DELISTING OF SHARES

-Vasavi

Contents
Listing & Delisting Why do Companies Delist? Brief history- The 2003 Guidelines & The 2009 Regulations Types of Delisting Current trend

What is Listing??
Admission of a Companys 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

 Freedom from public scrutiny

Contd

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- SEBI Report of the Committee- 2002 The SEBI (Delisting of Securities) Guidelines, 2003 Concept Paper- 2006 The 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

Promoters 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 prosecutions empowered to file

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 Promoters 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 2009 Not binding on the promoter Indicates financial outreach of the promoter Quells undue speculation Examples: Alfa Laval, UTV Software and Carol Info Services, Bosch Chassis Systems and GE Capital Transport

Post-Delisting: Minority Shareholders and Reduction

Minority Shareholders Reduction- Section 100 Sandvik 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

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