SEBI slashes timeline for delisting of firms to 76 days

SEBI has brought down the timeline for delisting of companies from 137 days to 76 days. Delisting would, however, be disallowed if the promoter or a group entity sold shares six months prior to the date of the board meeting where the delisting proposal was approved. Promoters will not be allowed to sell shares until the delisting process is completed.

This is part of SEBI’s new delisting regulations aimed at making it more effective. The SEBI board in its meeting on November 19, 2014, had approved the amendments but subsequently there were requests for changes.

In line with proposals Tejesh Chitlangi, Partner, IC Legal, said “The amendment regulations broadly capture the measures notified by SEBI last year in its November board meeting, with certain modifications in view of the industry feedback.

Some of the major amendments are in relation to casting greater obligations on the merchant bankers for ensuring that checks and balances are in place in a delisting offer. Amendments also include provision for wider public participation and vesting SEBI with powers to relax the strict applicability of regulations in cases which warrant relaxation to enable a smooth delisting process.”

SEBI said delisting would be considered successful only if the acquirer acquires 90 per cent of the total share capital of the company. This is in addition to at least 25 per cent of the public shareholders holding demat shares tendering shares in the reverse book building process. However, the 25 per cent rule would not apply if the acquirer and the merchant banker are able to demonstrate that they have contacted all the public shareholders about the offer in the prescribed manner

The price at which the shareholding of the promoter, after including the shareholding of the public who have tendered their shares, reaches the threshold limit of 90 per cent, would be the offer price. SEBI said acquirers have the option to delist the shares of the target company directly after an open offer has triggered. Failure to delist would, however, require the acquirer to complete the mandatory open offer process under the takeover regulations.

Exemption Companies with a maximum paid-up capital of ₹10 crore and net worth of up to ₹25 crore and whose shares have not been traded during the past one year, despite not being suspended, are exempt from the reverse book building process.

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