Tag Archives: delisting

investor charter


SEBI has vide its circular dated 23rd November, 2021 mandated merchant bankers to publish on their websites investors’ charter for various items such as IPOs, buyback, delisting, QIP, preferential issues, takeovers etc. This is slated for compliance from 1st January, 2022 onwards.

The operative part of their circular is given below:

With a view to provide investors an idea about the various activities pertaining to primary market issuances as well as exit options like Takeovers, Buybacks or Delistings, an Investor Charter has been developed in consultation with the Merchant Bankers.

  1. This charter is a brief document in an easy to understand language and contains different
    services to the investors at one single place for ease of reference.
  2. All the registered Merchant Bankers are hereby advised to disclose on their website, Investor
    Charter for each of the following categories, as provided at Annexure-‘A’ to this circular, –
    3.1. Initial Public Offer (IPO) and Further Public Offer (FPO) including Offer for Sale (OFS);
    3.2. Rights Issue;
    3.3. Qualified Institutions Placement (QIP);
    3.4. Preferential Issue;
    3.5. SME IPO and FPO including OFS;
    3.6. Buyback of Securities;
    3.7. Delisting of Equity Shares;
    3.8. Substantial Acquisitions of Shares and Takeovers.
  3. Additionally, in order to bring about transparency in the Investor Grievance Redressal Mechanism, it has also been decided that all the registered Merchant Bankers shall disclose on their respective websites, the data on complaints received against them or against issues dealt by them and redressal thereof, on each of the aforesaid categories separately as well as collectively, latest by 7th of succeeding month, as per the format enclosed at Annexure-‘B’ to this circular.
  4. These disclosure requirements are in addition to those already mandated by SEBI.
  5. The provisions of this circular shall come into effect from January 01, 2022

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delisting pursuant to open offer

SEBI has in its Board meeting held on 28th September, 2021 sought to simplify the procedures especially when the acquirer seeks to delist the company along with the open offer being made under the Takeover regulations. The existing procedure was a complicated three step process which was cumbersome and time consuming. Now the acquirer can make a delisting offer along with the open offer itself and if he crosses the 90% threshold, then all shareholders will get the delisting prices, otherwise it will be the takeover price which will come into effect.

The detailed note on this is given below as per SEBI press release:

The Board approved the proposal to amend the existing regulatory framework for delisting of equity shares pursuant to open offer as provided under the extant Regulation 5A of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Regulations).

Under the existing framework, if an open offer is triggered, compliance with Takeover Regulations could take the incoming acquirer’s holding to above 75% or perhaps even 90%, however, to ensure compliance with Securities Contract (Regulation) Rules, 1957 (SCRR) the acquirer would be forced to first bring his
stake down to 75% as the SEBI (Delisting of Equity Shares) Regulations, 2021 (Delisting Regulations) would not let the acquirer even to attempt at delisting unless the holding is first brought down to 75%. Such directionally contradictory transactions in a sequence pose complexity in the takeover of listed companies especially where the acquirer desires to get the company delisted pursuant to his take over.

The revised framework aims to make M&A transactions for listed companies a more rational and convenient exercise, balancing the interest of all investors in the process. The key features of revised framework for delisting pursuant to an open offer are as under: –

  1. The framework shall be made available in the case of open offers under the Takeover Regulations for an incoming acquirer who is seeking to acquire control under Regulation 3(1) or Regulation 4 or Regulation 5.
  2. If the acquirer is desirous of delisting the target company, the acquirer must propose a higher price for delisting with suitable premium over open offer price.
  3. If the response to the open offer leads to the delisting threshold of 90% being met, all shareholders who tender their shares shall be paid the same delisting price and if the response to the offer leads to the delisting threshold of 90% not being met, all shareholders who tender their shares shall be paid the same takeover price.
  4. If a company does not get delisted pursuant to the open offer under this framework, and the acquirer crosses 75% due to the open offer, a period of 12 months from the date of completion of the open offer will be provided to the acquirer to make further attempts to delist the company under the Delisting Regulations using the reverse book building mechanism. If delisting during this extended 12-month period is not successful, the acquirer then must comply with the minimum public shareholding norm within a period of 12 months from the end of such period.
  5. If the acquirer at the time of open offer, states upfront that it would opt for remaining listed, and the total stake at the end of the tendering period reaches above 75%, then the acquirer may opt for either proportionately scaling down of purchases made under both, i.e. the underlying share purchase agreement and the shares tendered under open offer, in such a manner that the 75% threshold is never crossed or alternatively, the acquirer shall have to become compliant with minimum public shareholding within the time stipulated under SCRR.
  6. While undertaking delisting under this framework, all the provisions of the Delisting Regulations shall be applicable mutatis-mutandis, save otherwise provided in this framework.

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SEBI Delisting Regulations – Amendments

SEBI has in its Board meeting held on 19th November, 2014 approved the following amendments to the SEBI (Delisting) Regulations.

(i) The delisting shall be considered successful only when (A) the shareholding of the acquirer together with the shares tendered by public shareholders reaches 90% of the total share capital of the company and (B) if atleast 25% of the number of public shareholders, holding shares in dematerialised mode as on the date of the Board meeting which approves the delisting proposal, tender in the reverse book building process.

(ii) The offer price determined through Reverse Book Building shall be the price at which the shareholding of the promoter, after including the shareholding of the public shareholders who have tendered their shares, reaches the threshold limit of 90%.

(iii) The promoter/ promoter group shall be prohibited from making a delisting offer if any entity belonging to the said group has sold shares of the company during a period of six months prior to the date of the Board meeting which approves the delisting proposal.

(iv) Use of Stock Exchange platform for offers made under Delisting, Buy Back and Takeover Regulations.

(v) The Board of the company shall approve the proposal for delisting only after satisfying itself that delisting is in the interest of shareholders and that the company is in compliance with applicable securities laws. The Board of the company shall appoint a Merchant Banker on behalf of the company and the promoter for the said purpose and for compliance with the Delisting Regulations.

(vi) Companies whose paid up capital does not exceed Rs.10 crores and net worth does not exceed Rs.25 crores as on the last day of the previous financial year are exempted from following the Reverse Book Building process. The exemption would be available only if (a) there was no trading in the shares of the company in the last one year from the date of the board resolution authorizing the company to go for delisting and (b) trading of shares of the company has not been suspended for any non-compliance during the same period.

(vii) Timelines for completing the delisting process has been reduced from 137 calendar days (approx 117 working days) to 76 working days.

(viii) Option to the acquirer to delist the shares of the company directly through Delisting Regulations pursuant to triggering Takeover Regulations has been provided. However, if the delisting attempt fails, the acquirer would be required to complete the mandatory open offer process under the Takeover Regulations and pay interest @ 10% p.a. for the delayed open offer.

(ix) SEBI may, for reasons recorded in writing, relax the strict enforcement of any requirement of the provisions of the Delisting Regulations or exempt from compliance, in line with the provisions existing in ICDR and Takeover Regulations.

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