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Delisting of Securities



SEBI Regulations gives an option to the listed company to either get itself delisted from all the recognised stock exchanges where it is listed or only from some of the few stock exchanges and continue to be listed on the exchange(s) having nationwide terminals. The difference between two options is that of giving ‘exit opportunity’ to the shareholders. This is described as under:

Option I – No ‘exit opportunity’ required to be given: In this option, if after the proposed delisting from any one or more recognised stock exchanges, the equity shares still remain listed on any recognised stock exchange which has nation-wide trading terminals, no exit opportunity needs to be given to the public shareholders. The procedure for such delisting of shares can be through a board resolution, public notice and application to the concerned exchange.

(1) It shall be approved by a resolution of the board of directors of the company in its meeting;

(2) The company shall give a public notice of the proposed delisting in at least one English national daily with wide circulation, one Hindi national daily with wide circulation and one regional language newspaper of the region where the concerned recognised stock exchanges are located;

(3) The company shall make an application to the concerned recognised stock exchange regarding this;

(4) The public notice shall mention the names of the recognised stock exchanges from which the equity shares of the company are intended to be delisted, the reasons for such delisting and the fact of continuation of listing of equity shares on recognised stock exchange having nationwide trading terminals;

(5) An application shall be disposed off by the recognised stock exchange within a period not exceeding thirty working days from the date of receipt of such application complete in all respects.

(6) The fact of delisting shall be disclosed in the first annual report of the company prepared after the delisting.

Securities and Exchange Board of India (Delisting Of Equity Shares) Regulations, 2009
Regulation No. 6

A company may delist its equity shares from one or more recognised stock exchanges where they are listed and continue their listing on one or more other recognised stock exchanges, subject to the provisions of these regulations and subject to the following –

(a) if after the proposed delisting from any one or more recognised stock exchanges, the equity shares would remain listed on any recognised stock exchange which has nationwide trading terminals, no exit opportunity needs to be given to the public shareholders; and,

(b) if after the proposed delisting, the equity shares would not remain listed on any recognised stock exchange having nationwide trading terminals, exit opportunity shall be given to all the public shareholders holding the equity shares sought to be delisted.

Option II – ‘Exit opportunity’ must be given: This option requires that if after the proposed delisting, the equity shares do 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, through reverse book building.

Step wise procedure for delisting:

Step 1: Conduct Board Meeting

Step 2: Passing of special resolution (If votes cast by public shareholder in favour of the proposal amount to at least two times the number of votes cast by public shareholders against it)

Step 3: Application for in-principal approval to Stock Exchanges

Step 4: Opening of Escrow account (Appoint a merchant banker)

Step 5: Public Announcement

Step 6: Dispatch of letter of offer

Step 7: Bidding/Reverse Book Building

Step 8: Determination of offer price

Step 9: Public announcement for closure of offer

Step 10: If offer is successful
            Payment of consideration to shareholder and final application to stock exchange
            If offer is unsuccessful
            Refund of shares

Procedure for delisting where no exit opportunity is required:
Regulation No. 8

(1) Any company desirous of delisting its equity shares under the provisions of Chapter III shall, except in a case falling under clause (a) of regulation 6, -

(a) obtain the prior approval of the board of directors of the company in its meeting;

(b) obtain the prior approval of shareholders of the company by special resolution passed through postal ballot, after disclosure of all material facts in the explanatory statement sent to the shareholders in relation to such resolution:
Provided that the special resolution 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.

(c) make an application to the concerned recognised stock exchange for in-principle approval of the proposed delisting in the form specified by the recognised stock exchange; and

(d) within one year of passing the special resolution, make the final application to the concerned recognised stock exchange in the form specified by the recognised stock exchange:

(1A) Prior to granting approval under clause (a) of sub-regulation (1), the board of directors of the company shall,-

(i) make a disclosure to the recognized stock exchanges on which the equity shares of the company are listed that the promoters have proposed to delist the company;

(ii) appoint a merchant banker to carry out due-diligence and make a disclosure to this effect to the recognized stock exchanges on which the equity shares of the company are listed;

(iii) obtain details of trading in shares of the company for a period of two years prior to the date of board meeting by top twenty five shareholders as on the date of the board meeting convened to consider the proposal for delisting, from the stock exchanges and details of off-market transactions of such shareholders for a period of two years and furnish the information to the merchant banker for carrying out due-diligence;

(iv) obtain further details in terms of sub-regulation (1D) of regulation 8 and furnish the information to the merchant banker.

(1B) The board of directors of the company while approving the proposal for delisting shall certify that:

(i) the company is in compliance with the applicable provisions of securities laws;

(ii) the promoter or promoter group or their related entities, are in compliance with sub-regulation (5) of regulation 4;

(iii) the delisting is in the interest of the shareholders.

(1C) For certification in respect of matters referred to in sub regulation (1B), the board of directors of the company shall take into account the report of the merchant banker as specified in sub regulation (1E) of regulation 8.

(1D) The merchant banker appointed by the board of directors of the company under clause (ii) of sub-regulation (1A) shall carry out due diligence upon obtaining details from the board of directors of the company in terms of clause (iii) of sub-regulation (1A) of regulation 8

Provided that if the merchant banker is of the opinion that details referred to in clause (iii) of sub-regulation (1A) of regulation 8 are not sufficient for certification in terms of sub-regulation (1E) of regulation 8, he shall obtain additional details from the board of directors of the company for such longer period as he may deem fit.

(1E) Upon carrying out due-diligence as specified in terms of sub regulation (1D) of regulation 8, the merchant banker shall submit a report to the board of directors of the company certifying the following:

(a) the trading carried out by the entities belonging to acquirer or promoter or promoter group or their related entities was in compliance or not, with the applicable provisions of the securities laws; and

(b) entities belonging to acquirer or promoter or promoter group or their related entities have carried out or not, any transaction to facilitate the success of the delisting offer which is not in compliance with the provisions of sub-regulation (5) of regulation 4.

(2) An application seeking in-principle approval for delisting under clause (c) of sub-regulation (1) shall be accompanied by an audit report as required under regulation 55A of the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 in respect of the equity shares sought to be delisted, covering a period of six months prior to the date of the application.

(3) An application seeking in-principle approval for delisting shall be disposed of by the recognised stock exchange within a period not exceeding  five working days from the date of receipt of such application complete in all respects.

(4) While considering an application seeking in-principle approval for delisting, the recognised stock exchange shall not unfairly withhold such application, but may require the company to satisfy it as to –

(a) compliance with clause (b) of sub-regulation (1);

(b) the resolution of investor grievances by the company;

(c) payment of listing fees to that recognised stock exchange;

(d) the compliance with any condition of the listing agreement with that recognised stock exchange having a material bearing on the interests of its equity shareholders;

(e) any litigation or action pending against the company pertaining to its activities in the securities market or any other matter having a material bearing on the interests of its equity shareholders;

(f) any other relevant matter as the recognised stock exchange may deem fit to verify.

(5) A final application for delisting made under clause (d) of sub regulation(1) shall be accompanied with such proof of having given the exit opportunity in accordance with the provisions of Chapter IV, as the recognised stock exchange may require.

Recognised stock exchange having nation wide trading terminals’ means the Bombay Stock Exchange Limited, the National Stock Exchange of India Limited or any other recognised stock exchange which may be specified by SEBI in this regard.

Exit Opportunity
Regulation 10

(1) The promoters of the company shall within one working day from the date of receipt of in principle approval for delisting from the recognised stock exchange, make a public announcement in at least one English national daily with wide circulation, one Hindi national daily with wide circulation and one regional language newspaper of the region where the concerned recognised stock exchange is located.

(2) The public announcement shall contain all material information including the information specified in Schedule I and shall not contain any false or misleading statement.

(3) The public announcement shall also specify a date, being a day not later than thirty working days from the date of the public announcement, which shall be the ‘specified date’ for determining the names of shareholders to whom the letter of offer shall be sent. 

(4) Before making the public announcement, the promoter shall appoint a merchant banker registered with the Board and such other intermediaries as are considered necessary.

(5) It shall be the responsibility of the promoter and the merchant banker to ensure compliance with the provisions of this Chapter.

(6) No promoter shall appoint any person as a merchant banker under sub-regulation (4) if such a person is an associate of the promoter.

(7)No entity belonging to the promoter and promoter group of the company shall sell shares of the company during the period from the date of the board meeting in which the delisting proposal was approved till the completion of the delisting process.

Escrow Account
Regulation 11

(1) Before making the public announcement under regulation 10, the promoter shall open an escrow account and deposit therein the total estimated amount of consideration calculated on the basis of floor price and number of equity shares outstanding with public shareholders.

(2) On determination of final price and making of public announcement under regulation 18 accepting the final price, the promoter shall forthwith deposit in the escrow account such additional sum as may be sufficient to make up the entire sum due and payable as consideration in respect of equity shares outstanding with public shareholders.

(3) The escrow account shall consist of either cash deposited with a scheduled commercial bank, or a bank guarantee in favour of the merchant banker, or a combination of both.

Letter of offer  
Regulation 12

(1) The promoter shall dispatch the letter of offer to the public shareholders of equity shares, not later than two working days from the date of the public announcement.

(2) The letter of offer shall be sent to all public shareholders holding equity shares of the class sought to be delisted whose names appear on the register of the company or depository as on the date specified in the public announcement under sub-regulation (3) of regulation 10.

(3) The letter of offer shall contain all the disclosures made in the public announcement and such other disclosures as maybe necessary for the shareholders to take an informed decision.

(4) The letter of offer shall be accompanied with a bidding form for use of public shareholders and a form to be used by them for tendering shares under sub-regulation (1) of regulation 21.

Bidding Period
Regulation 13

(1) The date of opening of the offer shall not be later than seven working days from the date of the public announcement.

(1A) The promoter shall facilitate tendering of shares by the shareholders and settlement of the same, through the stock exchange mechanism as specified by the Board.

(2) The offer shall remain open for a period of five working days, during which the public shareholders may tender their bids.

Book Building
Regulation 14

14. (1) All public shareholders of the equity shares which are sought to be delisted shall be entitled to participate in the book building process in the manner specified in Schedule II.

(2) An promoter or a person acting in concert with any of the promoters shall not make a bid in the offer and the merchant banker shall take necessary steps to ensure compliance with this sub-regulation.

(3) Any holder of depository receipts issued on the basis of underlying shares held by a custodian and any such custodian shall not be entitled to participate in the offer.

(4) Nothing contained in sub-regulation (3) shall affect the right of any holder of depository receipts to participate in the book building process under sub-regulation (1) if the holder of depository receipts exchanges such depository receipts with shares of the class that are proposed to be delisted.

Offer Price
Regulation 15 

(1) The offer price shall be determined through book building in the manner specified in Schedule II, after fixation of floor price under sub-regulation (2) and disclosure of the same in the public announcement and the letter of offer.

(2) The floor price shall be determined in terms of regulation8 of Securities and Exchange Board of India(Substantial Acquisition of Shares and Takeovers) Regulations, 2011,asmay be applicable.]

Minimum No. of equity shares to be acquired
Regulation 17

An offer made under chapter III shall be deemed to be successful only if,-

(a) the post offer promoter shareholding (along with the persons acting in concert with the promoter) taken together with the shares accepted through eligible bids at the final price determined as per Schedule II, reaches ninety per cent. of the total issued shares of that class excluding the shares which are held by a custodian and against which depository receipts have been issued overseas; and

(b) at least twenty five per cent of the public shareholders holding shares in the demat mode as on date of the board meeting referred to in sub-regulation (1B) of regulation 8 had participated in the Book Building Process:

Provided that this requirement shall not be applicable to cases where the acquirer and the merchant banker demonstrate to the stock exchanges that they have delivered the letter of offer to all the public shareholders either through registered post or speed post or courier or hand delivery with proof of delivery or through email as a text or as an attachment to email or as a notification providing electronic link or Uniform Resource Locator including a read receipt.

Explanation.- In case the delisting offer has been made in terms of regulation 5A of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, the threshold limit of ninety per cent. for successful delisting offer shall be calculated taking into account the post offer shareholding of the acquirer taken together with the existing shareholding, shares to be acquired which attracted the obligation to make an open offer and shares accepted through eligible bids at the final price determined as per Schedule II.]

Public announcement after closure of offer
Regulation 18

Within five working days of closure of the offer, the promoter and the merchant banker shall make a public announcement in the same newspapers in which the public announcement under sub-regulation (1) of regulation 10 was made regarding:- (i) the success of the offer in terms of regulation 17 Along with the final price accepted by the acquirer; or (ii) the failure of the offer in terms of regulation 19; or (iii) rejection under regulation 16 of the final price discovered under Schedule II, by the promoters.

Payment of consideration and return of equity
Regulation 20

(1) The promoter shall immediately on ascertaining success of the offer, open a special account with a banker to an issue registered with the Board and transfer thereto, the entire amount due and payable as consideration in respect of equity shares tendered in the offer, from the escrow account.

(2) All the shareholders whose equity shares are verified to be genuine shall be paid the final price stated in the public announcement within ten working days from the closure of the offer.

Right of remaining shareholders to tender equity shares
Regulation 21

(1) Where, pursuant to acceptance of equity shares tendered in terms of these regulations, the equity shares are delisted, any remaining public shareholder holding such equity shares may tender his shares to the promoter up to a period of at least one year from the date of delisting and, in such a case, the promoter shall accept the shares tendered at the same final price at which the earlier acceptance of shares was made.

(2) The payment of consideration for shares accepted under sub regulation (1) shall be made out of the balance amount lying in the escrow account.

(3) The amount in the escrow account or the bank guarantee shall not be released to the promoter unless all payments are made in respect of shares tendered under sub-regulation (1).

Delisting not permissible in certain circumstances and conditions for delisting
Regulation 4

4. (1) No company shall apply for and no recognised stock exchange shall permit delisting of equity shares of a company,-
(a) pursuant to a buyback of equity shares by the company ;or
(b) pursuant to a preferential allotment made by the company ;or
(c) unless a period of three years has elapsed since the listing of that class of equity shares on any recognised stock exchange; or
(d) if any instruments issued by the company, which are convertible into the same class of equity shares that are sought to be delisted, are outstanding.

(1A) No promoter or promoter group shall propose delisting of equity shares of a company, if any entity belonging to the promoter or promoter group has sold equity shares of the company during a period of six months prior to the date of the board meeting in which the delisting proposal was approved in terms of sub-regulation (1B) of regulation 8.]

(2) For the removal of doubts, it is clarified that no company shall apply for and no recognised stock exchange shall permit delisting of convertible securities.

(3) Nothing contained in clauses (c) and (d) of sub-regulation (1) shall apply to a delisting of equity shares falling under clause (a) of regulation 6.

(4) No promoter shall directly or indirectly employ the funds of the company to finance an exit opportunity provided under Chapter IV or an acquisition of shares made pursuant to sub regulation(3) of regulation 23.

(5) No promoter or promoter group or their related entities shall – (a) employ any device, scheme or artifice to defraud any shareholder or other person; or (b) engage in any transaction or practice that operates as a fraud or deceit upon any shareholder or other person; or (c) engage in any act or practice that is fraudulent, deceptive or manipulative – in connection with any delisting sought or permitted or exit opportunity given or other acquisition of shares made under these regulations


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Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.

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This blog is Created by CA Anil Kumar Jain.