Sebi amends delisting trigger norms

Firms can be delisted only if promoters hike stake to 90%, or acquire 50% through open offer.

Companies can be delisted only if the promoters hike their stake to 90 per cent, or acquire at least 50 per cent through a share purchase offer aimed at giving the shareholders an exit opportunity, capital market regulator Securities and Exchange Board of India (Sebi) said in a notification today.

The notification said promoters could not “directly or indirectly” use the company’s funds to finance purchase of shares to facilitate an exit opportunity for the shareholders.

OTHER CONDITIONS

•  Promoters can't use company's funds to finance purchase of shares
• No delisting within 3 years following a buyback or a preferential allotment of equity
• Promoters can't seek listing for 10 years from the date of delisting 
• Small companies can be delisted if shares had not been traded for one year

In an effort to bring in more transparency in delisting processes, Sebi also said no company could opt for delisting within three years following a buyback or a preferential allotment of equity made by the company.

The market regulator said if a company intended to remain listed on any exchange that has nationwide trading terminals, after delisting from another exchange, no exit opportunity would be required to be given to public shareholders. However, an exit opportunity would be required if the company obtained a prior approval of its board and shareholders.

The date of opening of the delisting offer has to fall within 55 working days from the date of the public announcement, and the offer would remain open for at least three working days, during which public shareholders might tender their bids.

Sebi said that the floor price of the offer could not be less than the average of the weekly high and low closing prices of the shares during 26 weeks, or two weeks preceding the date on which exchanges were notified about the delisting proposal. However, the promoter would not be bound to accept the equity shares at the offer price, and in such a case, he would not acquire any share tendered in the offer.

The regulator added that following a compulsory delisting, a company, its whole time directors, its promoters and the firms promoted by any of them would 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.

For voluntary delisting, all public shareholders must be given an exit opportunity, the notification said.

Sebi further said that promoters could not appoint any of their associates as merchant bankers for the open offer aimed at facilitating the exit opportunity and the offer price should be determined through a book-building process.

However, the promoters would not be bound to accept the price determined in this manner. Besides, the promoters need to open an escrow account and deposit the total estimated amount of consideration before making the public announcement about the offer.

In a special provision for small firms, Sebi said shares of a company with up to Rs 1 crore paid-up capital could be delisted from all bourses, if the stock did not trade for one year. Besides, if a company had 300 or less public shareholders and the paid-up value of these shares was not more than Rs 100 crore, the shares could be delisted.

In these cases, the exit price offered to public shareholders should not be less than the price arrived at in consultation with the merchant banker.