Firm’s funds can’t be used by promoters for delisting

It said that a company cannot be delisted unless three years have passed since the listing or any instruments convertible into shares are listed. Besides,delisting would not be allowed pursuant to a buyback offer or a preferential allotment made by the company.

For voluntary delisting,where promoters are desirous of delisting the company,Sebi said in a notification,all the public shareholders must be given an exit opportunity. However,if shares are to remain listed on any recognised national stock exchange despite delisting from one or more other bourses,the exit opportunity need not be required.

The regulator further said that promoters cannot appoint any of their associates as merchant banker for the open offer aimed at facilitating the exit opportunity and the offer price should be determined through a book building process. However,the promoters would not be bound to accept the price determined in this manner. Besides,the promoters need to open an escrow account and deposit therein the total estimated amount of consideration,before making the public announcement of the offer.

The promoters would need to despatch the letter of offer to all public shareholders not later than 45 days from the date of announcement. Besides,the date of opening of the offer should not be less than 55 days from the public announcement and the offer should remain open for a minimum of three days and a maximum of five days.

In a special provision for small companies,Sebi said shares of a company with up to Rs 1 crore paid up capital could be delisted from all bourses,if shares have not been traded for one year.

Besides,if a company has 300 or less public shareholders and the paid up value of these shares is not more than Rs 100 crore,the shares could be delisted. In these cases,the exit price offered to public shareholders should not be less than the price arrived at in consultation with the merchant banker.

For cases of compulsory delisting,Sebi said stock exchanges cannot seek a compulsory delisting unless the concerned company has been given a reasonable opportunity to be heard.

The exchange would have to appoint an independent valuer (chartered accountant) to determine the fair value of the shares and the promoters would have to acquire the shares from public shareholders by paying them the value such determined. In the case of a compulsory delisting,the company,its whole-time directors,promoters and the companies promoted by any of them should not directly or indirectly access the market or seek listing of any shares for 10 years.

New norms for delisting

• Promoters cannot “directly or indirectly” use company’s funds to fund purchase of shares to facilitate an exit opportunity for shareholders

• Company can only be delisted if promoter hikes stake to 90 pc or acquires at least 50 pc through share purchase aimed at giving shareholders an exit opportunity

• For voluntary delisting,shareholders must be given an exit opportunity

• Promoters cannot appoint an associate as merchant banker for the open offer,price should be determined through a book building process

• Promoters also need to open an escrow account and deposit total estimated amount of consideration before making a public announcement of the offer