Surbhi Bihani

SECURITIES AND EXCHANGE BOARD OF INDIA (DELISTING OF EQUITY SHARES) REGULATIONS, 2021

Pre-conditions to initiate the process of delisting (Reg. 4):

♦ Such delisting should not be pursuant to buyback of equity shares by the company or should not be pursuant to a preferential allotment made by the company unless a period of six months has elapsed from the date of completion of such buyback/ date of such allotment.

♦ A three year period should have elapsed after the listing of the class of equity shares on any stock exchange;

♦ That no instruments issued by a company that are convertible into the same class of equity shares that are to be delisted, are outstanding;

♦ A promoter or a promoter group cannot propose delisting of equity shares, if any company belonging to the promoter or such group has sold equity shares of the company during the six month period before the meeting date of the board of directors where the delisting proposal is sought to be approved; and

Checklist for Voluntary Delisting of shares from Stock Exchanges

♦ Further, a company cannot apply for delisting of convertible securities, and no recognized stock exchange can permit the same.

Event / compliance Timeline
Appointment of merchant Banker (Reg.9) Acquirer shall appoint a merchant banker who shall act as manager to the offer
Intimate to SE (Reg.8) Intention to delist the company (termed as initial public announcement)
Inform the company at its registered office Within one working day of its intimation to SE
Appointment of Peer reviewed Company Secretary for carrying out Due diligence Before considering the proposal of delisting in board meeting
Intimation to SE Company shall submit to SE due-diligence report of CS

SE shall disseminate the same to public shareholders

Board resolution (Reg.10) Within 21 days from the date of Initial Public Announcement (the acquirer expresses his intention)
Special resolution (Reg.11) Within 45 days from the date of approval of the board

Votes in favour: Votes in against- 2:1

Escrow Account (Reg.14) Not later than 7 working days from the date of obtaining the shareholder’s approval. (Deposit 25% of total consideration) (Equity shares o/s with public shareholders*floor price/indicative price)
Application for In-principle approval (Reg.12) Within 15 working days from the date of obtaining shareholders approval or receipt of any statutory or regulatory approval; whichever is later.
Deposit remaining consideration in Escrow account Before making Detailed Public Announcement (Deposit 75% of total consideration) (Equity shares o/s with public shareholders*floor price/indicative price)
Detailed public announcement (Reg.15) Within 1 working day of obtaining In-principal approval

(In English, Hindi and Vernacular Newspaper) DPA shall specify a date not later than 1 working day from the date of DPA as ‘specified date’ for determining the names of the shareholders to whom the letter of offer shall be sent.

BoD of the company shall constitute a committee of Independent Directors and publish the recommendations of committee At least 2 working days before the commencement of the bidding period, in the same newspaper in which the detailed public announcement of the offer for delisting of equity shares was published.

A copy of the same shall be sent to the SE and the Manager to the offer

Dispatch of Letter of Offer to Public Shareholders (Reg.16) Within 2 working days of DPA

(Make available to manager and on website of company)

Start of Bidding Period (Reg.17) Within 7 working days of DPA (which shall remain open for 5 working days)
Outcome of Reverse Book Building (‘RBB’) To be announced within 2 hours from the closure of the bidding period. The same is also required to be published in the same newspapers as the newspapers in which the detailed public announcement was made within 2 working days from closure of the tendering period.
Release of shares in case of failure of offer In case of failure due to 90% of the shares are not tendered: on the date of disclosure of the outcome of the RBB process

Discovered price being rejected by acquirer: on the date of making public announcement for the failure of the delisting

Payment on successful delisting (Reg.24) Discovered price same as floor price: payment through secondary market settlement mechanism

Discovered price higher than floor price: within 5 working days from the date of making the payment to the public shareholders

Final application to the stock exchanges after successful delisting (Reg.25) Within 5 working days from the date of making the payment to the public shareholders
Disposal of final application by SE Within fifteen working days from the date of receipt of such application that is complete in all respects

Voluntary delisting for a small company – Any company with

  • paid up capital of less than Rs. ten crores and net worth less than Rs. twenty five crores;
  • whose equity shares have not been frequently traded on any recognized stock exchange for a period of one year and
  • Has not been suspended for any non-compliance in the preceding one year would not be required to follow the Reverse Book Building process.

In addition to Board resolution and Special resolution, following conditions are fulfilled:

a) the promoter decides the exit price in consultation with the merchant banker;

b) the exit price offered to the public shareholders shall not be less than the floor price;

c) The promoter writes to all public shareholders informing the proposal for delisting;

d) Once the requisite consent is received (irrespective of their numbers, holding ninety percent or more of the public shareholding), the promoter makes payment of consideration for the same and the shareholders can exit;

e) Acquirer completes the process of delisting within 75 working days from communication made in clause (c);

f) Payment– within 15 working days from the expiry of 75 working days.

Sl. No   Regulation of SEBI  (Delisting of Equity  Shares) Regulation,  2021   Particulars
1. Regulation 8 Promoter/acquirer has to intimate to the Company about their intention to delist the shares of the Company from the Recognized stock exchanges.
2. Regulation 9 Appoint a merchant banker to carry out due diligence process and to decide an exit price in consultation with the merchant banker.
3. Regulation 10(2)(a) 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 and details of off-market transactions of such shareholders for a period of two years.
4. Regulation 10 Obtain Prior approval of BOD
5. Regulation 11 Obtain prior approval of shareholders by SR passed through Postal Ballot (Votes cast against: In favour-2:1)
6. Regulation 12 Make an application to the concerned recognized stock exchange for obtaining the in-principal approval
7. Regulation 12(2) An application seeking in-principle approval shall be accompanied by Reconciliation of Share Capital Audit Report under Reg. 76 of SEBI (DP) Regulations, covering a period of six months prior to the date of application
8. Regulation 12(3) Recognized Stock Exchange shall grant in principle approval within 15 working days from the date of receipt of application, if such application is complete in all respect.
9. Regulation 35(2)(c) The promoter have to write individually to all public shareholders in the company informing them of his intention to get the equity shares delisted
10. Regulation 35(2)(d) Receive the consent of 90% of the public shareholders in writing to the proposal for delisting, and have consented either to sell their shares to the promoter/acquirer or to remain the shareholders even if the company is delisted
11. Regulation 35(2)(e) Promoters have to complete the process of inviting the positive consent within seventy five working days of the invitation made as per clause c of Regulation 35(2)(e).
12. Regulation 35(2)(f) The promoter/acquirer have to make payment to the shareholders in cash within 15 working days from the date of expiry of 75 working days as stipulated in clause e of Regulation 35(2)(f)
13. Apply to the Recognized Stock Exchange for obtaining the final delisting approval along with the proof that the payment has been to the shareholders.
14. Regulation 35(5) The Recognized Stock Exchange may delist the Equity shares of the Company upon satisfying itself of compliance with this Regulation.

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Qualification: CS
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Location: Kolkata, West Bengal, India
Member Since: 12 Nov 2021 | Total Posts: 3

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