Sebi proposes rationalising existing timelines for delisting process

To further streamline and strengthen the delisting process, Sebi on Friday proposed enhancing disclosure requirement by promoters and specified the timeline for obtaining the company's board approval forvoluntary delisting.

The move is aimed at making the delisting process robust, efficient, transparent and investor friendly, the Securities and Exchange Board of India (Sebi) said in a consultation paper.

Under the proposal, the promoter or acquirer should make the public announcement of their intention to voluntarily delist the company to all the stock exchanges on which the company is listed, on the same day their said intention is intimated to the company.

Currently, promoter or acquirer's proposal to voluntarily delist the company is disclosed to the exchanges by the company's board while the obligation to disclose the intention to voluntarily delist the firm to public is not cast on the promoter or acquirer.

To ensure that the delisting exercise is concluded in a time- bound matter, it isimperative to specify the timeline for obtaining board's approval forvoluntary delisting.

The company should convene the boardmeeting within 21 working days from the date of receipt of delisting proposal to consider and approve the delisting proposal.

At present, timeline for obtaining board's approval has not been specified.

The board of directors while communicating its decision of granting approval of delisting should also disclose about the merchant banker's due-diligence as well the audit report to the bourses.

The committee of independent directors should be required to provide their reasoned recommendations on the proposal for delisting.

Further, voting pattern of the committee of the independent directors should also bedisclosed, while giving reasoned recommendations on the proposal of delisting.

It has been proposed that the shareholders' approval through special resolution should be obtained either through postal ballot or through e-voting.

"Voluntary delisting may not be permitted pursuant to buy-back and preferentialallotment, unless a period of six months has elapsed from completion of the lastbuy-back or preferential allotment," Sebi said.

It has been proposed that for companies having shareholders --vanishing companies; struck off firms; those whose shares have been transferred to investor education and protection fund (IEPF) account-- the minimum acquisition threshold under RBB should be calculated after deducting the shareholding held by such shareholders.

Under the rules, for successful delisting the acquirer has to acquire 90 per cent of the total share capital of the company.

The outcome of reverse book building (RBB) in terms of its success or failure should be announced within two hours of the closure of the tendering period. Further, unconfirmed bids should not be displayed in the exchange reverse book building window.

The regulator has sought comments from public till December 21 on these suggestions.

With regard to indicative price, it has been suggested that promoter should be allowed to specify an indicative price which should not be less than the floor price. This would actually help the investors to gauge the inclination of the promoters and his willingness to pay such price.

"The book value may be considered on the basis of both consolidated andstandalone basis, whichever is higher, as per the latest quarterly financial resultsfiled by the company on the stock exchanges, as on the date of public announcement for counter offer," Sebi proposed.

In respect of timeline, it has been proposed that a time period of 15 working days from the passing of special resolution should be stipulated for the company to file application for in-principle approval by exchanges.

Further, a timeline of five working days from the date of making payment to theshareholders may be stipulated for the company to make the final application tothe exchanges.

At present, there is no specific timeline for these framework in the delisting rules.

Besides, the time period for granting in-principle approval by the stock exchanges should be extended from the present five working days to 15 working days.

The regulator recommended that the cooling off period for relisting post delisting should be reduced to three years from the present five years.

According to the regulator, there should be a cooling-off period of six months between two delisting offers and same acquirercannot make another delisting offer during the cooling-off period.

Sebi suggested that public announcement for giving either counter offer or accepting or rejecting the discovered price, should be made within two working days of the closure of the tendering period.