How to Plan Delisting
Applicability of Delisting Regulation:
1. Delisting of Equity Shares from all the stock exchanges or any STXs except securities listed without making a public issue, on the institutional trading platform of a recognised stock exchange and
a. BIFR under SICA Or
Delisting not permissible:
1. Pursuant to Buyback
2. Pursuant to Preferential Allotment.
3. Unless 3 years have elapsed since the listing of shares on any Regional Stock Exchange.
4. If any convertible securities are outstanding.
The Promoter shall not propose delisting of shares of Co. if any entity belonging to promoter or promoter group has sold shares during 6 months prior to date of Board meeting in which delisting proposal was approved.
Note: In case of Delisting from only some of the STXs condition No. 3 & 4 shall not apply.
Types of Delisting:
a) 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
b) Voluntary Delisting:
In voluntary delisting, a listed company decides on its own to permanently remove its securities from a stock exchange if all public shareholders holding equity shares of theclass which are sought to be delisted are given an exit opportunity.
Criteria to determine Offer Price:
• The offer price shall be determined through book building as specified in Schedule II, after fixation of floor price.
• The floor price shall be determined according to Reg. 8 of SEBI (SAST) Regulations, 2011
• As per Schedule II the final offer price shall be the price which takes the shareholding of promoters to 90% of the total issued shares
• If the final price is accepted, the promoter shall accept all tendered shares at the final price or at a lesser price.
• The promoter may fix the higher final price.
Note: Book Building Process not applicable where the settlement is carried out through stock exchange mechanism.
Delisting of Small Companies:
The Company wishes to delist its securities have to satisfy all below mentioned conditions:
• A Co. having a paid up capital of Rs. 10 Cr. Or less
• Net worth 25 cr. or less as on last date of preceding FY
• Shares traded during 12 calendar months immediately preceding the date of BM for delisting proposal is less than ten per cent of the total number of shares of such company
• Shares have not been suspended by any STX having nationwide terminals for any non-compliance in preceding 1 year.
Grounds of Delisting:
• Losses suffered by listed entity during the preceding three consecutive years leading to negative net worth
• Suspension of trading in the securities for more than 6 months
• Fall in public shareholding to below minimum threshold level
• Infrequent trading in the securities during the preceding 3 years
• Non traceability of company, its promoters or directors
• Conviction of company, its promoters or directors for violation of SEBI Act,
Depository Act and related Rules and Regulations leading to imposition of penalty of more than Rs. 1 crore or imprisonment for more than 3 years
SEBI has a power to grant exemption/relaxation for reasons recorded in writing, in the interest of the investor after considering all the facts and pass a reasoned order.
Other important points to be considered:
• No application for listing shall be made in respect of any equity shares
• Which have been delisted under Voluntary Delisting or Small Company Delisting - 5 Years from the delisting
• Which have been delisted under compulsory delisting- 10 Years from the delisting
• An application for listing made in respect of delisting equity shares shall be deemed as fresh listing and shall be subject to listing of equity shares of unlisted companies.
Refer: SECURITIES AND EXCHANGE BOARD OF INDIA (DELISTING OF EQUITY SHARES) REGULATIONS, 2009 (updated upto January 12, 2016)
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