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What How When
DELISTING. IN
DELISTING – REGULATORY FRAMEWORK
SEBI(DELISTING OF EQUITY SHARES) REGULATIONS, 2009
SCRA[ SECURITIES CONTRACT( REGULATION ACT) 1956]
LISTING AGREEMENTCOMPANIES ACT,1956SEBI ( SUBSTANTIAL ACQUISITION OF
SHARES AND TAKEOVER) REGULATION, 1997
WHAT IS DELISTING?
• Delisting
To be able to understand the meaning of delisting,
one has to first understand the meaning of the word
“Listing”.
DELISTING
“Delisting” is totally the reverse of listing. To delist
means permanent removal of securities of a listed
company from a stock exchange. As a consequence
of delisting, the securities of that company would
no longer be tradeable at that stock exchange.
JOURNEY FROM GUIDELINES TO REGULATIONS………
JOURNEY……….
SEBI Delisting Guidelines, 1998.
SEBI Delisting Guidelines, 2003.
SEBI (Delisting of Equity Shares ) Regulations, 2009.
THE SALIENT FEATURES OF REGULATIONS ARE:-
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.
Not be applicable to sick companies
THE SALIENT FEATURES OF REGULATIONS ARE:-
The companies cannot delist their securities from the
Exchanges pursuant to buyback and preferential
allotment.
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.
THE SALIENT FEATURES OF REGULATIONS ARE:-
The concept of Specified Date has been introduced,
which shall not be later than 30 working days from
the date of the Public Announcement.
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.
Special Resolution by way of Postal Ballot
THE SALIENT FEATURES OF REGULATIONS ARE:-
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.
Promoters’ option of not accepting the Offer Price
Promoters/ PAC not allowed to participation in bidding:
Guidelines,2003
Definition- The Public shareholding is the
shareholding in a company other than by the Promoters,
Persons Acting in concert with the Promoter
Inapplicability- Not mentioned exclusively and
separately.
Regulations.,2009
Definition- Along with the Promoters, Persons Acting in concert with the
Promoter , holders of Depositors
receipts and the custodian thereof are also Included
Inapplicability- Separate section is
made. The exemption is
available to the companies which
have been declared sick & their
reconstruction scheme provides the delisting including
the provisions of the exit option to the
shareholders.
COMPARISON
Guidelines,2003
Shareholders Resolution -
Special resolution to be passed through the
shareholders is compulsory.
No time limit was prescribed for the
exchanges for disposal of the
Delisting application filed by
the companies.
Regulations.,2009
Shareholders Resolution -Now the requirement of special resolution for
the delisting without Exit route is deleted. Only public announcement and the disclosure in the first annual report after delisting will suffice the
requirement.
A 30 days time period after the receipt of Application complete in all respect,
given to the exchanges for disposing of the application
of delisting.
COMPARISON
Guidelines,2003
Small Companies-No special
provisions are there for the small companies.
Reinstatement of securities- The companies can not be relisted at the exchange for a period of 2 years from the period of
delisting.
Regulations.,2009
Small Companies-Special provisions under the separate section be given for the small companies
and winding up companies. Reinstatement of
securities- The companies delisted
voluntarily can not be relisted for a period 5
years and the companies
compulsorily delisted can not be relisted for a period of 10 years
from the date of delisting
COMPARISON
TYPES OF DELISTING
Delisting
Compulsory Delisting
Voluntary Delisting
HOW TO DELIST ??
Delisting
Compulsory Delisting
Voluntary delisting
Voluntary delisting from all the exchanges.
Exit opportunity
Voluntary delisting from few exchanges but remains listed on at least one stock exchange
having nation wide terminalsNo exit opportunity
Small Company (whether listed at any of the Exchanges)
No Bidding, but exit opportunity is there
COMPULSORY DELISTING
A recognized stock exchange may, by order,
delist any equity shares of a company on any
ground prescribed in the rules made under
section 21A of the Securities Contracts
(Regulation) Act, 1956
HIGHLIGHTS OF COMPULSORY DELISTING
Decision by panel of experts after considering the
various parameters given in the regulations.
Public notice by the exchange for inviting the
representation by the aggrieved persons.
Determination of exit price by the independent
valuer appointed by the concerned stock exchange.
No requirement of going through the reverse book
building process.
Acquisition of shares by the promoters at fair value.
Where a company has been compulsorily delisted,
the company itself, its whole time directors, its
promoters and the companies which are promoted
by any of them shall not directly or indirectly
access the securities market or seek listing for any
equity shares for a period of ten years from the
date of such delisting
HIGHLIGHTS OF COMPULSORY DELISTING Contd…..
SPECIAL POWERS TO STOCK EXCHANGE SCHEDULE -III
The recognized stock exchange can file prosecutions under relevant provisions of the Securities Contracts (Regulation) Act, 1956 or any other law for the time being in force against identifiable promoters and directors of the company for the alleged non-compliances.
The recognized stock exchange can also file a petition for winding up the company under section 433 of the Companies Act, 1956 (1 of 1956) or make a request to the Registrar of Companies to strike off the name of the company from the register under section 560 of the said Act.
VOLUNTARY DELISTING
Voluntary delisting :-
VOLUNTARY DELISTING FROM ALL THE EXCHANGES
VOLUNTARY DELISTING FROM FEW EXCHANGES
BUT REMAINS LISTED ON AT LEAST ONE STOCK
EXCHANGE HAVING NATION WIDE TERMINALS
VOLUNTARY DELISTING BY THE SMALL COMPANIES
HIGHLIGHTS OF VOLUNTARY DELISTING
VOLUNTARY DELISTING FROM ALL THE EXCHANGES
If after the proposed delisting, the equity shares
would not remain listed on any recognized stock
exchange having nation wide trading terminals,
Exit Opportunity shall be given to all the public
shareholders holding the equity shares sought to
be delisted. (Regulation 6 (b))
HIGHLIGHTS OF VOLUNTARY DELISTING
The special resolution to be passed by postal ballot shall be acted upon if and only if the votes cast by public shareholders in favour of the proposal amount to at least two times the number of votes cast by public shareholders against it.
The company shall obtain in principle approval from the concerned stock exchange for the proposed delisting of its equity shares .
Contd…..
HIGHLIGHTS OF VOLUNTARY DELISTING
The promoter appoint a merchant banker.Public announcement by the promoters.Invitation of bids from the public shareholders
through letter of offer for determination of final price [ Reverse Book Building]
The final offer price shall be determined as the price at which the maximum number of equity shares is tendered by the public shareholders.
The offer shall remain open for a minimum period of three working days and a maximum period of five working days during which the public shareholders may tender their bids
Contd…..
HIGHLIGHTS OF VOLUNTARY DELISTING
Post offer Promoter shareholding should reach to either 90% of total paid up capital or minimum 50% of the public shareholding tendered through offer whichever is high.
The final price need not to be accepted by the promoters.
Remaining public shareholder may tender their shares to the promoter upto a period of one year from the date of delisting
Contd…..
DETERMINATION OF FLOOR PRICE (REGULATION 15)
Where the equity shares are frequently traded in all the recognized stock exchanges where they are listed, the fair price shall be higher of the following:
A.) the average of the weekly high and low of the closing prices of the equity shares of the company during the twenty six weeks .
OR B.) two weeks preceding the date on which the
recognized stock exchanges were notified of the board meeting in which the delisting proposal was considered,
HIGHLIGHTS OF VOLUNTARY DELISTING
VOLUNTARY DELISTING FROM FEW EXCHANGES BUT REMAIN LISTED AT
ONE STOCK EXCHANGE HAVING NATION WIDE TRADING TERMINAL
If after the proposed delisting from any one or more
recognized stock exchanges, the equity shares would
remain listed on any recognized stock exchange which
has nationwide trading terminals, No Exit Opportunity
needs to be given to the public shareholders. (Section
6 (a))
Contd…..
HIGHLIGHTS OF VOLUNTARY DELISTING
No need to pass Special resolution by members.
The company has to give a public notice of
the proposed delisting.
The company shall disclose the fact of the
delisting in the first annual report after delisting.
Contd…..
SMALL COMPANIES
Definition
A company having paid-up capital of upto one
Crore rupees and its equity shares were not
traded on any exchange in the one year
immediately preceding the date of decision of
delisting; OR (Regulation 27 (1))
A company having upto 300 public shareholders
and the paid-up value of the shares held by such
shareholders is upto one Crore rupees.
(Regulation 27 (2))
HIGHLIGHTS OF SMALL COMPANIES
The special resolution through postal ballot and be acted
upon if and only if the votes cast by public shareholders
in favour of the proposal amount to at least two times the
number of votes cast by public shareholders against it.
The promoters shall determine the exit price in
consultation with the Merchant Banker.
The company shall obtain in principle approval from the
concerned stock exchange for the proposed delisting of
its equity shares .
Contd…..
HIGHLIGHTS OF SMALL COMPANIES
90% public shareholders should give their consent for
delisting of the equity shares by not following the
reverse book building process.
The shareholders should be given a option to remain
the shareholders even if the company gets delisted.
Contd…..
RELISTING
Cooling period:-
The company that has voluntarily delisted its securities can
relist its securities only after a period of 5 years.
The company that has been compulsory delisted by the
exchange can relist its securities only after a period of 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.
The sick companies are exempted from the provision of cooling
period.
STILL GRAY AREAS……..
Non Payment to the shareholders No check by the regulatory authorities on whether the
payment has been made to the shareholders or not in case of compulsory delisting.
It does not mention the penalties/ consequences in case of defaulting promoters in making the payment of the fixed fair value to the public shareholders.
Applicability of regulation 8 in case of small companies The extent of the applicability of regulation 8 is not clearly
defined in case of delisting by small companies.
No time period for the acquisition of shares from the public shareholders has been prescribed in case of compulsory delisting.
THANKS