGULATIONS ARE:-

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 SALIENT FEATURES OF REGULATIONS ARE:-

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 SALIENT FEATURES OF REGULATIONS ARE:-

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

THE SALIENT FEATURES OF REGULATIONS ARE:-

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.

COMPARISON

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.

COMPARISON

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

COMPARISON

TYPES OF DELISTING

Delisting

Compulsory Delisting

Voluntary Delisting

HOW TO DELIST ??

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 terminalsNo exit opportunity

Small Company (whether listed at any of the Exchanges)

No Bidding, but exit opportunity is there

COMPULSORY DELISTING

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

HIGHLIGHTS OF COMPULSORY DELISTING

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

HIGHLIGHTS OF COMPULSORY DELISTING Contd…..

SPECIAL POWERS TO STOCK EXCHANGE SCHEDULE -III

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 :-

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

HIGHLIGHTS OF VOLUNTARY DELISTING

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))

HIGHLIGHTS OF VOLUNTARY DELISTING

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 .

 

Contd…..

HIGHLIGHTS OF VOLUNTARY DELISTING

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

Contd…..

HIGHLIGHTS OF VOLUNTARY DELISTING

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

Contd…..

DETERMINATION OF FLOOR PRICE (REGULATION 15)

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,

HIGHLIGHTS OF VOLUNTARY DELISTING

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))

Contd…..

HIGHLIGHTS OF VOLUNTARY DELISTING

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.

Contd…..

SMALL COMPANIES

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))

HIGHLIGHTS OF SMALL COMPANIES

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 .

Contd…..

HIGHLIGHTS OF SMALL COMPANIES

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.

Contd…..

RELISTING

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.

STILL GRAY AREAS……..

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.

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