In a bid to protect investors, market regulator SEBI has proposed tighter norms for the delisting of non-convertible debt securities.
SEBI has proposed to bar listed entity that has more than 200 non-QIB holders of non-convertible debt securities from voluntarily delisting. The listed entity shall obtain approval from all holders of non-convertible debt securities within 15 working days from the date of the notice of delisting.
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Current delisting norms allow entities to delist by simply giving a prior intimation to the stock exchange about the meeting of the board of directors, where the proposal for a voluntary delisting is considered.
“Presently, in case of any change in the structure of the non-convertible debt securities and non-convertible redeemable preference shares, the threshold for the approval as per Regulation 59 of Listing Regulations is inter-alia specified as three-fourth by value of holders of such securities,” SEBI said in a consultation paper.
It added, “However, delisting of non-convertible debt securities will take away the benefits of listed securities from the investors such as transparency, efficient discovery of prices of such securities, opportunity of investing and exiting through the stock exchange mechanism, recourse to the investor protection mechanisms for any reasons including change/removal of the debenture trustee or in case default. Thus, the approval of all the holders of nonconvertible debt securities is necessitated.”
The delisting proposal shall be considered to have failed if non-receipt of in-principle approval from the stock exchange; non-receipt of no-objection certificate from the debenture trustee; and non-receipt of approval from all the holders of non-convertible debt securities.
SEBI said the proposed framework will benefit listed entities because “... it will specify a well-defined framework for delisting of non-convertible debt securities by listed entities. It will augment the ease of doing business for listed entities proposing to delist their non-convertible debt securities.”