SOP for delisting of Subsidiary Company

CS Tanveer Singh Saluja | Last updated: 21 July 2021

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SEBI has introduced a Standard Operating Procedure (SOP) for listed subsidiary companies looking to delist via a Scheme of Arrangement, provided they are in the same line of business as their listed parent company. The 'same line of business' is defined by specific criteria related to principal economic activities, revenue, and asset investment, all requiring certification. Additionally, both the parent and subsidiary must have been listed for a minimum of three years.

SEBI has issued a Circular on 6th July 2021, to bring into action Standard Operating Procedure (SOP) for listed subsidiary companies desirous of getting delisted through a Scheme of Arrangement wherein the listed parent holding company and the listed subsidiary are in the same line of business.

SEBI vide notification dated 10th June, 2021, amended the SEBI (Delisting of Equity Shares) Regulations, 2021, by inserting special provisions for a listed subsidiary company getting delisted through a scheme of arrangement wherein, the listed holding company and the listed subsidiary company are in the same line of business.

Subsidiary Delisting SOP: SEBI Guidelines Explained

Particulars	SOP
Meaning of same line of business	For the purposes of defining ‘same line of business’, the following criteria needs to be fulfilled by holding & subsidiary co.: a. Principal economic activities of both are under the same Group (3-digit numeric code) under the National Industrial Classification (NIC) Code 2008. b. Not less than 50%of revenue from the operations of both must come from same line of business as per latest audited financial statements submitted by both the Cos. c. Not less than 50% of the net tangible assets of both must have been invested in the same line of business as per latest audited financial statements submitted by both the Cos. d. In case of change of name of the listed entities, within the last 1 year, at least 50% of the revenue, calculated on a restated and consolidated basis, for the preceding 1 full year has to be earned by it from the activity indicated by its new name. e. Both the Cos. are required to provide a self-certification with respect to being in the same line of business.
Certification	The above-mentioned criteria is to be certified by the Statutory Auditor of the Companies & SEBI registered Merchant Banker.
Minimum period of listing	In terms of Regulation 37(2)(e) & (f) of the SEBI (Delisting of Equity Shares) Regulations, 2021, the shares of the Cos. shall be listed for at least 3 years and the subsidiary company shall be a listed subsidiary of the listed holding company for a period of 3 years.

FAQ :

SEBI has issued a Standard Operating Procedure (SOP) for listed subsidiary companies that are in the same line of business as their listed parent company and wish to delist through a Scheme of Arrangement.

To be considered in the 'same line of business', both the holding and subsidiary companies must have principal economic activities under the same 3-digit NIC Code 2008 group, derive at least 50% of their revenue from the same business line, and have at least 50% of their net tangible assets invested in that same business line.

The criteria for being in the same line of business must be certified by the Statutory Auditor of the companies and a SEBI-registered Merchant Banker.

Yes, the shares of both the subsidiary and the parent holding company must have been listed for a minimum period of three years. The subsidiary must also have been a listed subsidiary of the listed holding company for three years.

If a company has changed its name within the last year, at least 50% of its revenue for the preceding full year, calculated on a restated and consolidated basis, must have been earned from the activity indicated by its new name.