After a company becomes listed company, there are also regulations that govern the delisting of shares of the Company from one or more recognized stock exchanges. To delist means permanent removal of securities of a listed company from a stock exchange. As a result, the securities of that company would no longer be tradable at that stock exchange.
Delisting of Indian companies is governed by the SEBI (Delisting of Equity Shares) Regulations, 2009 (“2009 Regulations”) issued by SEBI in the Official Gazette vide dated 10.06.2009. Further, the regulations amended on 08.10.2013, 24.03.2015, 14.08.2015 and 12.01.2016. Here, we will discuss about procedure of delisting after taking into account all these amended regulations.
These regulations shall apply to delisting of equity shares of a company from all or any of the recognised stock exchanges (RSE) where such shares are listed.
Provided that these regulations shall not apply to securities listed without making a public issue, on the institutional trading platform of a RSE.
NON- APPLICABILITY: [3(2)]
Nothing in these regulations shall apply to any delisting made pursuant to a scheme sanctioned by the Board for Industrial and Financial Reconstruction under the Sick Industrial Companies (Special Provisions) Act, 1985 or by the National Company Law Tribunal under section 424D of the Companies Act, 1956, if such scheme –
(a) Lays down any specific procedure to complete the delisting; or
(b) Provides an exit option to the existing public shareholders at a specified rate
NON- PERMISSIBILITY: 
♠ No company shall apply for and no RSE shall permit delisting of equity shares of a company, –
a. pursuant to a buy-back 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 (not applicable where exit opportunity is not required to be provided to public shareholders)
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.(i.e. Delisting of Convertible securities is not allowed) (not applicable where exit opportunity is not required to be provided to public shareholders)
♠ 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.
♠ 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
♠ No promoter or other person ‘ acquirer or 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.
DELISTING CAN BE BY TWO WAYS:
1. VOLUNTARY DELISTING
A. From all the RSEs. [exit opportunity to public shareholders shall be given][6(b)]
B. From any 1 or more RSEs. [exit opportunity to public shareholders may be given][6(a)]
2. COMPULSORY DELISTING
PROCEDURE WHERE NO EXIT OPPORTUNITY IS REQUIRED: 
Public Notice: shall mention the:
Application for delisting made shall be disposed of by the RSE within a period not exceeding 30 working days from the date of receipt of such application complete in all respects.
CONDITIONS AND PROCEDURE FOR DELISTING WHERE EXIT OPPORTUNITY IS REQUIRED 
♠ Obtain the prior approval of the Board in the Board Meeting. Prior to granting approval, the board of directors of the company shall,-
(i) make a disclosure to the concerned RSEs that the promoters/acquirers 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 concerned RSEs;
(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 additional details as may be required by the merchant banker.
♠ The merchant banker appointed by the board of directors of the company shall carry out due-diligence upon obtaining details from the board of directors of the company or additional details for such longer period as he may deem fit. Thereafter, the merchant banker shall submit a report to the board of directors of the company certifying the following:
(i) 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
(ii) 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 permissible.
♠ The Board after taking into account the report of merchant shall also certify that:
a. the company is in compliance with the applicable provisions of securities laws;
b. the acquirer or promoter or promoter group or their related entities, had not done any act which is not permissible.
c. the delisting is in the interest of the shareholders.
♠ Obtain the prior approval of shareholders by special resolution passed through postal ballot.
Provided that the special resolution shall be acted upon if and only if the consent of atleast 2/3rd public shareholders is received.
♠ make an application to the concerned RSE for in-principle approval of the proposed delisting in the form specified by the RSE. The application 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.
The application shall be disposed of by the RSE within a period not exceeding 5 working days from the date of receipt of such application complete in all respects.
♠ While granting in-principle approval, the RSE shall satisfy itself 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.
♠ Within 1 year of passing the special resolution, make the final application to the concerned RSE in the form specified by the RSE. The final application shall be accompanied with such proof of having given the exit opportunity to the public shareholders, as the RSE may require.
EXIT OPPORTUNITY 
ESCROW ACCOUNT 
LETTER OF OFFER 
BIDDING PERIOD 
RIGHT OF SHAREHOLDERS TO PARTICIPATE IN THE BOOK BUILDING PROCESS 
OFFER PRICE 
RIGHT OF THE PROMOTER NOT TO ACCEPT THE OFFER PRICE 
♣ The acquirer or promoter shall not be bound to accept the equity shares at the offer price determined by the book building process.
♣ Where acquirer or the promoter decides not to accept the offer price so determined,-
(a) the “acquirer or” promoter shall not acquire any equity shares tendered pursuant to the offer and the equity shares deposited or pledged by a shareholder pursuant to paragraphs 7 or 9 of Schedule II shall be returned or released to him within ten working days of closure of the bidding period;
(b) the company shall not make the final application to the exchange for delisting of the equity shares;
(c) the “acquirer or” promoter may close the escrow account opened under regulation 11;
MINIMUM NUMBER OF EQUITY SHARES TO BE ACQUIRED 
♣ 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, reaches 90%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) atleast 25% of the public shareholders holding shares in the demat mode as on date of the board meeting.
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 90% 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.
PROCEDURE AFTER CLOSURE OF OFFER 
♣ Within 5 working days of closure of the offer, the promoter/acquirer and the merchant banker shall make a public announcement in the same newspapers in which the former public announcement was made regarding:-
(i) the success of the offer alongwith the final price accepted by the acquirer; or
(ii) the failure of the offer; or
(iii) rejection of the final price discovered by the promoters.
FAILURE OF OFFER 
♣ Where the offer is rejected or is not successful, the offer shall be deemed to have failed and no equity shares shall be acquired pursuant to such offer.
♣ Where the offer fails –
(a) The equity shares deposited or pledged by a shareholder under paragraphs 7 or 9 of Schedule II shall be returned or released to him within ten working days from the end of the bidding period;
Provided that the acquirer shall not be required to return the shares if the offer is made pursuant to regulation 5A of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
(b) No final application shall be made to the exchange for delisting of the equity shares; and
(c) The escrow account opened shall be closed.
PAYMENT OF CONSIDERATION AND RETURN OF EQUITY SHARES 
COMPULSORY DELISTING BY A STOCK EXCHANGE 
♠ A RSE 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 (42 of 1956):
Provided that no order shall be made under this sub-regulation unless the company concerned has been given a reasonable opportunity of being heard.
♠ The decision regarding compulsory delisting shall be taken by a panel to be constituted by the recognised stock exchange consisting of –
(a) two directors of the recognised stock exchange (one of whom shall be a public representative);
(b) one representative of the investors;
(c) one representative of the Ministry of Corporate Affairs or Registrar of Companies; and
(d) the Executive Director or Secretary of the recognised stock exchange.
♠ Before making the order, the RSE shall give a notice in one English national daily with wide circulation and one regional language newspaper of the region where the concerned recognised stock exchange is located, of the proposed delisting, giving a time period of not less than 15 working days from the notice, within which representations may be made to the RSE by any person who may be aggrieved by the proposed delisting and shall also display such notice on its trading systems and website.
♠ The RSE shall while passing any consider the representations, if any, made by the company as also any representations received in response to the notice given and shall comply with the criteria specified in Schedule III.
♠ The provisions for Exit Opportunity shall not be applicable to a compulsory delisting made by a RSE under this Chapter.
♠ Where the recognised stock exchange passes an order, it shall, –
(a) forthwith publish a notice in one English national daily with wide circulation and one regional language newspaper of the region where the concerned RSE is located, of the fact of such delisting, disclosing therein the name and address of the company, the fair value of the delisted equity shares determined and the names and addresses of the promoters of the company who would be liable; and
(b) inform all other stock exchanges where the equity shares of the company are listed, about such delisting and the surrounding circumstances.
RIGHTS OF PUBLIC SHAREHOLDERS IN CASE OF A COMPULSORY DELISTING 
♠ The RSE shall appoint an independent valuer or valuers who shall determine the fair value of the delisted equity shares. For the said purpose, the RSE shall form a panel of expert valuers from whom the valuer or valuers shall be appointed
♠ The promoter of the company shall acquire delisted equity shares from the public shareholders by paying them the value determined by the valuer, subject to their option of retaining their shares.
(a) ‘valuer’ means a chartered accountant within the meaning of clause (b) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949), who has undergone peer review as specified by the Institute of Chartered Accountants of India constituted under that Act, or a merchant banker appointed to determine the value of the delisted equity shares;
(b) value of the delisted equity shares shall be determined by the valuer having regard to the parameters including return on net worth, book value of the shares of the company, earning per share, price earning multiple vis-à-vis the industry average.
CONSEQUENCES OF COMPULSORY DELISTING 
Where a company has been compulsorily delisted under this Chapter, the company, 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 10 years from the date of such delisting.
SPECIAL PROVISIONS IN CASE OF SMALL COMPANIES
♠ Equity shares of a company may be delisted from all the RSEs where they are listed, without following the above mentioned procedure if,-
a. The company has paid up capital not exceeding 10 crore rupees and net worth not exceeding 25 crore rupees as on the last date of preceding financial year
b. the no. of equity shares of the company traded on each such RSE during the 12 calendar months immediately preceding the date of board meeting is less than ten per cent of the total number of shares of such company:
Provided that where the share capital of a particular class of shares of the company is not identical throughout such period, the weighted average of the shares of such class shall represent the total number of shares of such class of shares of the company; and
c. the company has not been suspended by any of the RSEs having nation-wide trading terminals for any non-compliance in the preceding 1 year
♠ the promoter appoints a merchant banker and decides an exit price in consultation with him;
♠ the exit price offered to the public shareholders shall not be less than the floor price determined in terms of regulation 8 of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
♠ the promoter writes individually to all public shareholders in the company informing them of his intention to get the equity shares delisted, indicating the exit price together with the justification therefor and seeking their consent for the proposal for delisting;
♠ at least 90% of such public shareholders give their positive consent in writing to the proposal for delisting, and have consented either to sell their equity shares at the price offered by the promoter or to remain holders of the equity shares even if they are delisted;
♠ the promoter completes the process of inviting the positive consent and finalisation of the proposal for delisting of equity shares within seventy five working days of the first communication made under clause (c);
♠ the promoter makes payment of consideration in cash within fifteen working days from the date of expiry of seventy five working days stipulated in clause (e).
♠ The concerned recognised stock exchange may delist such equity shares upon satisfying itself of compliance with this regulation.
DELISTING IN CASE OF WINDING UP, DE RECOGNITION, ETC 
SCRA, 1956 (Sections relating to listing and delisting)
Listing of Securities
Conditions for listing.
21. Where securities are listed on the application of any person in any recognised stock exchange, such person shall comply with the conditions of the listing agreement with that stock exchange.
Delisting of securities
21A. (1) A recognised stock exchange may delist the securities, after recording the reasons therefor, from any recognised stock exchange on any of the ground or grounds as may be prescribed under this Act :
Provided that the securities of a company shall not be delisted unless the company concerned has been given a reasonable opportunity of being heard.
(2) A listed company or an aggrieved investor may file an appeal before the Securities Appellate Tribunal against the decision of the recognised stock exchange delisting the securities within 15 days from the date of the decision of the recognised stock exchange delisting the securities and the provisions of sections 22B to 22E of this Act, shall apply, as far as may be, to such appeals :
Provided that the Securities Appellate Tribunal may, if it is satisfied that the company was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding 1 month.
CAUSES OF COMPULSORY DELISTING
CAUSES OF VOLUNTARY DELISTING
Download SEBI(Delisting of Equity Shares) Regulations, 2009 along with Schedule updated with Subsequent Changes
(Author Vinita Verma is a CS Management Trainee and can be reached at email@example.com)