SEBI (Delisting of Equity Shares) Regulations, 2009 – Securities Laws and Capital Markets Important Questions

Question 1.
What are the conditions for voluntary delisting of securities? [Dec 2009 (3 Marks)]
Answer:
Case I: Procedure for delisting where no exit opportunity is required [Regulation 7]: In a case falling under clause 6(a):

  • The proposed delisting shall be approved by a resolution of the board of directors of the company in its meeting.
  • The company shall give public notice of the proposed delisting in at least one English national daily with wide circulation, one Hindi national daily with wide circulation, and one regional language newspaper of the region where the concerned recognized stock exchanges are located.
  • The company shall make an application to the concerned recognized stock exchange for delisting its equity shares.
  • The fact of delisting shall be disclosed in the first annual report of the company prepared after the delisting.
  • The public notice shall mention the names of the recognized stock exchanges
    from which the equity shares of the company are intended to be delisted, the: reasons for such delisting, and the fact of continuation of listing of equity shares on the recognized stock exchange having nationwide trading terminals.

An application for delisting shall be disposed of by the recognized stock ex; change within a period not exceeding 30 working days from the date of receipt of such application complete in all respects.

Case II: Conditions and procedure for delisting where exit opportunity is required [Regulation 7]:
1. Any company desirous of delisting its equity shares where exit opportunity is required to given shall observe the following provisions:
(a) The company shall obtain the prior approval of the board of directors of the company in its meeting.

(b) The company shall obtain the prior approval of shareholders of the company by a special resolution passed through postal ballot, after disclosure of all material facts in the explanatory statement sent to the shareholders in relation to such resolution. However, the special resolution shall be acted upon only if the votes cast by public shareholders in favor of the proposal amount to at least 2 times the number of votes cast by public shareholders against it.

(c) The company shall make an application to the concerned recognized stock exchange for in-principle approval of the proposed delisting in the form specified by the recognized stock exchange.

(d) The company shall within 1 year of passing the special resolution, make the final application to the concerned recognized stock exchange in the form specified by the recognized stock exchange.

2. Prior to granting approval, the board of directors of the company shall –
1. make a disclosure to the recognized stock exchanges on which the equity shares of the company are listed that the promoters/acquirers have proposed to delist the company;

2. appoint a merchant banker to carry out due diligence and make a disclosure to this effect to the recognized stock exchanges on which the equity shares of the company are listed;

3. obtain details of trading in shares of the company for a period of two years prior to the date of a board meeting by top 25 shareholders as on the date of the board meeting convened to consider the proposal for delisting, from the stock exchanges and details of off-market transactions of such shareholders for a period of 2 years and furnish the information to the merchant banker for carrying out due-diligence;

4. obtain further details in terms of Clause (5) and furnish the information to the merchant banker.

3. The board of directors of the company while approving the proposal for delisting shall certify that:

  1. the company is in compliance with the applicable provisions of securities laws;
  2. the acquirer or promoter or promoter group or their related entities are in compliance with Regulation 4(5);
  3. the delisting is in the interest of the shareholders.

4. For certification in respect of approval by the board of directors of the company, the company shall take into account the report of the merchant banker.

5. The merchant banker appointed by the board of directors of the company shall carry out due diligence upon obtaining details from the board of directors of the company. However, if the merchant banker is of the opinion that details are not sufficient for certification, the merchant banker shall obtain additional details from the board of directors of the company for such a long period as it may deem fit.

6. Upon carrying out due diligence, the merchant banker shall submit a report to the board of directors of the company certifying the following:
(a) The trading carried out by any of the acquirer or promoter or promoter group entity or their related entities was in compliance or not, with the applicable provisions of the securities laws; and

(b) Any of the acquirer or promoter or promoter group entity or persons acting in concert or their related entities have carried out or not any transaction to facilitate the success of the delisting offer which is in contravention of the provisions of Regulation 4(5).

7. An application seeking in-principle approval for delisting shall be accompanied by an audit report in respect of the equity shares sought to be delisted, covering a period of 6 months prior to the date of the application.

8. An application seeking in-principle approval for delisting shall be disposed of by the recognized stock exchange within a period not exceeding 5 working days from the date of receipt of such application complete in all respects.

9. While considering an application seeking in-principle approval for de-listing, the recognized stock exchange shall not unfairly withhold such application, but may require the company to satisfy it as to –
(a) compliance with the above regulations;
(b) the resolution of investor grievances by the company;
(c) payment of listing fees to that recognized stock exchange;
(d) the compliance with any condition of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 with that recognized stock exchange having a material bearing on the interests of its equity shareholders;
(e) any litigation or action pending against the company pertaining to its activities in the securities market or any other matter having a material bearing on the interests of its equity shareholders;
(f) any other relevant matter as the recognized stock exchange may deem fit to verify.

10. A final application for delisting shall be accompanied with such proof of having given the exit opportunity, as the recognized stock exchange may require.

Question 2.
What are the rights of security holders in case of compulsory delisting of securities? [Dec 2009 (5 Marks)]
Answer:
Rights of public shareholders in case of a compulsory delisting [Regulation 23]:

  • In case of compulsory delisting, the recognized stock exchange shall appoint an independent valuer who shall determine the fair value of the delisted equity shares.
  • The recognized stock exchange shall form a panel of expert valuers from whom the valuer shall be appointed.
  • The promoter of the company shall acquire delisted equity shares from the public shareholders by paying them the value determined by the valuer, subject to their option of retaining their shares.

Question 3.
Write a short note on Compulsory Delisting [Dec 2010 (4 Marks)]
Answer:
Compulsory delisting refers to the permanent removal of securities of a listed company from a stock exchange as a penalizing measure for

  • Not complying with the requirements of the listing agreement.
  • Not complying with the requirements of provisions of the SEBI Act, 1992, SCR Act, 1956, Companies Act, 2013.

The power to compulsory delists the shares of any company can be exercised by the recognized stock exchange u/s 21A of the SCR Act, 1956.

Compulsory delisting by a stock exchange [Regulation 22 of the SEBI (Delisting of Equity Shares) Regulations, 2009]:
1. A recognized stock exchange may by passing order delist any equity shares of a company u/s 21A of the SCR Act, 1956. However, a reasonable opportunity of being heard should be given to the company before passing such an order.

2. The decision regarding compulsory delisting shall be taken by a panel to be constituted by the recognized stock exchange consisting of:
(a) Two directors of the recognized stock exchange (one of whom shall be a public representative)
(b) One representative of the investors
(c) One representative of the MCA or ROC
(d) Executive Director or Secretary of the recognized stock exchange.

3. The recognized stock exchange shall give notice of the proposed delisting in one English national daily and one regional language newspaper. Such notice must state a time of not less than 15 working days for making representations by any person who may be aggrieved by the proposed delisting. Such notice shall also be displayed on trading systems and the website of the stock exchange.

4. The recognized stock exchange shall while passing any order, consider the representations, made by the company and any representations received in response to the notice given newspapers and shall comply with the criteria specified in Schedule III of the Regulation.

5. Where the recognized stock exchange passes an order, it shall –
(a) forthwith publish notice of such delisting in the newspaper, disclosing the name and address of the company, the fair value of the delisted equity shares, and the names and addresses of promoters of the company and

(b) inform about such delisting and the surrounding circumstances to all other stock exchanges where the equity shares are listed.

Question 4.
Write a short note on Delisting of securities [Dec 2011 (4 Marks)]
Answer:
Compulsory Delisting: Compulsory delisting refers to the permanent removal of securities of a listed company from a stock exchange as a penalizing measure for:

  • Not complying with the requirements of the Listing agreement
  • Not complying with the requirements of provisions of the SEBI Act, 1992, SCR Act, 1956, Companies Act, 2013.

The power to compulsory delists the shares of any company can be exercised by the recognized stock exchange u/s 21A of the SCR Act, 1956.

Voluntary Delisting: In voluntary delisting, a listed company decides on its own to permanently remove its securities from a stock exchange by complying with provisions of the SEBI (Delisting of Equity Shares) Regulations, 2009.

Question 5.
What are the criteria for compulsory delisting by stock exchanges? [June 2012 (5 Marks)]
Answer:
Compulsory delisting refers to the permanent removal of securities of a listed company from a stock exchange as a penalizing measure for

  • Not complying with the requirements of the listing agreement.
  • Not complying with the requirements of provisions of the SEBI Act, 1992, SCR Act, 1956, Companies Act, 2013.

The power to compulsory delists the shares of any company can be exercised by the recognized stock exchange u/s 21A of the SCR Act, 1956.

Compulsory delisting by a stock exchange [Regulation 22 of the SEBI (Delisting of Equity Shares) Regulations, 2009]:
1. A recognized stock exchange may by passing order delist any equity shares of a company u/s 21A of the SCR Act, 1956. However, a reasonable opportunity of being heard should be given to the company before passing such an order.

2. The decision regarding compulsory delisting shall be taken by a panel to be constituted by the recognized stock exchange consisting of:
(a) Two directors of the recognized stock exchange (one of whom shall be a public representative)
(b) One representative of the investors
(c) One representative of the MCA or ROC
(d) Executive Director or Secretary of the recognized stock exchange.

3. The recognized stock exchange shall give notice of the proposed delisting in one English national daily and one regional language newspaper. Such notice must state a time of not less than 15 working days for making representations by any person who may be aggrieved by the proposed delisting. Such notice shall also be displayed on trading systems and the website of a stock exchange.

4. The recognized stock exchange shall while passing any order, consider the representations, made by the company and any representations received in response to the notice given newspapers and shall comply with the criteria specified in Schedule III of the Regulation.

5. Where the recognized stock exchange passes an order, it shall
(a) forthwith publish notice of such delisting in the newspaper, disclosing the name and address of the company, the fair value of the delisted equity shares, and the names and addresses of promoters of the company and

(b) inform about such delisting and the surrounding circumstances to all other stock exchanges where the equity shares are listed.

Question 6.
Write a short note on Voluntary Delisting
Answer:
Delisting not permissible in certain circumstances [Regulation 4]: No company shall apply for and no recognized stock exchange shall permit delisting of equity shares of a company:
(a) pursuant to a buy-back of equity shares by the company; or
(b) pursuant to a preferential allotment made by the company; or
(c) unless a period of 3 years has elapsed since the listing of that class of equity shares on any recognized stock exchange; or
(d) if any instruments issued by the company, which are convertible into the same class of equity shares that are sought to be delisted, are outstanding.

No promoter or promoter group shall propose delisting of equity shares of a company if any entity belonging to the promoter or promoter group has sold equity shares of the company during a period of 6 months prior to the date of the board meeting in which the delisting proposal was approved.

No company shall apply for and no recognized stock exchange shall permit delisting of convertible securities.

Delisting from all recognized stock exchanges [Regulation 5]: A company may delist its equity shares from all the recognized stock exchanges where they are listed or from the only recognized stock exchange where they are listed.

However, all public shareholders holding equity shares are given an exit opportunity in accordance with Chapter IV of the Regulation.

Delisting from only some of the recognized stock exchanges [Regulation 6]: If a company has listed its equity shares on more than one stock exchange, it may continue listing its equity shares on a particular exchange and delist its equity shares from some or all other stock exchange. Following conditions are required to be fulfilled in this regard:
(a) If the company decides to continue its listing on the stock exchange having nationwide trading terminals, no exit opportunity needs to be given to the public shareholders.

(b) If the company decides to continue its listing on the stock exchange not having nationwide trading terminals, exit opportunity needs to be given to the public shareholders.

Case I: Procedure for delisting where no exit opportunity is required [Regulation 7]: In a case falling under clause 6(a):
(a) The proposed delisting shall be approved by a resolution of the board of directors of the company in its meeting.

(b) The company shall give public notice of the proposed delisting in at least one English national daily with wide circulation, one Hindi national daily with wide circulation, and one regional language newspaper of the region where the concerned recognized stock exchanges are located.

(c) The company shall make an application to the concerned recognized stock exchange for delisting its equity shares.

(d) The fact of delisting shall be disclosed in the first annual report of the company prepared after the delisting.

The public notice shall mention the names of the recognized stock exchanges from which the equity shares of the company are intended to be delisted, the reasons for such delisting, and the fact of continuation of listing of equity shares on the recognized stock exchange having nationwide trading terminals.

An application for delisting shall be disposed of by the recognized stock exchange within a period not exceeding 30 working days from the date of receipt of such application complete in all respects.

Case II: Conditions and procedure for delisting where exit opportunity is required [Regulation 7]:
1. Any company desirous of delisting its equity shares where exit opportunity is required to given shall observe the following provisions:
(a) The company shall obtain the prior approval of the board of directors of the company in its meeting.

(b) The company shall obtain the prior approval of shareholders of the company by a special resolution passed through postal ballot, after disclosure of all material facts in the explanatory statement sent to the shareholders in relation to such resolution. However, the special resolution shall be acted upon only if the votes cast by public shareholders in favor of the proposal amount to at least 2 times the number of votes cast by public shareholders against it.

(c) The company shall make an application to the concerned recognized stock exchange for in-principle approval of the proposed delisting in the form specified by the recognized stock exchange.

(d) The company shall within 1 year of passing the special resolution, make the final application to the concerned recognized stock exchange in the form specified by the recognized stock exchange.

2. Prior to granting approval, the board of directors of the company shall
1. make a disclosure to the recognized stock exchanges on which the equity shares of the company are listed that the promoters /acquirers j have proposed to delist the company;

2. appoint a merchant banker to carry out due diligence and make a disclosure to this effect to the recognized stock exchanges on which the equity shares of the company are listed;

3. obtain details of trading in shares of the company for a period of two years prior to the date of a board meeting by top 25 shareholders as on the date of the board meeting convened to consider the proposal for delisting, from the stock exchanges and details of off-market transactions of such shareholders for a period of 2 years and furnish the information to the merchant banker for carrying out due-diligence;

4. obtain further details in terms of Clause (5) and furnish the information to the merchant banker.

3. The board of directors of the company while approving the proposal for delisting shall certify that:

  1. the company is in compliance with the applicable provisions of securities laws;
  2. the acquirer or promoter or promoter group or their related entities are in compliance with Regulation 4(5);
  3. the delisting is in the interest of the shareholders.

4. For certification in respect of approval by the board of directors of the company, the company shall take into account the report of the merchant banker.

5. The merchant banker appointed by the board of directors of the company shall carry out due diligence upon obtaining details from the board of directors of the company. However, if the merchant banker is of the opinion that details are not sufficient for certification, the merchant banker shall obtain additional details from the board of directors of the company for such a long period as it may deem fit.

6. Upon carrying out due diligence, the merchant banker shall submit a report to the board of directors of the company certifying the following:
(a) The trading carried out by any of the acquirer or promoter or promoter group entity or their related entities was in compliance or not, with the applicable provisions of the securities laws; and

(b) Any of the acquirer or promoter or promoter group entity or persons acting in concert or their related entities have carried out or not any transaction to facilitate the success of the delisting offer which is in contravention of the provisions of Regulation 4(5).

7. An application seeking in-principle approval for delisting shall be accompanied by an audit report in respect of the equity shares sought to be delisted, covering a period of 6 months prior to the date of the application.

8. An application seeking in-principle approval for delisting shall be disposed of by the recognized stock exchange within a period not exceeding 5 working days from the date of receipt of such application complete in all respects.

9. While considering an application seeking in-principle approval for delisting, the recognized stock exchange shall not unfairly withhold such application but may require the company to satisfy it as to:
(a) compliance with the above regulations;
(b) the resolution of investor grievances by the company;
(c) payment of listing fees to that recognized stock exchange;
(d) the compliance with any condition of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 with that recognized stock exchange having a material bearing on the interests of its equity shareholders;
(e) any litigation or action pending against the company pertaining to its activities in the securities market or any other matter having a material bearing on the interests of its equity shareholders;
(f) any other relevant matter as the recognized stock exchange may deem fit to verify.

10. A final application for delisting shall be accompanied with such proof of having given the exit opportunity, as the recognized stock exchange may require.

Question 7.
“A company cannot get itself delisted without giving sufficient opportunity to shareholders to exit.” Comment. [June 2014 (5 Marks)]
Answer:
Delisting from only some of the recognized stock exchanges [Regulation 6]: If a company has listed its equity shares on more than one stock exchange, it may continue listing its equity shares on a particular exchange and delist its equity shares from some or all other stock exchanges.

Following conditions are required to be fulfilled in this regard:
1. If the company decides to continue its listing on the stock exchange having nationwide trading terminals, no exit opportunity needs to be given to the public shareholders.

2. If the company decides to continue its listing on the stock exchange not having nationwide trading terminals, an exit opportunity needs to be given to the public shareholders.

Question 8.
Delisting not permissible in certain circumstances. Comment. [June 2015 (4 Marks)]
Answer:
Delisting not permissible in certain circumstances [Regulation 4]: No company shall apply for and no recognized stock exchange shall permit delisting of equity shares of a company:
(a) pursuant to a buyback of equity shares by the company; or
(b) pursuant to a preferential allotment made by the company; or
(c) unless a period of 3 years has elapsed since the listing of that class of equity shares on any recognized stock exchange; or
(d) if any instruments issued by the company, which are convertible into the same class of equity shares that are sought to be delisted, are outstanding.

No promoter or promoter group shall propose delisting of equity shares of a company if any entity belonging to the promoter or promoter group has sold equity shares of the company during a period of 6 months prior to the date of the board meeting in which the delisting proposal was approved.

No company shall apply for and no recognized stock exchange shall permit delisting of convertible securities.

Question 9.
Briefly explain the provisions relating to delisting of equity shares under the SEBI (Delisting of Equity Shares) Regulations, 2009. [June 2017 (4 Marks)]
Answer:
Delisting not permissible in certain circumstances [Regulation 4]: No company shall apply for and no recognized stock exchange shall permit delisting of equity shares of a company:
(a) pursuant to a buy-back of equity shares by the company; or
(b) pursuant to a preferential allotment made by the company; or
(c) unless a period of 3 years has elapsed since the listing of that class of equity shares on any recognized stock exchange; or
(d) if any instruments issued by the company, which are convertible into the same class of equity shares that are sought to be delisted, are outstanding.

No promoter or promoter group shall propose delisting of equity shares of a company if any entity belonging to the promoter or promoter group has sold equity shares of the company during a period of 6 months prior to the date of the board meeting in which the delisting proposal was approved.

No company shall apply for and no recognized stock exchange shall permit delisting of convertible securities.

Delisting from all recognized stock exchanges [Regulation 5]: A company may delist its equity shares from all the recognized stock exchanges where they are listed or from the only recognized stock exchange where they are listed.

However, all public shareholders holding equity shares are given an exit opportunity in accordance with Chapter IV of the Regulation.

Delisting from only some of the recognized stock exchanges [Regulation 6]: If a company has listed its equity shares on more than one stock exchange, it may continue listing its equity shares on a particular exchange and delist its equity shares from some or all other stock exchange. Following conditions are required to be fulfilled in this regard:
(a) If the company decides to continue its listing on the stock exchange having nationwide trading terminals, no exit opportunity needs to be given to the public shareholders.

(b) If the company decides to continue its listing on the stock exchange not having nationwide trading terminals, exit opportunity needs to be given to the public shareholders.

Case I: Procedure for delisting where no exit opportunity is required [Regulation 7]: In a case falling under clause 6(a):
(a) The proposed delisting shall be approved by a resolution of the board of directors of the company in its meeting.

(b) The company shall give public notice of the proposed delisting in at least one English national daily with wide circulation, one Hindi national daily with wide circulation, and one regional language newspaper of the region where the concerned recognized stock exchanges are located.

(c) The company shall make an application to the concerned recognized stock exchange for delisting its equity shares.

(d) The fact of delisting shall be disclosed in the first annual report of the company prepared after the delisting.

The public notice shall mention the names of the recognized stock exchanges from which the equity shares of the company are intended to be delisted, the reasons for such delisting, and the fact of continuation of listing of equity shares on the recognized stock exchange having nationwide trading terminals.

An application for delisting shall be disposed of by the recognized stock exchange within a period not exceeding 30 working days from the date of receipt of such application complete in all respects.

Case II: Conditions and procedure for delisting where exit opportunity is required [Regulation 7]:
(1) Any company desirous of delisting its equity shares where exit opportunity is required to given shall observe the following provisions:
(a) The company shall obtain the prior approval of the board of directors of the company in its meeting.

(b) The company shall obtain the prior approval of shareholders of the company by a special resolution passed through postal ballot, after disclosure of all material facts in the explanatory statement sent to the shareholders in relation to such resolution. However, the special resolution shall be acted upon only if the votes cast by public shareholders in favor of the proposal amount to at least 2 times the number of votes cast by public shareholders against it.

(c) The company shall make an application to the concerned recognized stock exchange for in-principle approval of the proposed delisting in the form specified by the recognized stock exchange.

(d) The company shall within 1 year of passing the special resolution, make the final application to the concerned recognized stock exchange in the form specified by the recognized stock exchange.

2. Prior to granting approval, the board of directors of the company shall
1. make a disclosure to the recognized stock exchanges on which the equity shares of the company are listed that the promoters /acquirers j have proposed to delist the company;

2. appoint a merchant banker to carry out due diligence and make a disclosure to this effect to the recognized stock exchanges on which the equity shares of the company are listed;

3. obtain details of trading in shares of the company for a period of two years prior to the date of a board meeting by top 25 shareholders as on the date of the board meeting convened to consider the proposal for delisting, from the stock exchanges and details of off-market transactions of such shareholders for a period of 2 years and furnish the information to the merchant banker for carrying out due-diligence;

4. obtain further details in terms of Clause (5) and furnish the information to the merchant banker.

3. The board of directors of the company while approving the proposal for delisting shall certify that:

  1. the company is in compliance with the applicable provisions of securities laws;
  2. the acquirer or promoter or promoter group or their related entities are in compliance with Regulation 4(5);
  3. the delisting is in the interest of the shareholders.

4. For certification in respect of approval by the board of directors of the company, the company shall take into account the report of the merchant banker.

5. The merchant banker appointed by the board of directors of the company shall carry out due diligence upon obtaining details from the board of directors of the company. However, if the merchant banker is of the opinion that details are not sufficient for certification, the merchant banker shall obtain additional details from the board of directors of the company for such a long period as it may deem fit.

6. Upon carrying out due diligence, the merchant banker shall submit a report to the board of directors of the company certifying the following:
(a) The trading carried out by any of the acquirer or promoter or promoter group entity or their related entities was in compliance or not, with the applicable provisions of the securities laws; and

(b) Any of the acquirer or promoter or promoter group entity or persons acting in concert or their related entities have carried out or not any transaction to facilitate the success of the delisting offer which is in contravention of the provisions of Regulation 4(5).

7. An application seeking in-principle approval for delisting shall be accompanied by an audit report in respect of the equity shares sought to be delisted, covering a period of 6 months prior to the date of the application.

8. An application seeking in-principle approval for delisting shall be disposed of by the recognized stock exchange within a period not exceeding 5 working days from the date of receipt of such application complete in all respects.

9. While considering an application seeking in-principle approval for delisting, the recognized stock exchange shall not unfairly withhold such application, but may require the company to satisfy it as to
(a) compliance with the above regulations;
(b) the resolution of investor grievances by the company;
(c) payment of listing fees to that recognized stock exchange;
(d) the compliance with any condition of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 with that recognized stock exchange having a material bearing on the interests of its equity shareholders;
(e) any litigation or action pending against the company pertaining to its activities in the securities market or any other matter having a material bearing on the interests of its equity shareholders;
(f) any other relevant matter as the recognized stock exchange may deem fit to verify.

10. A final application for delisting shall be accompanied with such proof of having given the exit opportunity, as the recognized stock exchange may require.

Question 10.
SEBI in the exercise of the powers conferred by Section 31 read with Section 21A of the Securities Contracts (Regulation) Act, 1956, Section 30, Sub-section (1) of Section 11 and Sub-section (2) of Section 11A of SEBI Act, 1992 made the SEBI (Delisting of Equity Shares) Regulations, 2009. Explain the framework and complete process of delisting as per regulations. [Dec 2017 (8 Marks)]
Answer:
The term “delisting” of securities 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 traded at that stock exchange. Delisting can be voluntary or compulsory.

SEBI circulated Concept Paper on the proposed SEBI (Delisting of Securities) Regulations, 2006, asking for public comments on the proposed Regulations. SEBI received various comments, opinions, and suggestions on the subject and finally, by its publication dated 10th June 2009 in the Official Gazette, SEBI notified the much-awaited SEBI (Delisting of Equity Shares) Regulations, 2009.

Delisting from all recognized stock exchanges [Regulation 5]: A company may delist its equity shares from all the recognized stock exchanges where they are listed or from the only recognized stock exchange where they are listed.

However, all public shareholders holding equity shares are given an exit opportunity in accordance with Chapter IV of the Regulation.

Delisting from only some of the recognized stock exchanges [Regulation 6]: If a company has listed its equity shares on more than one stock exchange, it may continue listing its equity shares on a particular exchange and delist its equity shares from some or all other stock exchanges.

Following conditions are required to be fulfilled in this regard:
(a) If the company decides to continue its listing on the stock exchange having nationwide trading terminals, no exit opportunity needs to be given to the public shareholders.

(b) If the company decides to continue its listing on the stock exchange not having nationwide trading terminals, exit opportunity needs to be given to the public shareholders.

‘Recognized stock exchange having nationwide trading terminals’ means BSE, NSE, or other stock exchange specified by the SEBI in this regard.

Case I: Procedure for delisting where no exit opportunity is required [Regulation 7]: In a case falling under clause 6(a):
(a) The proposed delisting shall be approved by a resolution of the board of directors of the company in its meeting.

(b) The company shall give public notice of the proposed delisting in at least one English national daily with wide circulation, one Hindi national daily with wide circulation, and one regional language newspaper of the region where the concerned recognized stock exchanges are located.

(c) The company shall make an application to the concerned recognized stock exchange for delisting its equity shares.

(d) The fact of delisting shall be disclosed in the first annual report of the company prepared after the delisting.

The public notice shall mention the names of the recognized stock exchanges from which the equity shares of the company are intended to be delisted, the reasons for such delisting, and the fact of continuation of listing of equity shares on the recognized stock exchange having nationwide trading terminals.

An application for delisting shall be disposed of by the recognized stock exchange within a period not exceeding 30 working days from the date of receipt of such application complete in all respects.

Case II: Conditions and procedure for delisting where exit opportunity is re-quired [Regulation 7]:
1. Any company desirous of delisting its equity shares where exit opportunity is required to given shall observe the following provisions:
(a) The company shall obtain the prior approval of the board of directors of the company in its meeting.

(b) The company shall obtain the prior approval of shareholders of the company by a special resolution passed through postal ballot, after disclosure of all material facts in the explanatory statement sent to the shareholders in relation to such resolution. However, the special resolution shall be acted upon only if the votes cast by public shareholders in favor of the proposal amount to at least 2 times the number of votes cast by public shareholders against it.

(c) The company shall make an application to the concerned recognized stock exchange for in-principle approval of the proposed delisting in the form specified by the recognized stock exchange.

(d) The company shall within 1 year of passing the special resolution, make the final application to the concerned recognized stock exchange in the form specified by the recognized stock exchange.

2. Prior to granting approval, the board of directors of the company shall:
1. make a disclosure to the recognized stock exchanges on which the equity shares of the company are listed that the promoters/acquirers have proposed to delist the company;

2. appoint a merchant banker to carry out due diligence and make a disclosure to this effect to the recognized stock exchanges on which the equity shares of the company are listed;

3. obtain details of trading in shares of the company for a period of two years prior to the date of a board meeting by top 25 shareholders as on the date of the board meeting convened to consider the proposal for delisting, from the stock exchanges and details of off-market transactions of such shareholders for a period of 2 years and furnish the information to the merchant banker for carrying out due-diligence;

4. obtain further details in terms of Clause (5) and furnish the information to the merchant banker.

3. The board of directors of the company while approving the proposal for delisting shall certify that:

  1. the company is in compliance with the applicable provisions of securities laws;
  2. the acquirer or promoter or promoter group or their related entities are in compliance with Regulation 4(5);
  3. the delisting is in the interest of the shareholders.

4.For certification in respect of approval by the board of directors of the company, the company shall take into account the report of the merchant banker.

5. The merchant banker appointed by the board of directors of the company shall carry out due diligence upon obtaining details from the board of directors of the company. However, if the merchant banker is of the opinion that details are not sufficient for certification, the merchant banker shall obtain additional details from the board of directors of the company for such a long period as it may deem fit.

6. Upon carrying out due diligence, the merchant banker shall submit a report to the board of directors of the company certifying the following:
(a) The trading carried out by any of the acquirer or promoter or promoter group entity or their related entities was in compliance or not, with the applicable provisions of the securities laws; and

(b) Any of the acquirer or promoter or promoter group entity or persons acting in concert or their related entities have carried out or not any transaction to facilitate the success of the delisting offer which is in contravention of the provisions of Regulation 4(5).

7. An application seeking in-principle approval for delisting shall be accompanied by an audit report in respect of the equity shares sought to be delisted, covering a period of 6 months prior to the date of the application.

8. An application seeking in-principle approval for delisting shall be disposed of by the recognized stock exchange within a period not exceeding 5 working days from the date of receipt of such application complete in all respects.

9. While considering an application seeking in-principle approval for delisting, the recognized stock exchange shall not unfairly withhold such application, but may require the company to satisfy it as to –
(a) compliance with the above regulations;
(b) the resolution of investor grievances by the company;
(c) payment of listing fees to that recognized stock exchange;
(d) the compliance with any condition of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 with that recognized stock exchange having a material bearing on the interests of its equity shareholders;
(e) any litigation or action pending against the company pertaining to its activities in the securities market or any other matter having a material bearing on the interests of its equity shareholders;
(f) any other relevant matter as the recognized stock exchange may deem fit to verify.

10. A final application for delisting shall be accompanied with such proof of having given the exit opportunity, as the recognized stock exchange may require.

Question 11.
The equity share of Ashina Buildcon Ltd. was listed on National Stock Exchange Ltd. (NSE). NSE delisted its shares by complying with SEBI guidelines on delisting. The order of delisting was passed on March 5, 2017. Kunj, one of the shareholders has not participated in the bidding process due to ill health. He wanted to tender shares on January 1, 2018. Analyze the problem in the light of the SEBI (Delisting of Equity Shares) Regulations, 2009. [Dec 2018 (4 Marks)]
Answer:
Right of remaining shareholders to tender equity shares [Regulation 21]:
1. Where pursuant to acceptance of equity shares tendered, the equity shares are delisted, any remaining public shareholder holding such equity shares may tender his shares to the promoter up to a period of at least 1 year from the date of delisting and in such a case, the promoter shall accept the shares tendered at the same final price at which the earlier acceptance of shares was made.

2. The payment of consideration for shares accepted shall be made out of the balance amount lying in the escrow account.

3. The amount in the escrow account or the bank guarantee shall not be released to the promoter unless all payments are made in respect of shares tendered.

As per facts given in the case, shares of AshinaBildcon Ltd. are delisted on 5th March 2017, and Kunj, one of the shareholders wants to tender shares on 1st Jan. 2018; he can do so as a period of 1 year has not been elapsed from the date of delisting.

Question 12.
The Board of directors of a listed company desires to delist its equity shares from all the recognized stock exchanges. The voting details through the postal ballot are as under:
Total No. of voters: 7,000 (Public: 5,000 & Promoters: 2,000)
Voting at shareholders meeting:
(a) Public shareholders:
In favor: 3,300 votes
In against : 1,700 votes
(b) All promoter shareholders have voted in favor of the resolution.
By referring to SEBI’s delisting regulation, decide upon the resolution passed by the shareholders. [June 2019 (4 Marks)] if
Answer:
As per Regulation 8 of the SEBI (Delisting of Equity Shares) Regulations, 2009, in case of delisting of shares, where exit opportunity is required to be f given, the company should obtain prior approval of shareholders by a special resolution passed through postal ballot. However, the special resolution shall be acted upon only if the votes cast by public shareholders in favor of the proposal are two times the number of votes cast against it.

As per Section 114 of the Companies Act, 2013, a resolution shall be a special resolution when the votes cast in favor of the resolution, are required to be not less than 3 times the number of the votes, if any, cast against the resolution.

As per facts given in the case,
Votes in favour of the resolution = 3,300 (public voter) + 2,000 (promoter voter) = 5,300 votes.
Votes against resolution = 1,700 votes

Thus, a special resolution is passed as per Section 114 of the Companies Act, 2013.

However, as per Regulation 8 votes cast by public shareholders in favor of the proposal are not two times the number of votes cast against it as 3,400 or more votes are required to complete this condition whereas only 3,300 votes are in favor of the resolution. Thus, the special resolution shall not be acted upon in terms of provisions of Regulation 8 of the SEBI (Delisting of Equity Shares) Regulations, 2009.

Question 13.
ABC Ltd. a company whose equity shares are listed at BSE and NSE is seeking delisting of its equity shares from both the recognized stock exchanges. It provides an exit opportunity to all public shareholders in accordance with SEBI (Delisting of Equity Shares) Regulations, 2009. Calculate the minimum number of equity shares to be acquired for the delisting offer to be successful. Also, determine the final offer price from the details given hereunder:
(i)

Number of sharesPercentage holding
Promoter75,00,00075
Public25,00,00025
1,00,00,000100

(ii) The floor price in terms of SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 2011 is ₹ 550 per share.
(iii) Assume that all the public shareholders holding shares in the Demat mode had participated in the book-building process as follows:

Bid prices (₹)Number of investorsDemand (No. of shares)
55052,50,000
56584,00,000
575102,00,000
58544,00,000
59561,20,000
60051,30,000
60532,10,000
61031,40,000
61531,50,000
62015,00,000
4825,00,000

Answer:
As per Regulation 6(b) of the SEBI (Delisting of Equity Shares) Regulations, 2009, if after the proposed delisting, the equity shares of the company would not remain listed on any recognized stock exchange having nationwide trading terminals then exit opportunity shall be given to all the public shareholders holding the equity shares sought to be delisted in accordance with Chapter IV.

A minimum number of equity shares to be acquired [Regulation 17(A)]: An offer made under chapter III shall be deemed to be successful only if the post-offer promoter shareholding (along with the persons acting in concert with the promoter) taken together with the shares accepted through eligible bids at the final price determined as per Schedule II, reaches 90% of the total issued shares of that class excluding the shares which are held by a custodian and j against which depository receipts have been issued overseas.

Thus, a minimum of 15,00,000 shares are required to be acquired for delisting offers to be successful.

As per Schedule II Clause, 12 of the SEBI (Delisting of Equity Shares) Regulations, 2009, the final offer price shall be determined as the price at which shares | accepted through eligible bids, that takes the shareholding of the promoter or the acquirer (along with the persons acting in concert) to 90% of the total issued shares of that class excluding the shares which are held by a custodian ! and against which depository receipts have been issued.

If the final price is accepted, then, the promoter shall accept all shares tendered where the corresponding bids placed are at the final price or at a price which j is lesser than the final price. The promoter may, if he deems fit, fix a higher final price.
SEBI (Delisting of Equity Shares) Regulations, 2009 – Securities Laws and Capital Markets Important Questions 1
The floor price of ₹ 550 per share, promoter/acquirer shareholding at 75°o and number of shares required for successful delisting are 15,00,000, the final price would be the price at which the promoter reaches the threshold of 90°o i.e. it would be ₹ 600 per share.

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