The market regulator securities and exchange board of India (Sebi) has notified the Sebi (Delisting of Equity Shares) regulations, 2009 vide Notification No. LAD-NRO/GN/2009-2010/09/165992 Dated : 10th June 2009, which would govern the normal guidelines to be followed by a company for delisting its shares from a stock exchange.

According to the notified guidelines, the offer price for delisting shall be determined by calculating the average of the weekly high and low of the closing prices during the last twenty six weeks or two weeks preceding the date on which the recognized stock exchange were notified. Currently, the offer price was decided on the basis of the average of the last 26 weeks.

A senior executive of a leading investment banking company said, “Given the current market situation where the share prices have again bounced back sharply, if the offer price is determined on the basis of the previous rule where the average of last 26 weeks are calculated, it would prove disadvantageous to the shareholders. So the incorporation of two weeks average price is a welcome step”.

Further the open offer would be considered a success only when the shareholding of the promoter combined with the shares accepted through eligible bids crosses 90% of the total shares issued or when it reaches higher than the total of 50% of the offer size and the aggregate percentage of pre offer promoter shareholding.

On closure of the open offer process, all share holders whose equity shares are verified to be genuine shall be paid the final price stated in the public announcement within ten working days.

With regards to the remaining public shareholder holding such equity shares may tender his shares to the promoter upto a period of atleast one year from the date of delisting.

On tendering of shares by the remaining shareholder, the promoter shall pay the same price at which the earlier acceptance of shares was made.

Major Highlight of The Sebi (Delisting of Equity Shares) regulations, 2009 are as follows:-

1. 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.

2. Non applicability: These Regulations shall not be applicable to sick companies and whose reconstruction/ revival scheme provides for the delisting and an exit option to the public shareholders be given.

3. Non permissibility of delisting: The companies cannot delist their securities from the Exchanges pursuant to buyback and preferential allotment. Any instruments pending conversion into equity shares cannot be delisted.

4. 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.

5. The Stock Exchanges have also been held liable for speedy and timely disposal of applications. The exchanges have to dispose off the application seeking delisting/ in principal approval within 30 working days from the date of receipt of application complete in all respect.

6. In Principle Approval: In cases where an Exit Opportunity is required to be given to the Public Shareholders (i.e. where the company is seeking delisting from the all the exchanges or in a case, where after delisting the company will not remain listed at the exchanges having nationwide trading terminal), the Company will have to now take the in principal approval from the concerned Exchange(s).

7. Specified Date: The concept of Specified Date has been introduced, which shall not be later than 30 working days from the date of the Public Announcement.

7. Validity of the Special Resolution: 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.

8. Special Resolution by way of Postal Ballot: The shareholders approval should be sought from the shareholders via postal ballot in case  the exit opportunity be given to the shareholders. The votes cast by the  public shareholders in favour of the delisting proposal should be atleast  2 times of numbers cast against it.

9. Offer Document & Offer Period: The Opening Date of the Offer  should not be later than 55 working days from the Public Announcement. The  Offer should remain open for a minimum period of 3 working days and a  maximum of 5 working days.

10. Promoters/ PAC not allowed to participation in bidding: Promoters/  PAC/ GDR/ ADR/ Receipt Holders can not participate in the delisting bid.  If Depository Receipt holders wish to participate then they have to first  convert them into Equity shares.

11. Promoters’ option of not accepting the Offer Price: Under the  Regulations, the Promoters are not bound to accept the Offer Price, as may  be determined by the Book Building Process. If the promoters do not accept  the price arising out of bidding, then the promoter will be responsible to comply with the clause 40A of the Listing agreement within 6 months of  closing of bidding process.

12. 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.

13. Validity period of the Exit Price: Under the Regulations, the  final exit price to remain open for a period of 1 year from the date of  delisting, for the remaining shareholders who have not exercised the option at the time the offer is open.

14. Valuation under the Compulsory Delisting: Under the Regulations,  the Exchanges are required to constitute a Panel for taking decisions  regarding the compulsory delisting and also to appoint an Independent  Valuer  for determining the fair value of such compulsorily delisted  shares, at which the promoters of the company have to accept the shares of  the public shareholders.

16. Repercussions of Compulsory Delisting: The promoters, the whole  time directors, and the companies which are promoted by any of them shall  not directly or indirectly access the securities market or seek listing  for 10 years.

17. Special Exemptions for Small Companies: Small companies having a  paid up capital of upto Rs. 1 crore or having less than equal to 300  shareholders and holding not more than Rs.1 crore, they need not to follow  Reverse book building process.

18. Cooling period for Relisting:

  • In case of voluntary delisting: 5 years; and
  • In case of Compulsory Delisting: 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.

Download Sebi (Delisting of Equity Shares) regulations, 2009

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