Lesson 8

SEBI (Delisting of Equity Shares) Regulations, 2021

8.1 Shubhamm Sukhlecha (CA, CS, LLM) INSPIRE ACADEMY

1INTRODUCTION
 Delisting denotes removal of the listing of the securities of a listed company
from the Stock Exchange.
 Delisting differs from suspension or withdrawal of admission to dealings of
listed securities, which is for a limited period.
 ‘Suspension’ of trading in securities means that no trade can take place in the
securities of the company suspended for a temporary period. Suspension is not
done at the instance of company but it is action taken by the Stock Exchanges
against the company, generally for non-compliance of listing conditions as
stipulated under SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015 (LODR Regulations).
 On the other hand, ‘delisting’ of securities means removal of the name of the
company from the stock exchange and no trade can take place in the securities
of the company delisted. Delisting of securities can be done either by company
voluntarily or by the stock exchange, compulsorily. Generally stock exchange,
in order to impose severe punishment on companies compulsorily delists
securities of any company, as a last resort. Compulsory delisting affects
reputation of company and to the extent of liquidity in trading those shares.
 Delisting of securities may be of two types, namely, voluntary delisting and
compulsory delisting. In the case of voluntary delisting, a listed company seeks
of its own volition for the delisting of its securities; while in case of compulsory
delisting, the Stock Exchange itself delists the securities of such Company.

AGENCIES INVOLVED IN DELISTING PROCESS AND THEIR ROLE

Agencies Functions
Merchant banker  Determine exit price.
 Makes public announcements.
 Determines biding centres.
 Appoints trading members.
 Determines and announces final trading price.
 Overseas settlement process.
Professionals  Intimates stock exchange
involved  Gets special resolution approved and filed at ROC.
 Determines exit price.
 Finalizes schedule of delisting.
 Overseas book building process.
 Opens escrow account.
 Prepare Public announcement.
 Determines and announces final trading price.
 Overseas settlement process.

8.2 Shubhamm Sukhlecha (CA, CS, LLM) INSPIRE ACADEMY

8.3 Shubhamm Sukhlecha (CA, CS, LLM) INSPIRE ACADEMY
Circumstances where delisting is not permissible
Pursuant to Buy back of equity shares by the company; or
Pursuant to Preferential allotment made by the company; or
Unless a period of three years has elapsed since the listing of that class of equity
shares; or
Instruments which are convertible into the same class of equity shares that are
sought to be delisted are outstanding;
Delisting of convertible securities.
No acquirer shall directly or indirectly employ the funds of the company to finance
an exit opportunity or an acquisition of shares made pursuant to be provided under
these regulation.
An acquirer shall not propose delisting of equity shares of a company, if the acquirer
had sold equity shares of the company during a period of six months prior to the
date of the initial public announcement.
No acquirer shall, directly or indirectly-
-Employ any device, scheme or artifice to defraud any shareholder or other person; or
-Engage in any transaction or practice that operates as a fraud or deceit upon any
shareholder or other person; or
-Engage in any act or practice that is fraudulent, deceptive or manipulative in
connection with such delisting.

VOLUNTARY DELISTING
 In voluntary delisting, a listed company decides on its own to permanently
remove its securities from a stock exchange.
 Chapter III of SEBI (Delisting of Shares) Regulations 2021 gives an option to the
listed company to either get itself delisted from all the recognised stock
exchanges where it is listed or only from some of the few stock exchanges and
continue to be listed on the exchange(s) having nation wide terminals.
 The difference between two options is that of giving ‘exit opportunity’ to the
shareholders. This is described as under:

Option I No ‘exit opportunity’ required to be given : In this option, if after the

proposed delisting from any one or more recognised stock exchanges, the
equity shares still remain listed on any recognised stock exchange which
has nation-wide trading terminals, no exit opportunity needs to be given
to the public shareholders. The procedure for such delisting of shares
can be through a board resolution, public notice and application to the
concerned exchange.
Option II Exit opportunity’ must be given : This option requires that if after the
proposed delisting, the equity shares do not remain listed on any
recognised stock exchange having nation-wide trading terminals, exit
opportunity shall be given to all the public shareholders holding the
equity shares sought to be delisted, through reverse book building.

8.4 Shubhamm Sukhlecha (CA, CS, LLM) INSPIRE ACADEMY

8.5 Shubhamm Sukhlecha (CA, CS, LLM) INSPIRE ACADEMY
So, Different modes of Voluntary Delisting
 Voluntary delisting from all the stock exchanges
 Voluntary delisting from few stock exchanges subject to listing at atleast
one stock exchange having nation wide terminals
 Voluntary delisting for Small Companies

1. Procedure for voluntary delisting from all the stock exchanges

Convene a Board Meeting

Intimation of Board Meeting to Stock Exchange
Special Resolution Through postal Ballot
(Note – The special resolution shall be acted upon if and only if the votes cast by
public shareholders in favour of the proposal, amount to at least two times the
number of votes cast by public shareholders against it.)
Appointment of Merchant Banker
Application for In Principal Approval to Concerned Stock Exchange
(along with Audit Report of the company for last 6 months)
In principal Approval by the Exchange
(The recognized stock exchange shall dispose off the Application of the in-Principal
approval complete in all respects within a period not exceeding five working days
from the date of receipt of such application.)
Public Announcement
The acquirer or promoters of the company within one working day from the date of
receipt of in- principle approval for delisting from the recognized stock exchange,
make a public announcement in at least one English national daily with wide
circulation, one Hindi national daily with wide circulation and one regional language
newspaper of the region where the concerned recognized stock exchange is located.
Dispatch of Letter of offer
The acquirer or promoter shall dispatch the letter of offer to the public shareholders
of equity shares, not later than two working days from the date of the public
announcement.
Opening of Escrow account
The acquirer or promoter open an escrow account and deposit therein the total
estimated amount of consideration calculated on the basis of floor price and number
of equity shares outstanding with public shareholders. The escrow account shall
consist of either cash deposited with a scheduled commercial bank, or a bank
guarantee in favour of the merchant banker, or a combination of both.
Duration of the Bidding period [Regulation13]
The date of opening of the offer shall not be later than seven working days from the
date of the public announcement and shall remain open for a period of five working
days during which the public shareholders may tender their bids.
Determination of Offer Price
The offer price shall be determined through book building process after fixation of
floor price and disclosure of the same in the public announcement and the letter of
offer.

8.6 Shubhamm Sukhlecha (CA, CS, LLM) INSPIRE ACADEMY

8.7 Shubhamm Sukhlecha (CA, CS, LLM) INSPIRE ACADEMY
Minimum number of equity shares to be acquired
An offer made shall be deemed to be successful only if, –
 the post offer promoter shareholding (along with the persons acting in concert
with the promoter) taken together with the shares accepted through eligible bids
at the final price determined, reaches 90% of the total issued shares of that
class excluding the following:
o shares which are held by a custodian and against which depository receipts
have been issued overseas; and
o shares held by a Trust set up for implementing an Employee Benefit scheme
under the SEBI (Share Based Employee Benefits) Regulations, 2014;
o shares held by inactive shareholders such as vanishing companies and
struck off companies, shares transferred to the IEPF’s account and shares
held in terms of regulation 39 (4) read with Schedule VI of the SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015
However, such shareholders shall be certified by the Peer Review Company
Secretary appointed by the Board of Directors of the company for due-diligence.

Explanation- The cut-off date for determination of inactive shareholders shall be the
date on which the in-principle approval of the Stock Exchange is received, which shall
be adequately disclosed in the public announcement
Payment of consideration
Final Application to Stock Exchange
Right of remaining shareholders to tender equity shares [Regulation 21]
Remaining public shareholder holding such equity shares may tender their shares
to the promoter upto a period of at least one year from the date of delisting and, in
such a case, the promoter shall accept the shares tendered at the same final price at
which the earlier acceptance of shares was made. The payment of consideration for
shares accepted shall be made out of the balance amount lying in the escrow
account.

2. Procedure for Voluntary delisting from few stock exchanges subject to listing
at atleast one stock exchange having nationwide terminals

Convene a Board Meeting

Intimation of Board Meeting to Stock Exchange
Public notice
The company to give a public notice of the proposed delisting in at least one English
national daily with wide circulation, one Hindi national daily with wide circulation
and one regional language newspaper of the region where the concerned recognized
stock exchanges are located.
Application to the concerned recognized stock exchange
Delisting order by the Exchange
Disclosure of fact of delisting in the first annual report post delisting

8.8 Shubhamm Sukhlecha (CA, CS, LLM) INSPIRE ACADEMY

8.9 Shubhamm Sukhlecha (CA, CS, LLM) INSPIRE ACADEMY
3. Voluntary Delisting by Small Companies
Small Company means
 A company has a paid up capital not exceeding ten crore rupees and net
worth not exceeding twenty five crore rupees as on the last date of
preceding financial year;
 The number of equity shares of the company traded on each such recognised
stock exchange during the twelve calendar months immediately preceding the
date of board meeting is less than ten per cent of the total number of shares of
such company.
 the company has not been suspended by any of the recognised stock exchanges
having nationwide trading terminals for any non-compliance in the preceding
one year;
Convene a Board Meeting
Special Resolution Through postal Ballot
(Note – The special resolution shall be acted upon if and only if the votes cast by
public shareholders in favour of the proposal amount to at least two times the
number of votes cast by public shareholders against it.)
Appointment of Merchant Banker
Determination of Exit Price
Application for In Principal Approval to Concerned Stock Exchange
(along with Audit Report of the company for last 6 months)
In principal Approval by the Exchange
Public notice
The company shall give a public notice of the proposed delisting in at least one
English national daily with wide circulation, one Hindi national daily with wide
circulation and one regional language newspaper of the region where the concerned
recognized stock exchanges are located.
Letter to all public Shareholders
contains the following particulars:
 Intention of delisting the shares.
 Exit price and justification of the exit price.
 Seeking the consent of the shareholders for delisting proposal.
Consent of the Public Shareholders
Atleast 90% of the public shareholders shall give their positive consent in writing for
the delisting of the shares and the shareholders shall have the option to surrender
their shares at the exit price determined or to remain the shareholders even if the
shares get delisted.
The process of inviting the positive consent and finalisation of the proposal for
delisting of shares to be made within 75 working days of dispatching the Letter to all
the shareholder .
Payment to shareholders
The promoters shall make the payment in cash to the public shareholders who have
tendered their shares within 15 working days from the date of expiry of 75 working
days as mentioned above.
Final Application to Stock Exchange
Delisting Order

8.10 Shubhamm Sukhlecha (CA, CS, LLM) INSPIRE ACADEMY

8.11 Shubhamm Sukhlecha (CA, CS, LLM) INSPIRE ACADEMY
COMPULSORY DELISTING
 Compulsory delisting refers to permanent removal of securities of a listed
company from a stock exchange as a penalizing measure at the behest of the
stock exchange for not making submissions/comply with various requirements
set out in the Listing agreement within the time frames prescribed.

Constitution of Panel
The decision regarding compulsory delisting shall be taken by a panel to be
constituted by the recognized stock exchange consisting of -
 Two directors of the recognized stock exchange (one of whom shall be a public
representative);
 One representative of an investor association recognised by the SEBI;
 One representative of the Ministry of Corporate Affairs or Registrar of
Companies; and
 The Executive Director or Secretary of the recognized stock exchange.
Public notice before delisting order [Regulation 22 (3)]
Before making a delisting order the recognized stock exchange shall give a notice in
one English national daily with wide circulation, one Hindi national newspaper with
wide circulation and one regional language newspaper of the region where the
concerned recognized stock exchange is located and shall also display such notice
on its trading systems and website.
Time period of making representation
(not less than fifteen working days from the notice)
Delisting Order by the Recognised Stock Exchange
Public notice after Delisting Order [Regulation 22 (6)]
Where the recognized stock exchange passes the delisting order, it shall, -
 Forthwith publish a notice in one English national daily with wide circulation,
one Hindi national newspaper with wide circulation and one regional
language newspaper of the region where the concerned recognized stock
exchange is located.
 Inform all other stock exchanges where the equity shares of the company are
listed, about such delisting and the surrounding circumstances.
Exit Price Determination by an Independent Valuer (Regulation 23 (1))
The recognized stock exchange shall form a panel of expert valuers from whom the
valuer or valuers shall be appointed.

8.12 Shubhamm Sukhlecha (CA, CS, LLM) INSPIRE ACADEMY

 Additional Topics ( Chapter 8)
Timelines for counter offer

Public announcement of counter offer by the acquirer

through stock exchange mechanism
Within 2 working days from the date of closure of
reverse book building bidding process -
1
Publication of counter offer public announcement in the within 4 working days from the closure of the re-
same newspapers where the detailed public announce- verse book building bidding process
ment was made

option to withdraw the shares tendered during the re- within 10 working days from the counter offer pub-
verse book building process lic announcement

Dispatch of “Letter of offer for counter offer within 4 working days from the closure of the re-
verse book building bidding process
Opening of counter offer bidding process not later than 7 working days from the date of pub-
lic announcement
closing of counter offer bidding process not later than 5 working days from the opening of
counter offer bidding process
public announcement of success/failure of counter offer not later than 5 working days of the closing of the
in the same newspaper in which detailed public an- counter offer bidding process
nouncement was made
payment of consideration not later than 10 working days from the closing of
counter offer or through the secondary market
settlement mechanism, as the case may be.

Cancellation of outstanding depository receipts

2 After delisting of equity shares from all the recognized stock exchanges having nationwide trading terminals, the
company shall be required to compulsorily cancel all the outstanding depository receipts issued overseas and
change them into the underlying equity shares in the home jurisdiction after termination of the depository receipts
program(s), within 1 year of such delisting.

GUIDELINES FOR COMPULSORY DELISTING

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1. The recognised stock exchange shall take into account the grounds prescribed in the rules made under the Securi-
ties Contracts (Regulation) Act, 1956 while compulsorily delisting the equity shares of the company.
2. The recognised stock exchange shall take all reasonable steps to trace the promoters of a company whose equity
shares are proposed to be delisted.
3. The recognised stock exchange shall consider the nature and extent of the alleged noncompliance by the company
and the number and percentage of public shareholders who may be affected by such non-compliance.
4. The recognised stock exchange shall take reasonable efforts to verify the status of compliance with the provisions of
the Companies Act, 2013 and the rules and regulations made thereunder, by the company with the office of the con-
cerned Registrar of Companies.
5. The names of the companies whose equity shares are proposed to be delisted and their promoters shall be displayed
in a separate section on the website of the recognised stock exchange. If delisted, the names shall be shifted to an-
other separate section on the website.
6. The recognised stock exchange shall in appropriate cases file prosecutions under relevant provisions of the Securities
Contracts (Regulation) Act, 1956 or any other law for the time being in force against identifiable promoters and di-
rectors of the company for the alleged non-compliances.
7. The recognised stock exchange shall, in appropriate cases, under the applicable provisions of the Companies Act,
2013, file a petition for winding up the company or make a request to the Registrar of Companies to strike off the
name of the company from the register
Delisting of Equity Shares of Companies Listed on Innovators Growth Platform after making an Initial Public Offer

4
A company whose equity shares are listed and traded on the innovators growth platform pursuant to an initial public
offer may be delisted from the innovators growth platform, if –
(a) such delisting is approved by the Board of Directors of the company;
(b) such delisting is approved by the shareholders of the company by a special resolution passed through postal ballot or
e-voting, after disclosure of all material facts in the explanatory statement sent to the shareholders in relation to
such resolution. However, the special resolution shall be acted upon only if the votes cast by the majority of public
shareholders are in favour of such exit proposal;
(c) delisting price is based on a floor price determined in terms of regulation 8 of Takeover Regulations, as may be appli-
cable, and an additional delisting premium justified by the acquirer;
(d) the post offer shareholding of the acquirer along with the persons acting in concert with it, taken together with the
shares tendered reaches seventy five per cent of the total issued shares of that class and at least fifty per cent shares
of the public shareholders as on date of the board meeting are tendered and accepted; and
(e) the recognised stock exchange, on which its shares are listed, approves of such delisting.

Question: The equity Shares of XYZ limited have been delisted from the stock exchange. When can an application be

5 made for listing of equity sahres of XYZ limited?

Answer: No application for listing shall be made in respect of equity shares of a company which have been delisted
under Chapter III (Voluntary Delisting) or under Chapter VI (Exit Opportunity in case delisting of equity shares of a
company from all the recognised stock exchanges), for a period of 3 years from the delisting and which have been del-
isted under Chapter V (Compulsory Delisting), for a period of 10 years from the delisting, except the following:
(a) whose equity shares have been delisted pursuant to a resolution plan under section 31 of the Insolvency Code;
(b) whose equity shares are listed and traded on the innovators growth platform pursuant to an initial public offer and
which is delisted from the said platform;
(c) whose equity shares have been delisted in terms of regulation 35 (Delisting of equity shares of small companies)