Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021

 Background

SEBI   vide    notification    dated    June   10,    2009   notified   the    SEBI    (Delisting    of   Equity Shares)  Regulations,  2009  ("Delisting  Regulations"),  thereby  superseding  the  earlier  SEBI  (Delisting  of  Securities)  Guidelines,  2003. Since then, several amendments have been carried out in the Delisting Regulations according to the changing needs and developments in the securities market

To further streamline and strengthen the delisting process / regulations, the SEBI has issued the Securities and Exchange Board of India (Delisting of Equity Shares) Regulation 2021 vide notification No. SEBI/LAD-NRO/GN/2021-25 dated 10^th June, 2021, with the objectives of:

• Enhance disclosures to help investors to take informed investment decisions
• Refine process
• Rationalize the existing  timelines,  so  as  to  complete  the  delisting  in  time  bound manner.
• Streamline the delisting regulations  to  make  it  robust,  efficient,  transparent  and investor’s friendly.
• Update references to the Companies Act, 2013 and other securities laws

Applicability

Delisting of equity shares of a company including equity shares having superior voting rights from all or any of the recognised stock exchanges where such shares are listed except delisting of equity shares of those listed companies :-

1. that have been listed and traded on the innovators growth platform of a recognised stock exchange without making a public issue;
2. Where pursuant to a resolution plan approved under section 31 of the Insolvency Code, if such plan provides for:

• delisting of such shares; or
• an exit opportunity to the existing public shareholders at a specified price:

Conditions of delisting

  1. Neither any company shall apply for nor any recognised stock exchange shall permit delisting of     equity shares of a company:-

• unless 3years has elapsed since the listing of that class of equity shares on any recognised stock exchange;
•  if any convertible instrument issued by the company is outstanding;
•  pursuant to a buyback of equity shares by the company, unless a period of 6 months has elapsed from the date of completion of such buyback;
• pursuant to a preferential allotment made by the company unless a period of 6 months has elapsed from the date of such allotment:

2. No acquirer shall propose delisting of equity shares of a company, if the acquirer had sold the equity shares of the company during the period of six months prior to the date of the initial public announcement made in terms of sub-regulation (1) of regulation 8 of above specified regulations.

3. No acquirer shall, directly or indirectly, employ the funds of the company to finance an exit opportunity or an acquisition of shares made pursuant to sub-regulation (4) of regulation 33 of above specified regulations.

4. No acquirer shall, directly or indirectly,–

• employ any device, scheme or artifice to defraud any shareholder or other person; or
• engage in any transaction or practice that operates as a fraud or deceit upon any shareholder or other person; or
• engage in any act or practice that is fraudulent, deceptive or manipulative
•  in connection with any delisting of equity shares sought or permitted or exit opportunity given or other acquisition of equity shares made under specified regulations.

 

Modes of Delisting

Delisting from the stock exchanges could either be undertaken voluntarily or compulsory delisting by the stock exchange or delisting pursuant to liquidation.

Voluntary Delisting can be done in two ways, firstly delisting from some of the recognized stock exchange without providing an exit opportunity to the public shareholders, if after the proposed delisting, the equity shares remain listed on any recognised stock exchange that has nationwide trading terminals and secondly, delisted from all the recognised stock exchanges having nationwide trading terminals on which they are listed, after an exit opportunity has been provided by the acquirer to all the public shareholders holding the equity shares.

Given below the brief procedure of Voluntary Delisting in case where no exit opportunity is required:

Voluntary Delisting
Procedure for delisting where no exit opportunity is required
S.No.	Steps	Regulation	Remarks
1.	Obtaining Board Approval for considering the Delisting of the securities from relevant stock exchange.	Regulation 6(1)(a)
2.	Make application to the relevant stock exchange for Delisting of securities	Regulation 6(1)(b)	The application shall submit with copy of Board resolution.
3.	Issue a public Notice of the proposed delisting in one English and one Hindi national newspaper (with wide circulation in their all India circulation) and in one vernacular newspaper where the relevant stock exchange is location	Regulation 6(1)(c)	The public notice shall mention the name of the recognized stock exchange where the securities are intended to be delisted and reasons of delisting and fact of continuation of listing of equity shares on the recognized stock exchange having nationwide trading terminals. The fact of delisting shall be disclosed in the annual report post delisting.
4.	An application shall be disposed off by the stock exchange within 30 days from the date of receipt of application.	Regulation 6(3)	Application shall be complete in all respects

 

This article has been Compiled by Swati Garg (Senior Associate), you can direct your queries or comments to the author at swati@factumlegal.com

 Disclaimer-

The contents of this article should not be construed as a legal opinion. This article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. We expressly disclaim any financial or other responsibility arising due to any action taken by any person on the basis of this article.