Delisting means permanent removal of securities of a listed company from all or any of the recognised stock exchanges where such shares are listed. As a consequence of delisting, the securities of that company would no longer be tradable at that stock exchange.
Applicability of Delisting Regulation:
- Delisting of Equity Shares from all the stock exchanges or any STXs except securities listed without making a public issue, on the institutional trading platform of a recognised stock exchange and
- Delisting made pursuant to Scheme sanctioned by:
- BIFR under SICA Or
Delisting not permissible:
- Pursuant to Buyback
- Pursuant to Preferential Allotment.
- Unless 3 years have elapsed since the listing of shares on any Regional Stock Exchange.
- If any convertible securities are outstanding.
The Promoter shall not propose delisting of shares of Co. if any entity belonging to promoter or promoter group has sold shares during 6 months prior to date of Board meeting in which delisting proposal was approved.
Note: In case of Delisting from only some of the STXs condition No. 3 & 4 shall not apply.
Types of Delisting:
- Compulsory Delisting:
A recognized stock exchange may, by order, delist any equity shares of a company on any ground prescribed in the rules made under section 21 A of the Securities Contracts (Regulation) Act, 1956
- Voluntary Delisting:
In voluntary delisting, a listed company decides on its own to permanently remove its securities from a stock exchange if all public shareholders holding equity shares of the class which are sought to be delisted are given an exit opportunity.
Criteria to determine Offer Price:
- The offer price shall be determined through book building as specified in Schedule II, after fixation of floor price.
- The floor price shall be determined according to Reg. 8 of SEBI (SAST) Regulations, 2011
- As per Schedule II the final offer price shall be the price which takes the shareholding of promoters to 90% of the total issued shares
- If the final price is accepted, the promoter shall accept all tendered shares at the final price or at a lesser price.
- The promoter may fix the higher final price.
Note: Book Building Process not applicable where the settlement is carried out through stock exchange mechanism.
Delisting of Small Companies:
The Company wishes to delist its securities have to satisfy all below mentioned conditions:
- A Co. having a paid up capital of Rs. 10 Cr. Or less
- Net worth 25 cr. or less as on last date of preceding FY
- Shares traded during 12 calendar months immediately preceding the date of BM for delisting proposal is less than ten per cent of the total number of shares of such company
- Shares have not been suspended by any STX having nationwide terminals for any non-compliance in preceding 1 year.
Grounds of Delisting:
- Losses suffered by listed entity during the preceding three consecutive years leading to negative net worth
- Suspension of trading in the securities for more than 6 months
- Fall in public shareholding to below minimum threshold level
- Infrequent trading in the securities during the preceding 3 years
- Non trace ability of company, its promoters or directors
- Conviction of company, its promoters or directors for violation of SEBI Act, Depository Act and related Rules and Regulations leading to imposition of penalty of more than 1 crore or imprisonment for more than 3 years
SEBI has a power to grant exemption/relaxation for reasons recorded in writing, in the interest of the investor after considering all the facts and pass a reasoned order.
Other important points to be considered:
- No application for listing shall be made in respect of any equity shares
- Which have been delisted under Voluntary Delisting or Small Company Delisting – 5 Years from the delisting
- Which have been delisted under compulsory delisting- 10 Years from the delisting
- An application for listing made in respect of delisting equity shares shall be deemed as fresh listing and shall be subject to listing of equity shares of unlisted companies.
Refer: SECURITIES AND EXCHANGE BOARD OF INDIA (DELISTING OF EQUITY SHARES) REGULATIONS, 2009 (updated upto January 12, 2016)