DELISTING OF SHARES

-Vasavi

ContentsListing & Delisting

Why do Companies Delist?

Brief history- The 2003 Guidelines & The 2009 Regulations

Types of Delisting

Current trend

What is Listing??

Admission of a Company’s securities to a trading platform

Listing Agreement

Listing Requirements

What is Delisting??

Reverse of listing

Permanent removal of securities of a listed company from a stock exchange

Why do Companies Delist??

Reasons are varied…• Violating Regulations• Failing to meet financial specifications• Acquisitions & Mergers• Non-compliance with listing requirements• Turns into a private company• Bankruptcy

Contd…• Freedom from public scrutiny

• Freedom from the purview of Regulations

• Greater flexibility in decision making process;

• Preference of listing only in home country;

• In sync with global policy of being closely held

Journey from Guidelines to Regulations

Before 1992- Controller of Capital Issues (CCI)After 1992- SEBIReport of the Committee- 2002The SEBI (Delisting of Securities) Guidelines,

2003Concept Paper- 2006The SEBI (Delisting of Equity Shares)

Regulations, 2009

SEBI Delisting Regulations 2009:Salient Features

Applies only to equity shares

Public shareholders defined

Inapplicable to sick industries

Exit Opportunity

Contd…Special Resolution by way of postal ballot

Successful Exit Offer

Promoter’s discretion in accepting Offer Price

Small Companies

Reinstatement of securities

Types of Delisting

Delisting

Compulsory Delisting Voluntary Delisting

Compulsory Delisting

By a recognized stock exchange

Representation of aggrieved persons

Independent valuation- exit opportunity- Fair Price

No reverse book building process

Contd…

Reinstatement of securities- 10 yrs

Stock Exchange empowered to file prosecutions

Can file petitions for winding up

Voluntary Delisting

1) Voluntary delisting from all the exchanges

2) Voluntary delisting from few exchanges but remains listed on at least one stock exchange having nation wide terminals

3) Voluntary delisting by the small companies

Voluntary delisting from all the exchanges• No listing at any trading terminal• Exit opportunity to all public shareholders• Special resolution- Postal ballot• In-principle approval• Reverse Book Building (RBB) process• Promoter’s discretion in accepting Offer Price• Exit opportunity

Voluntary delisting from few exchanges

• No exit opportunity

• No special resolution

• Public notice

Small Companies• Definition

• Special Resolution

• Exit price to be fixed by Promoters & Merchant Banker

• In-principle approval

• 90% shareholders should assent

The Recent Trend of Delisting:ATTRACTIVE PRICE

Aka ‘Indicative’ or ‘Acceptable Price’Not specified under the Regulations 2009Not binding on the promoterIndicates financial outreach of the promoterQuells undue speculationExamples: Alfa Laval, UTV Software and Carol

Info Services, Bosch Chassis Systems and GE Capital Transport

Post-Delisting: Minority Shareholders and Reduction

Minority ShareholdersReduction- Section 100Sandvik Asia Ltd. v. Bharat Kumar Padamsi

{[2009] 92 SCL 272} - fair value- overwhelming majority

Elpro International Ltd., In re {[2008] 86 SCL 47}

- selective reduction

THANK YOU