Sebi Delisting Guidelines

SEBI GUIDELINES ON DELISTING OF SECURITIES

Covered under Clauses 4 to 18 of SEBI ( Delisting of Securities) Guidelines 2003.

WHEN IS IT APPLICABLE ?

·         Voluntary delisting by promoters.

·         Any consolidation of holdings or acquisitions by management by management by which PUBLIC SHAREHOLDING falls below minimum limits.

·         Compulsory delisting of companies.

VOLUNTARY DELISTING

Company may delist securities provided that –

·         Securities are listed for minimum 3 yrs,

·         Provided further that exit opportunity is given to investors and exit price is determined by book building process for that opportunity.

For delisting obtain prior approval of share holders by special resolution at GM.

FIRST appoint a Registered merchant banker, THEN make a public announcement and make an application annexing a copy of Special Resolution as per guidelines with stock exchange.

Book building process (Synopsis)

·         At least 30 bidding centres.

·         Promoter shall deposit 100% consideration in an escrow account calculated on floor price.

·         Offer open for minimum 3 days and In case of physical securities for 15 days.

·         Final offer price determined on the basis of price at which maximum shares has been offered.

·         Merchant Banker to announce price at the end of book building offer to press.

·         Offer price shall have floor price calculated on the basis of 26 weeks average traded price.

·         If public shareholding does not fall below the limit after offer also, the company should remain listed.

·         No extinguishment of paid up share capital as what happens in buy back.

·         Amount of consideration determined to be settled in cash.

PROMOTERS RIGHT

·         If promoter does not accept price determined by above process-

o   He shall not make any application for delisting.

o   And within 6 months he ensures that public shareholding limit is brought to the minimum limits by issuing shares or through sale of his own holdings to public.

PROMOTER TO MAKE PUBLIC ANNOUNCEMENT OF FINAL PRICE WITH IN 2 DAYS AND HIS ACCEPTENCE REGARDING THE SAME.

A COMPANY MAY EVEN DELIST A PARTICULAR CLASS OF SHARES.

COMPULSORY DELISTING BY STOCK EXCHANGES

·         If a company is suspended for minimum  6 months for not complying with Listing agreement.

·         Stock exchange to publish notice through newspapers and display at trading terminals.

·         Issues Show cause notice to company to adopt procedures for delisting.

·         If any person is aggrieved by the notice he has 15 days to make representation and stock exchange after considering such representation may delist.

What a security holder can do?

·         Claim from promoter his compensation determined on the basis of fair value of securities determined by a panel of experts of stock exchange.

RIGHTS ISSUE CASE

 If there is any right issue than in that case it may happen that public shareholding falls below the limit. In that case adequate disclosures to be made in offer document. If after subscription public shareholding falls below the limit then promoter should go for delisting or they can increase the holding and be listed.

ANY REINSTATEMENT OF DELISTED SECURITIES WITHIN A COOLING PERIOD OF 2 YRS IS PERMITTED BY STOCK EXCHANGE. SO WITHIN 2 YRS LISTING IS ALLOWED ON THE BASIS OF NORMS ON THE DATE OF NEW APPLICATION MADE FOR LISTING.

HOPE THIS WILL GUIDE A LEARNER AND ARTICLE FRNDS.