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 With
the blessings of
BHAGWATI MAA
 Contents of CMSL - Vol. #1

S. No. Chapter

1 Depository System – Depository Act, 1996, Depository and DP Regulation, 2018

2 S.E.B.I. (Delisting of equity shares) Regulation, 2021

3 SEBI Takeover Code, 2011

4 SEBI (Prevention of Insider Trading) Regulation, 2015

5 SEBI Act, 1992

6 SCRA, 1956

7 Remaining Chapters are in Vol. #2.

HONESTY
WILL WELCOME TO
ALWAYS
REMAIN EXPERTS FAMILY
THE
BEST
POLICY.
 J.M.D. INTRODUCTION OF SECURITY LAW By - DEEPAK GAJRANI

1. 2

3.

5. 6.

(i)
 J.M.D. INTRODUCTION OF SECURITY LAW By - DEEPAK GAJRANI

Basic Introduction

7 8

9. 10.

(ii)
J.M.D. INTRODUCTION OF SECURITY LAW By - DEEPAK GAJRANI

(iii)
J.M.D. INTRODUCTION OF SECURITY LAW By - DEEPAK GAJRANI

(iv)
J.M.D. INTRODUCTION OF SECURITY LAW By - DEEPAK GAJRANI

(v)
J.M.D. INTRODUCTION OF SECURITY LAW By - DEEPAK GAJRANI

(vi)
J.M.D. INTRODUCTION OF SECURITY LAW By - DEEPAK GAJRANI

(vii)
J.M.D. INTRODUCTION OF SECURITY LAW By - DEEPAK GAJRANI

(viii)
J.M.D. INTRODUCTION OF SECURITY LAW By - DEEPAK GAJRANI

(ix)
J.M.D. INTRODUCTION OF SECURITY LAW By - DEEPAK GAJRANI

(x)
CHAPTER - 1
 JMD 1.1 Depository System

A kind of banking system in which the

Depository System securities are kept in electronic form
instead of CASH.
There are only “2” Depositories in India
Sponsors (Only a company can be established as Depository.) Sponsors
IDBI ICICI
NSDL – National Securities CDSL – Central Depository
NSE Depository Limited Services India limited &
UTI BSE

Sec. 4 of Depository and DP Sec. 4 of Depository and DP

Depository = have principal-agent, Depository = have principal- agent,
Act, 1996 Relationship Act, 1996 Relationship

Many DP Alankit India-bulls HDFC Exponential Zuari Syndicate

[Depository Assignment Bank Securities Investment Bank Ltd
Participants] Ltd ltd
Etc.
Abhipra Etc. ICICI Etc.
SHCIL
Securities Etc. Securities Etc.
Etc.

Q1. Who can act as a sponsor? Q2. Who can act as DP?

Ans:- As per Regulation 2(1)(b) of SEBI (Depository & DP) Ans: - As per Regulation 35, of SEBI (Depository
Regulation, 2018, a sponsor shall be any person or persons & DP) Regulation, 2018, a DP shall be – (i) PFI, (ii)
who, acting alone or in combination with another person proposes Banks, (iii) Foreign bank, (iv) S.F.C, (v) any other
to establish a depository under these regulations and holds fifteen
entity promoted by above four categories, (vi)
percent shareholding of the depository e.g. PFI, Bank, Stock
Brokers etc.
exchange (STX) etc. [Refer R. 21 and 22]

CS DEEPAK GAJRANI (Wizard of Interpretations)

JMD 1.2 Depository System

SEBI (Depository & DP) Regulations, 2018

REGISTRATION OF DEPOSITORY WITH SEBI

For establishing a depository, the sponsors shall file application to SEBI in Form A of SEBI
(Depository & DP) Regulations, 2018, and SEBI gives certificate of registration in Form
B.

Thereafter, the sponsors shall file application to SEBI in Form C for obtaining certificate of
commencement of business, & SEBI grants the same in Form D.

Both, Form B and D are perpetual permissions granted by SEBI & do not require any
renewal.

REGISTRATION OF DP WITH SEBI

Before starting its activity, DP shall file application to SEBI in Form E to obtain the
certificate of registration, & SEBI grants the same in Form F.

This Form F is valid for 5 years. Form F contains DP-ID No. issued by SEBI.

Depository Participants - [J. 06, 10, 12]

SEBI regulations provide various categories of market participants who are eligible to
become depository participants. These categories already have a well-established customer
interface network and are, therefore, the ideal choice to become the agents of a depository.

These categories are : Public Financial Institutions; Scheduled Banks; RBI approved
foreign banks operating in India; State Financial Corporations; Certified custodians of
securities; Clearing corporations of stock exchanges, Registered stock brokers, Non-
Banking Financial Companies; Registrars and transfer agents (RTA).

Depository Participant act as an agent of the depository and its role and functions includes opening and
maintaining of demat account of the investor; processing dematerialsation and rematerialization of
securities; to make debit/credit in the demat accounts of the investors/ his clients as per instructions given
by the account holder; providing statements of accounts to the investors; and facilitating pledge or
hypothecation of securities held in demat account, transmission requests/nomination, acts as an customer
interface of Depository, functions like Securities Bank, instant transfer on pay-out, enables off market
transfers, settles trades in electronic segment.

CS DEEPAK GAJRANI (WIZARD OF INTERPRETATIONS)

 JMD 1.3 Depository System

DEPOSITORY SYSTEM
Depository is a kind of bank in which shares and other securities are kept in the
dematerialized form (i.e. non-physical form or electronic form), instead of cash.

There are only two depositories in India, namely – 1. NSDL - National Securities
Depository Limited; and 2. CDSL - Central Depository Services (India) Limited.

Both the depositories operate through various “Depository Participants [DPs]”.

Depository and its Depository Participants [DPs] have “principal-agent relationship”.

Example for understanding

(Registered owners) – As Trustees

Issuer NSDL / CDSL

company 4. Issuer company enters only
two names in its register of
(ABC Ltd) members – NSDL/CDSL. Step 1 - Demat a/c
holder signs an
D. P. agreement with
depository (through
DP) at the time of
2. Demat a/c opening demat
holders file account.
APPLICATION to
issuer company.

43 Lacs investors
3. Issuer company
(Allottees) Beneficial
makes allotment to owners
Demat a/c holders Demat account (B.O.)
holders

Step 5 – NSDL/CDSL maintain the record/list of 43 lacs beneficial

owners.
---*---

Section 89 of the Companies Act, 2013 provides that it is compulsory to write the
name of beneficial owner (if any) in the register of members along with the name of
registered member/ostensible owner. [Otherwise, fine up to Rs. 1000 per day.]

On the other side, section 9(2) of the Depository Act, 1996 provides that the name of
beneficial owner (i.e. actual allottees) shall not be written in the register of members
along with the name of registered member (i.e. Depository - NSDL or CDSL).

CS DEEPAK GAJRANI (Wizard of Interpretations)

 JMD 1.4 Depository System

HARMONIOUS INTERPRETATION - If the shares are in physical form – then

follow Section 89 of the Companies Act, 2013. But if, the shares are in demat form -
then follow Section 9 of the Depository Act, 1996.

---*---

OPENING OF DEMAT ACCOUNT AND PROCESS OF

DEMATERIALIZATION

Step 1 Investor shall have an income tax PAN number, and AADHAR.

Step 2 Investor shall open a DEMAT ACCOUNT with DP with zero balance.
For this purpose, he shall fill up an “account opening form” which
contains an agreement (on stamp paper) between client-investor and the
depository (NSDL/CDSL) through the DP.

Step 3 Investor can choose any DP in his discretion. (Investor has to pay account
opening charges and annual maintenance charges to DP for maintaining
the demat account.)

Step 4 DP issues DIS (Delivery-instruction-slips) Book to the investor. Investor

has to pay charges for DIS (Delivery-instruction-slips) Book.

Step 5 Thereafter, client-investor has to surrender his physical share certificates

etc. (stamped with words – surrendered for demat) to DP; and get them
converted into demat form as per procedure given below –

CS DEEPAK GAJRANI (Wizard of Interpretations)

 JMD 1.5 Depository System

PROCESS OF DEMATERIALIZATION – An Example.

(Conversion of shares from physical form in to the electronic form)

Step 1 – Client surrenders his physical

shares to DP* alongwith DRF (Demat
request form).
Step 2
On-line intimation

Client-
DP Depository
Step 6
investor Depository Depository credits
NSDL
Step 7 – DP intimates participant the shares in the or
CLIENT about the demat acc. CDSL
credit of shares in his & informs DP
demat account.
Step 3B
Step 3A
On-line request Step 5
Transfer share
certificate Company
communicates the
genuineness to
Depository
RTA OF
CONCERNED
COMPANY

# Step 4 – Company will check the genuineness of the share certificate.

---*---

CS DEEPAK GAJRANI (Wizard of Interpretations)

 JMD 1.6 Depository System

PROCESS OF REMATERIALIZATION – An Example.

(Conversion of shares from electronic form to the physical form.)

Step 2
DP freezes*
Step 1 – Client requests for
rematerialisation. (RRF)
shares in Demat Step 3 -
account DP forwards
request
Depository
Client-
DP
investor Step 6 NSDL
Depository Depository debits or
participant the account of
CDSL
client, &
Step 7 – DP intimates
informs DP.
client about the
same.

Step 4A- Communicates Step 5-B

request to company
Step 4B Company
DP forwards communicates
RRF information about
issuance of share
certificate
RTA OF
Step 5A CONCERNED
Company issues COMPANY
share certificate

#NOTE - Time gap between step 4A and step 5A shall not exceed 30 days.

---*---

Distinguish between - Dematerialization and rematerialisation –[J. 06; D. 05]

Dematerialization is a process of either issue of dematerialized securities or
conversion of physical share certificates into distinctive numbers. In process of
conversion, the physical share certificates from the investor are taken back by the
Company and an equivalent number of securities are credited his account opened with
a depository participant in electronic form at the request of the investor.
Rematerialisation - Holding of shares in Dematerialized form in the hands of
investors is optional and an investor can still hold shares in physical form. Therefore
the investor who has dematerialized shares with him can send a Rematerialisation
Request Form to DP for conversion of his shares to the physical share certificates.
This process of such conversion is known as rematerialisation.
---*---

CS DEEPAK GAJRANI (Wizard of Interpretations)

 JMD 1.7 Depository System

FAQs - DEPOSITORY SYSTEM

1. What is a depository?
A depository is an organisation which holds securities of investors in electronic form
at the request of the investors through a registered Depository DP. It also provides
services related to transactions in securities.

2. How is a depository similar to a bank?

It can be compared with a bank, which holds the funds for depositors. A Bank –
Depository Analogy is given in the following table:

BANK - DEPOSITORY – AN ANALOGY

BANK DEPOSITORY
Holds funds in an account Hold securities in an account
Transfers funds between accounts on Transfers securities between accounts on the
the instruction of the account holder instruction of the account holder
Facilitates transfer without having to Facilitates transfer of ownership without
handle money having to handle securities
Facilitates safekeeping of money Facilitates safekeeping of securities

3. How many Depositories are registered with SEBI?

At present there are only two Depositories in India - National Securities Depository
Limited (NSDL) and Central Depository Services (I) Limited (CDSL).

4. Who is a depository DP?

A Depository DP (DP) is an agent of the depository through which it interfaces with
the investor. A DP can offer depository services only after it gets proper registration
from SEBI. Banking services can be availed through a branch whereas depository
services can be availed through a DP.

5. What is the minimum net worth required for a depository?

The minimum net worth stipulated by SEBI for a depository is Rs. 100 crore.

6. How many Depository DPs are registered with SEBI?

Total 865 DPs are registered with SEBI. [275 of NSDL + 590 of CDSL]

7. Is it compulsory for every investor to open a depository account to trade in the

capital market?
As per the available statistics at BSE and NSE, 99.9% settlement takes place in demat
mode only. Therefore, in view of the convenience in settlement through demat mode,
it is ADVISABLE to have a beneficiary owner (BO) account [DEMAT A/C] to trade
at STX.

CS DEEPAK GAJRANI (Wizard of Interpretations)

 JMD 1.8 Depository System

Objectives of Depository Act, 1996

Depositories Act, 1996 aims at providing : -

– A legal basis for establishment of depositories to conduct the task of maintenance of

ownership records and effecting changes in ownership records through book entry;
– Dematerilisation of securities in the depositories mode as well as giving option to an
investor to choose between holding securities in physical mode and holding securities
in a dematerialized form in a depository;
– Making the securities fungible;
– Making the shares, debentures and any interest thereon of a public limited company
freely transferable; and
– Exempting all transfers of shares within a depository from stamp duty

What are the benefits of DEMATERIALISATION? - [J. 09; D. 09 exams]

The benefits are enumerated below:-

· A safe and convenient way to hold securities;

· Immediate transfer of securities;
· Elimination of risks associated with physical certificates such as bad delivery, fake
securities, delays, thefts etc.;
· Reduction in paperwork involved in transfer of securities, because there is no share
t/r deed;
· No odd lot problem in case of demat shares, as even one share can be sold in demat;
· Nomination facility [Sec. 72 of Companies Act, 2013];
· Change in address recorded with DP gets registered with all companies in which
investor holds securities electronically, eliminating the need to correspond with each
of them separately;
· Transmission of securities is done by DP eliminating correspondence with
companies;
· Automatic credit into demat account of shares, arising out of bonus/split
/consolidation etc.
· Holding investments in equity and debt instruments in a single account.

The legal framework

The legal framework for a depository system has been laid down by the
Depositories Act, 1996 and is regulated by SEBI. The depository business in India
is regulated by –
– The Depositories Act, 1996
– The SEBI (Depositories and Participants) Regulations, 2018

CS DEEPAK GAJRANI (Wizard of Interpretations)

 JMD 1.9 Depository System

– Bye-laws of Depository
– Business Rules of Depository.
Apart from the above, Depositories are also governed by certain provisions of:
– The Companies Act, 2013
– The Indian Stamp Act, 1899
– Securities and Exchange Board of India Act, 1992
– Securities Contracts (Regulation) Act, 1956
– Benami Transaction (Prohibition) Act, 1988
– Income Tax Act, 1961
– Bankers’ Books Evidence Act, 1891

ELIGIBILITY CRITERIA FOR DEPOSITORY

Any company or other institution to be eligible to provide depository services
must :-
- Have net worth of Rs. 100 Crores or more,
– be formed and registered as a company under the Companies Act, 2013.
– be registered with SEBI as a depository under SEBI Act, 1992.
– has framed bye-laws with the previous approval of SEBI.
– has one or more participants to render depository services on its behalf.
– has adequate systems and safeguards to prevent manipulation of records and
transactions to the satisfaction of SEBI.
– complies with Depositories Act, 1996 and SEBI (Depositories and Participants)
Regulations, 2018.
– meets eligibility criteria in terms of constitution, network, etc.
Account opening

How can services of a depository be availed?

To avail the services of a depository an investor is required to open an account with a depository
DP of any depository.

How can one open an account?

First an investor has to approach a DP and fill up an account opening form. The account opening
form must be supported by copies of any one of the approved documents to serve as proof of
identity (POI) and proof of address (POA) as specified by SEBI.

CS DEEPAK GAJRANI (Wizard of Interpretations)

JMD 1.10 Depository System

All applicants should carry original documents for verification by an authorized official of the
depository DP, under his signature.

Further, the investor has to sign an agreement with DP in a depository prescribed standard format,
which details rights and duties of investor and DP. DP should provide the investor with a copy of
the agreement and schedule of charges for their future reference. The DP will open the account in
the system and give an account number, which is also called BO ID (Beneficiary owner
Identification number).

The DP may revise the charges by giving 30 days notice in advance. SEBI has rationalised the
cost structure for dematerialisation by removing account opening charges, transaction charges for
credit of securities, and custody charges vide circular dated January 28, 2005.

Why should an investor give his bank account details at the time of account opening?

It is for the protection of investor’s interest. The bank account number will be mentioned on the
interest or dividend warrant, so that such warrant cannot be encashed by any one else. Further,
cash corporate benefits such as dividend, interest will be credited to the investors account directly
through the ECS (Electronic Clearing Service) facility, wherever available, by the company.

Can an investor change the details of his bank account?

Yes. Since in the depository system monetary benefits on the security balances are paid as per the
bank account details provided by the investor at the time of account opening, the investor must
ensure that any subsequent change in bank account details is informed to the DP.

What should be done if the address of the investor changes?

Investor should immediately inform his/her DP, who in turn will update the records. This will
obviate the need of informing different companies.

Can multiple accounts be opened?

Yes. An investor can open more than one account in the same name with the same DP and also
with different DPs.

Does the investor have to keep any minimum balance of securities in his/her accounts?
No.

Is it necessary to have account with the same DP as broker has?

No. Depository / DP can be chosen by investor as per convenience irrespective of the DP of the
broker.

Can an investor open a single account for securities owned in different ownership patterns
such as securities owned individually and securities owned jointly with others?
No. The demat account must be opened in the same ownership pattern in which the securities are
held in the physical form. e. g. if one share certificate is in the individual name and another
certificate is jointly with somebody, two different accounts would have to be opened.

What is required to be done if one has physical certificates with the same combination of
names, but the sequence of names is different i.e. some certificates with ‘A’ as first holder and
‘B’ as second holder and other set of certificates with ‘B’ as first holder and ‘A’ as second

CS DEEPAK GAJRANI (Wizard of Interpretations)

 JMD 1.11 Depository System

holder?

In this case the investor may open only one account with ‘A’ & ‘B’ as the account holders and
lodge the security certificates with different order of names for dematerialisation in the same
account. An additional form called "Transposition cum Demat" form will have to be filled in.
This would help you to effect change in the order of names as well as dematerialise the securities.

What is an ISIN? - ISIN (International Securities Identification Number) is a

unique identification number for a security. The ISIN standard is used worldwide to
identify specific securities such as bonds, stocks (common and preferred), futures,
warrant, rights, trusts, commercial paper and options. ISINs are assigned to securities
to facilitate clearing and settlement procedures. An ISIN is a 12-digit alphanumeric
code that uniquely identifies a specific security. It is issued by the National Numbering
Agency, present in each respective country. It is structured in a way that it includes the
country code where the headquarters of the issuing company are present, the specific
security identification number, and a check digit.

ROLE OF DEPOSITORY – NSDL / CDSL

i. Dematerialisation i.e., converting physical certificates to electronic form

ii. Rematerialisation i.e., conversion of securities in demat form into physical
certificates
iii. Facilitating repurchase / redemption of units of mutual funds
iv. Electronic settlement of trades in stock exchanges
v. Pledging/hypothecation of dematerialised securities against loan
vi. Electronic credit of securities allotted in public issues, rights issue
vii. Receipt of non-cash corporate benefits such as bonus, in electronic form
viii. Freezing of demat accounts, so that the debits from the account are not permitted
ix. Nomination facility for demat accounts
x. Services related to change of address
xi. Effecting transmission of securities
xii. Other facilities viz. holding debt instruments in the same account, availing
stock lending/borrowing facility, etc.

CS DEEPAK GAJRANI (Wizard of Interpretations)

JMD 1.12 Depository System

Basic Concepts from Depository Act, 1996

Sec.8 - Option to receive certificate or to hold securities with depository

Where a person holds a security with a depository, the issuer shall intimate such
depository the details of allotment (i.e. list of allottees) of the security, and on receipt
of such information the depository shall enter in its records the name of the allottee as
the beneficial owner of that security. [Refer the diagram on page 1.3]

Section 29 of Companies Act, 2013 - Every public issue shall be in the demat form
only. (Also Refer rule 9 and 9A of Companies (Share Capital and Debentures), Rules
2014.

Sec.9 - Securities in depositories to be in fungible form

(1) All securities held by a depository shall be dematerialised and shall be in a

fungible form, i.e. without any serial number.

(2) Nothing contained in sections 89 of Companies Act, 2013 shall apply to the
securities held by a depository on behalf of the beneficial owners. [Refer Pg 1.3]

FUNGIBILITY - [D. 08]

Fungibility means shares kept in the demat account in the electronic form DO NOT
have any serial number / distinctive number.

If the demat account holder wants to rematerialize his shares and wants to obtain the
physical share certificate then the distinctive number of shares in such new share
certificate issued to him may be different from distinctive number of those shares
which were originally surrendered by him to DP for dematerialization.

Investor loses the right to obtain the exact old certificate which he surrendered at the
time of entry into depository.

It is like withdrawing money from the bank without bothering about the distinctive
numbers of the currency notes.
---*---

CS DEEPAK GAJRANI (Wizard of Interpretations)

JMD 1.13 Depository System

Q. State briefly whether electronic-holding of securities can be converted into

physical form [Remat]. [J. 08 exams]

A. SEBI ICDR Regulations, 2009 prescribes that no company can make a public or
rights issue or an offer for sale unless the company enters into an agreement with
a depository for dematerialization of securities already issued or proposed to be
issued to the public or existing shareholders.
Thus, as per SEBI ICDR Regulations, 2009 dematerialization of securities is
compulsory for making the issue of securities.
However, after getting the shares allotted it is the DISCRETION of the shareholder
to either keep in dematerialized form or rematerialize it in physical form.
If one wishes to get back his securities in the physical from one has to fill in the
remat request form (RRF) to his DP for rematerialization of the balance in his
securities account.
CREATION OF PLEDGE
Regulation 79 of SEBI (Depository and Participants) Regulations, 2018 deals with the
creation of pledge or hypothecation of securities held in demat mode.

For the purpose of creating pledge the Depository Participant (DP) should ensure
that-
a) an application is submitted by the client to the depository through the
Participant;
b) note of pledge should be made in the records only after ensuring that sufficient
security balances are available for pledge;
c) DP should confirm creation of pledge to the Depository within 15 days of
receipt of the application;
d) DP should inform the pledger as well as pledgee about the creation of pledge;
e) if the DP does not create the pledge, an intimation to this effect should be sent
to the clients along with reasons.

The entry of pledge so made can also be cancelled by the depository on an

application made to it by the pledger or pledgee through the participant and intimation
to each of them shall be made in this regard by the depository.
Q. Depository system is a boon to capital market and investors both. – [D. 08]

Ans. Depositories gave a new dimension and a new scope for conducting transactions
in capital market - primary as well as secondary, in a more efficient and effective
manner, in a paperless form on an electronic book entry basis. It provided electronic
solution to the problems of bad deliveries and long settlement cycles.

CS DEEPAK GAJRANI (Wizard of Interpretations)

JMD 1.14 Depository System

The main benefits of a depository is to minimize the paper work involved with the
owner, trading and transfer of securities. In the depository system, the ownership and
transfer of securities takes place by means of electronic book entries. At the outset,
this system rids the capital market of the dangers related to handling of securities
through dematerialization which results in advantages:

 Elimination of bad deliveries - In the depository environment, once the holdings

of an investor are dematerialised, the question of bad delivery does not arise i.e.
they cannot be held “under objection”. In the physical environment, buyer of
shares was required to take the risk of transfer and face uncertainty of the quality
of assets purchased, while in a depository environment good money certainly
begets good quality of assets.
 Elimination of all risks associated with physical certificates - Dealing in physical
securities have associated security risks of theft, mutilation of certificates, loss of
certificates during movements through and from the registrars, thus exposing the
investors to the cost of obtaining duplicate certificates, loss of certificates and
advertisements, etc. This problem does not arise in the depository environment.
 Immediate transfer and registration of securities - In the depository environment,
once the securities are credited to the investor’s account on pay out, he becomes
the legal owner of the securities. There is no further need to send it to the
company’s registrar for registration. If securities are purchased in the physical
environment, the investor has to send it to the company’s Share Transfer Agent so
that the change of ownership can be registered. This process usually takes around
three to four months and is rarely completed within the statutory framework of
two months thus exposing the investor to opportunity cost of delay in transfer and
to risk of loss in transit. To overcome this, the normally accepted practice is to
hold the securities in street names i.e. not to register the change of ownership.
However, if the investors miss a book closure the securities are not good for
delivery and the investor would also stand to lose their corporate entitlements.
 Faster disbursement of non-cash corporate benefits like rights, bonus, etc. –
Depository system provides for direct credit of non-cash corporate entitlements to
an investors account, thereby ensuring faster disbursement and avoiding risk of
loss of certificates in transit.
 Reduction in brokerage by many brokers for trading in dematerialized securities –
Brokers provide this benefit to investors as dealing in dematerialized securities
reduces their back office cost of handling paper and also eliminates the risk of
being the introducing broker.
 Reduction in handling of huge volumes of paper and periodic status reports to
investors on their holdings and transactions, leading to better controls.

CS DEEPAK GAJRANI (Wizard of Interpretations)

JMD 1.15 Depository System

 Elimination of problems related to change of address of investor, transmission,

etc. – In case of change of address or transmission of demat shares, investors are
saved from undergoing the entire change procedure with each company or
registrar. Investors have to only inform their DP with all relevant documents and
the required changes are effected in the database of all the companies, where the
investor is a registered holder of securities.
 Elimination of problems related to selling securities on behalf of a minor – A natural
guardian is not required to take court approval for selling demat securities on
behalf of a minor.

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JMD 1.16 Depository System

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JMD 1.17 Depository System

RECONCILIATION - Regulation 75
Regulation 75 of SEBI (Depositories and Participants) Regulations, 2018
provides that the issuer or its agent shall reconcile the records of dematerialised
securities with all the securities issued by the issuer, on a daily basis, where the
State or the Central Government is the issuer of Government securities, the
depository shall, on a daily basis, reconcile the records of the dematerialised
securities.

Audit of issuer companies – Regulation 76

(1) Every issuer shall submit audit report on a quarterly basis, starting from
September 30, 2003, to the concerned stock exchanges audited by a qualified
Chartered Accountant or a practicing Company Secretary or Practicing Cost
Accountant for the purposes of reconciliation of the total issued capital, listed
capital and capital held by depositories in dematerialized form, the details of
changes in share capital during the quarter and the in-principle approval
obtained by the issuer from all the stock exchanges where it is listed in respect
of such further issued capital.

(2) The audit report shall also give the updated status of the register of members
of the issuer and confirm that securities have been dematerialized as per
requests within 21 days from the date of receipt of requests by the issuer and
where the dematerialization has not been effected within the said stipulated
period, the report shall disclose the reasons for such delay.

(3) The issuer shall immediately bring to the notice of the depositories and the
stock exchanges, any difference observed in its issued, listed, and the capital
held by depositories in dematerialised form.

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JMD 1.18 Depository System

AUDIT of DPs -

As per Circulars issued by NSDL and CDSL, two types of audits of DPs have to
be conducted and then audit reports shall be filed / submitted to NSDL or CDSL,
as the case may be, as discussed below -

---*---

INTERNAL AUDIT

Circular No. NSDL/SG/II/010/99 Date: 26 March, 1999

Every DP shall ensure that an INTERNAL AUDIT in respect of the operations of

the Depository is conducted at intervals of not more than three 6 months by a
qualified CA or a CS or CMA holding a certificate of Practice and a copy of the
internal audit report shall be furnished to the Depository. [Now, 6 months w.e.f.
17 Oct 2008].
Objective of internal audit is to check the capability of the infrastructure of a DP to
ascertain whether DP is capable to continue its business activity, having regard to the
interest of investors.

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JMD 1.19 Depository System

Internal audit of operations of depository participants –

While undertaking the internal audit function of a DP, Company Secretary in practice
shall –

1. Ensure that the operations of DP are in compliance with the legal requirements
of the Depositories Act, 1996, SEBI (Depositories & Participants) Regulations,
2018, bye laws & rules of depositories, and agreement with the depository.
2. Ensure that DP System is managed and maintained in a manner that there is no
threat to continuity of business activity.
3. Ensure that integrity of data processing system is maintained at all times; and
methods are put in place to ensure that records are not lost, destroyed or
tampered with.
4. Ensure that in the event of loss or destruction of data, sufficient back up of
records is available at all times.
5. Ensure that the capacity of computer system, staff strength and internal
procedures are in harmony with the business requirement of DP’s business.
6. Ensure that business operations of the DP are conducted in a manner that all the
foreseeable risks are addressed to with appropriate internal control
mechanism.
7. Ensure that operations are conducted in a manner that there is no loss of revenue,
and receivables are received promptly.

CONCURRENT AUDIT - Account opening, Control and Verification of

Delivery Instruction Slips [J. 08 Exams]

Objective of concurrent audit is to check (on the daily basis) – 1. New demat
accounts opened during the day; 2. DIS books issued on daily basis and the
maintenance of records of the same; and 3. stop delivery instructions received from
clients, 4. Dormant accounts.

All DPs are advised that w.e.f. August 1, 2006, the process of demat account
opening, control and verification of Delivery Instruction Slips (DIS) shall be subject
to Concurrent Audit.

Concurrent audit includes following areas:-

i) Account opening,
ii) Delivery Instruction Slip (DIS) book issuance,
iii) Execution of DIS,
iv) Power of Attorney modifications,
v) Account closure requests initiated by Participant,

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JMD 1.20 Depository System

vi) Investor grievances received by Participant,

vii) Providing Transaction Statements to clearing members (process level)
viii) KYC reconfirmation intimated by NSDL and initiated by Participant,
ix) Modification in the name of client (including minor correction in name),
x) Client data modifications,
xi) Freezes due to statutory orders,
xii) Pledge & Hypothecation,
xiii) Margin Pledge / Re-Pledge,
xiv) Online account closure by client ,
xv) etc.

Power of A depository to make bye-laws

A depository shall, with the previous approval of SEBI, make bye-laws consistent with
the provisions of this Act and the regulations. In particular, and without prejudice to the
generality of the foregoing power, such bye-laws shall provide for -
i. the eligibility criteria for admission and removal of securities in the depository;
ii. the conditions subject to which the securities shall be dealt with;
iii. the eligibility criteria for admission of any person as a participant;
iv. the manner and procedure for dematerialisation of securities;
v. the procedure for transactions within the depository;
vi. the manner in which securities shall be dealt with or withdrawn from a depository;
vii. the procedure for ensuring safeguards to protect the interests of participants and
beneficial owners;
viii. the conditions of admission into and withdrawal from a participant by a beneficial
owner;
ix. the procedure for conveying information to the participants and beneficial
owners on dividend declaration, shareholder meetings and other matters of
interest to the beneficial owners;
x. the manner of distribution of dividends, interest and monetary benefits
received from the company among beneficial owners;
xi. the manner of creating pledge or hypothecation in respect of securities held with a
depository;
xii. inter se rights and obligations among the depository, issuer, participants, and
beneficial owners;
(ICOS) DEEPAK GAJRANI
JMD 1.21 Depository System

xiii. the manner and the periodicity of furnishing information to the Board, issuer and
other persons;
xiv. the procedure for resolving disputes involving depository, issuer, company or a
beneficial owner;
xv. the procedure for proceeding against the participant committing breach of the
regulations and provisions for suspension and expulsion of participants from the
depository and cancellation of agreements entered with the depository;
xvi. the internal control standards including procedure for auditing, reviewing and
monitoring.
Where the SEBI considers it expedient so to do, it may, by order in writing, direct a
depository to make any bye-laws or to amend or revoke any bye-laws already made
within such period as it may specify in this behalf.
If the depository fails or neglects to comply with such order within the specified period,
the SEBI may make the byelaws or amend or revoke the bye-laws made either in the
form specified in the order or with such modifications thereof as the SEBI thinks fit.

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JMD 1.22 Depository Act

FEW MORE PROVISIONS OF DEPOSITORY ACT, 1996

DEFINITIONS

Beneficial Owner means a person whose name is recorded as beneficial owner in the
records of a depository.

Depository means a company formed and registered under the Companies Act, 1956
and which has been granted a certificate of registration under sub-section (1A) of
section 12 of the SEBI Act, 1992.

DP means a person registered as such under sub-section (1A) of section 12 of the

SEBI Act, 1992.

Registered Owner means a depository [NSDL/CDSL] whose name is entered as

registered owner in the register of the issuer company.

Sec. 3 - Certificate of commencement of business

(1) No depository shall act as a depository unless it obtains a certificate of

commencement of business from SEBI. [Form D]

(2) A certificate shall be in such form as may be specified by the regulations.

(3) SEBI shall not grant a certificate unless it is satisfied that the depository has
adequate systems and safeguards to prevent manipulation of records and transactions;

Provided that no certificate shall be refused unless the depository concerned has been
given a reasonable opportunity of being heard. [ROOBH]

RIGHTS AND OBLIGATIONS OF DEPOSITORIES, DP, ISSUERS AND

BENEFICIAL OWNERS

Sec. 4 - Agreement between depository and DP

(1) A depository shall enter into an agreement with one or more DPs as its AGENT.
(2) Every agreement shall be in such form as may be specified by the bye-laws.

Sec.5. - Services of depository

Any person (investor), through a DP, may enter into an agreement, in such form as
may be specified by the bye-laws, with any depository for availing its services.
SUCH AGREEMENT IS INSIDE THE DEMAT ACCOUNT OPENING FORM.

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JMD 1.23 Depository Act

Sec.6 - Surrender of certificate of security [Dematerialization]

(1) Any person who has entered into an agreement under section 5 SHALL
SURRENDER the certificate of security, for which he seeks to avail the services
of a depository, TO THE ISSUER in such manner as may be specified by the
regulations.

(2) On receipt of certificate of security, the issuer shall cancel the certificate of
security and substitute in its records the name of the depository as a registered
owner in respect of that security and inform the depository accordingly.

(3) A depository shall, on receipt of information, enter the name of the person in its
records, as the beneficial owner.

Sec.2(55) of Companies Act, 2013 - Definition of Member

(1) The subscribers of the memorandum (MOA) of a company shall be deemed to

have agreed to become members of a company, and on its registration, shall be
entered as members in its register of members,

(2) Every other person who agrees in writing to become a member of a company
and whose name is entered in its register of members,

(3) Every person holding share capital of a company and whose name is entered as
beneficial owner in the records of the depository shall be deemed to be a
member of the concerned company.

Sec.7 - Registration of transfer of securities with depository

(1) Every depository shall, on receipt of intimation from a DP, register the transfer of
security in the name of the transferee. (Depository will credit the demat account
of buyer and debit the demat account of seller).

(2) If a beneficial owner or a transferee of any security seeks to have custody of such
security, the depository shall inform the issuer accordingly. (REMAT)

Rights of depositories and beneficial owner - Sec. 10

(1) Notwithstanding anything contained in any other law for the time being in
force, a depository shall be deemed to be the registered owner for the purposes
of effecting transfer of ownership of security on behalf of a beneficial owner.
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JMD 1.24 Depository Act

(2) Save as otherwise provided in sub-section (1), the depository as a registered

owner shall not have any voting rights or any other rights in respect of
securities held by it.

(3) The beneficial owner shall be entitled to all the rights and benefits and be
subjected to all the liabilities in respect of his securities held by a depository.

Register of beneficial owner - Sec. 11

Every depository shall maintain a register and an index of beneficial owners in the
manner provided in sections 88 of the Companies Act, 2013.

Pledge or hypothecation of securities held in a depository - Sec. 12

(1) Subject to such regulations and bye-laws, as may be made in this behalf, a BO
may with the previous approval of the depository create a pledge or
hypothecation in respect of a security owned by him through a depository.

(2) Every BO shall give intimation of such pledge or hypothecation to the

depository and such depository shall thereupon make entries in its records
accordingly.

(3) Any entry in the records of a depository under sub-section (2) shall be
evidence of a pledge or hypothecation.

Furnishing of information and records by depository and issuer – Sec. 13

(1) Every depository shall furnish to the issuer information about the transfer of
securities in the name of beneficial owners at such intervals and in such manner
as may be specified by the bye-laws.

(2) Every issuer shall make available to the depository copies of the relevant
records in respect of securities held by such depository.

Sec.14 - Option to opt out in respect of any security [Rematerilisation]

(1) If a beneficial owner seeks to opt out of a depository in respect of any security
he shall inform the depository accordingly.

(2) The depository shall on receipt of intimation under sub-section (1) make
appropriate entries in its records and shall inform the issuer.

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JMD 1.25 Depository Act

(3) Every issuer shall, within 30 days of the receipt of intimation from the
depository and on fulfilment of such conditions and on payment of such fees as
may be specified by the regulations, issue the certificate of securities to the
beneficial owner or the transferee, as the case may be.

Act 18 of 1891 to apply to depositories Sec. 15

The Bankers’ Books Evidence Act, 1891 shall apply in relation to a depository as
if it were a bank as defined in section 2 of that Act.

Depositories to indemnify loss in certain cases Sec. 16

(1) Without prejudice to the provisions of any other law for the time being in
force, any loss caused to the beneficial owner due to the negligence of the
depository or the participant, the depository shall indemnify such beneficial
owner.

(2) Where the loss due to the negligence of the participant under sub-section (1) is
indemnified by the depository, the depository shall have the right to recover
the same from such participant.

Rights and obligations of depositories, etc. Sec. 17

(1) Subject to the provisions of this Act, the rights and obligations of the
depositories, participants and the issuers whose securities are dealt with by a
depository shall be specified by the regulations.

(2) The eligibility criteria for admission of securities into the depository shall be
specified by the regulations.

..Powers of SEBI – Sec. 18, 19 and 25………………………….

Sec.18 - Power of SEBI to call for information and enquiry

(1) SEBI, on being satisfied that it is necessary in the public interest or in the
interest of investors so to do, may, by order in writing, -

(a) call upon any issuer, depository, DP or beneficial owner to furnish in writing
such information relating to the securities held in a depository as it may require; or

(b) authorise any person to make an enquiry or inspection in relation to the

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JMD 1.26 Depository Act

affairs of the issuer, beneficial owner, depository or DP, who shall submit a report
of such enquiry or inspection to it within such period as may be specified in the
order.

(2) Every director, manager, partner, secretary, officer or employee of the

depository or issuer or the DP or beneficial owner shall on demand produce before
the person making the enquiry or inspection all information or such records and
other documents in his custody having a bearing on the subject matter of such
enquiry or inspection.

Sec.19 - Power of SEBI to give directions in certain cases

If after making or causing to be made an enquiry or inspection, SEBI is satisfied that

it is necessary –

(i) in the interest of investors, or orderly development of securities market; or

(ii) to prevent the affairs of any depository or DP being conducted in the manner
detrimental to the interests of investors or securities market.

it may issue such directions –

(a) to any depository or DP or any person associated with the securities market; or
(b) to any issuer company,

as may be appropriate in the interest of investors or the securities market.

Explanation— For the removal of doubts, it is hereby declared that power to issue
directions under this section shall include and always be deemed to have been
included the power to direct any person, who made profit or averted loss by
indulging in any transaction or activity in contravention of the provisions of this
Act or regulations made thereunder, to disgorge / recover an amount equivalent
to the wrongful gain made or loss averted by such contravention.’

Power of SEBI To Make Regulations

Section 25 provides that the SEBI may, by notification in the Official Gazette, make
regulations consistent with the provisions of this Act and the rules made thereunder to
carry out the purposes of this Act. In particular, and without prejudice to the
generality of the foregoing power, such regulations may provide for –
 the form in which record is to be maintained;
 the form in which the certificate of commencement of business shall be issued;
 the manner in which the certificate of security shall be surrendered ;

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JMD 1.27 Depository Act

 the manner of creating a pledge or hypothecation in respect of security owned by a

BO;
 the conditions and the fees payable with respect to the issue of certificate of
securities ;
 the rights and obligations of the depositories, participants and the issuers ;
 the eligibility criteria for admission of securities into the depository ;
 the terms determined by the Board for settlement of proceedings ;
 any other matter which is required to be, or may be, specified by regulations or
in respect of which provision to be made by regulations.

PENALTIES BY SEBI -

Penalty for failure to furnish information, return, etc.

19A. Any person, who is required under this Act or any rules or regulations or bye-
laws made thereunder,—

(a) to FURNISH any information, document, books, returns or report to the Board,
fails to furnish the same within the time specified therefor, he shall be liable to a
penalty which shall not be less than 1 lakh rupees but which may extend to one
lakh rupees for each day during which such failure continues subject to a
maximum of 1 crore rupees for each such failure;

(b) to FILE any return or furnish any information, books or other documents within
the time specified therefor in the regulations or bye-laws, fails to file return or
furnish the same within the time specified therefor, he shall be liable to a
penalty which shall not be less than 1 lakh rupees but which may extend to one
lakh rupees for each day during which such failure continues subject to a
maximum of one crore rupees.

(c) to MAINTAIN BOOKS of account or records, fails to maintain the same, he

shall be liable to a penalty which shall not be less than one lakh rupees but
which may extend to one lakh rupees for each day during which such failure
continues subject to a maximum of one crore rupees.

Penalty for failure to enter into an agreement.

19B. If a depository or participant or any issuer or its agent or any person, who is
registered as an intermediary under the provisions of section 12 of the Securities and
Exchange Board of India Act, 1992 (15 of 1992), and is required under this Act or
any rules or regulations made thereunder, to enter into an agreement, fails to enter

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JMD 1.28 Depository Act

into such agreement, such depository or participant or issuer or its agent or

intermediary shall be liable to a penalty which shall not be less than one lakh
rupees but which may extend to one lakh rupees for each day during which such
failure continues subject to a maximum of one crore rupees for every such failure.

Penalty for failure to redress investors’ grievances.

19C. If any depository or participant or any issuer or its agent or any person, who is
registered as an intermediary under the provisions of section 12 of the Securities and
Exchange Board of India Act, 1992 (15 of 1992), after having been called upon by
the Board in writing, to redress the grievances of the investors, fails to redress such
grievances within the time specified by the Board, such depository or participant or
issuer or its agents or intermediary shall be liable to a penalty which shall not be
less than one lakh rupees but which may extend to one lakh rupees for each day
during which such failure continues subject to a maximum of one crore rupees.

Penalty for delay in dematerialisation or issue of certificate of securities.

19D. If any issuer or its agent or any person, who is registered as an intermediary
under the provisions of section 12 of the Securities and Exchange Board of India
Act, 1992 (15 of 1992), fails to dematerialise or issue the certificate of securities on
opting out of a depository by the investors, within the time specified under this Act
or regulations or bye laws made thereunder or abets in delaying the process of
dematerialisation or issue the certificate of securities on opting out of a depository
of securities, such issuer or its agent or intermediary shall be liable to a penalty
which shall not be less than one lakh rupees but which may extend to one lakh
rupees for each day during which such failure continues subject to a maximum of
one crore rupees.

Penalty for failure to reconcile records.

19E. If a depository or participant or any issuer or its agent or any person, who is
registered as an intermediary under the provisions of section 12 of the Securities and
Exchange Board of India Act, 1992 (15 of 1992), fails to reconcile the records of
dematerialised securities with all the securities issued by the issuer as specified in
the regulations, such depository or participant or issuer or its agent or intermediary
shall be liable to a penalty which shall not be less than one lakh rupees but which
may extend to one lakh rupees for each day during which such failure continues
subject to a maximum of one crore rupees.

Penalty for failure to comply with directions issued by Board under section 19
of the Act.

19F. If any person fails to comply with the directions issued by the Board under

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JMD 1.29 Depository Act

section 19, within the time specified by it, he shall be liable to a penalty which shall
not be less than one lakh rupees but which may extend to one lakh rupees for
each day during which such failure continues subject to a maximum of one crore
rupees.

Penalty for contravention where no separate penalty has been provided.

19G. Whoever fails to comply with any provision of this Act, the rules or the
regulations or bye-laws made or directions issued by the Board thereunder for which
no separate penalty has been provided, shall be liable to a penalty which shall not
be less than one lakh rupees but which may extend to one crore rupees.

FACTORS TO BE TAKEN INTO ACCOUNT BY ADJUDICATING

OFFICER

Section 19 I requires that while adjudging the QUANTUM of penalty under section
19H, the adjudicating officer shall have due regard to the following factors, namely–
(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable,
made as a result of the default; (b) the amount of loss caused to an investor or group
of investors as a result of the default; (c) the repetitive nature of the default.

Settlement of Administrative Civil Proceedings

Section 19-IA provides that any person, against whom any proceedings have been
initiated or may be initiated under section 19, section 19H, as the case may be, may
file an application in writing to SEBI proposing for settlement of the proceedings
initiated or to be initiated for the alleged defaults.

Sub-section 2 authorises that SEBI may, after taking into consideration the nature,
gravity and impact of defaults, agree to the proposal for settlement, on payment of
such sum by the defaulter or on such other terms as may be determined by SEBI in
accordance with the regulations made under the SEBI Act, 1992.

Sub-section 3 lays down that for the purpose of settlement under this section, the
procedure specified by SEBI under the SEBI Act, 1992 shall apply. Further Sub-
section 4 provides that no appeal shall lie under section 23A against any order
passed by SEBI or the adjudicating officer, as the case may be, under this section.

CREDITING OF PENALTIES TO CONSOLIDATED FUND OF INDIA

Section 19J provides that all sums realised by way of penalties under this Act shall
be credited to the Consolidated Fund of India.

Sec.20 - Offences

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JMD 1.30 Depository Act

Whoever contravenes or attempts to contravene or abets the contravention of the

provisions of this Act or any regulations or bye-laws made thereunder shall be
punishable with imprisonment for a term which may extend to 10 years, or with
fine up to Rs. 25 crore, or with both.

If any person fails to pay the penalty imposed by the adjudicating officer OR fails
to comply with any of his directions or orders, he shall be punishable with
imprisonment for a term which shall not be less than one month but which may
extend to ten years, or with fine, which may extend to twenty-five crore rupees, or
with both.

Sec.21 - Offences by companies

(1) Where an offence under this Act has been committed by a company, EVERY
PERSON who at the time the offence was committed was in charge of, and was
responsible to, the company for the conduct of the business of the company, as
well as the company, shall be deemed to be guilty of the offence and shall be
liable to be proceeded against and punished accordingly;

Provided that nothing contained in this sub-section shall render any such person
liable to any punishment provided in this Act, if he proves that the offence
was committed without his knowledge or that he had exercised all due diligence
to prevent the commission of such offence.

(2) Where an offence under this Act has been committed by a company and it is
proved that the offence has been committed with the consent or connivance of,
or is attributable to any neglect on the part of, any director, manager,
secretary or other officer of the company, such director, manager, secretary
or other officer shall also be DEEMED to be guilty of the offence and shall be
liable to be proceeded against and punished accordingly.

Explanation - For the purpose of this section, -

(a) "company" means any body corporate and includes a firm or other
association of individuals; and
(b) "director" in relation to a firm, means a partner in the firm.

COGNIZANCE OF OFFENCES BY COURTS

Section 22 provides that no court shall take cognizance of any offence punishable
under this Act or any rules or regulations or bye-laws made there under except on a
complaint made by the Central Government or State Government or the SEBI or by
any person.

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COMPOSITION OF CERTAIN OFFENCES

Section 22A provides that notwithstanding anything contained in the Code of

Criminal Procedure, 1973, any offence punishable under this Act, not being an
offence punishable with imprisonment only, or with imprisonment and also with fine,
may either before or after the institution of any proceeding, be compounded by a
Securities Appellate Tribunal or a court before which such proceedings are
pending.

Section 22C - The Central Government may, for the purpose of providing speedy
trial of offences under this Act, by notification, establish or designate as many
Special Courts as may be necessary.

Power of CG to make Rules

Section 24 of the Act provides that the Central Government may, by notification in the
Official Gazette, make rules for carrying out the provisions of this Act. In particular,
and without prejudice to the generality of the foregoing power, such rules may provide
for all or any of the following matters, namely :—
 the manner of inquiry under sub-section (1) of section 19H;
 the time within which an appeal may be preferred under section 23(1);
 the form in which an appeal may be preferred under section 23(3) and the fees
payable in respect of such appeal;
 the procedure for disposing of an appeal under sub-section (4) of section 23;
 the form in which an appeal may be filed before the Securities Appellate
Tribunal under section 23A and the fees payable in respect of such appeal.

NOTE - In exercise of the powers conferred, the CG makes the Depositories (Procedure for
Holding enquiry and imposing penalties by adjudicating officer) Rules, 2005 for holding
inquiry for the purpose of imposing penalty under sections 19A to 19G.

ROLE OF C.S.

Right to Legal Representation (Section 23C)

In case of any decision of the SEBI, the aggrieved entity/ company (the
appellant) may either appear in person or authorise one or more chartered
accountants or company secretaries (PCS) or cost accountants or legal
practitioners or any of its officers to present his or its case before the Securities
Appellate Tribunal (SAT).

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Internal Audit of Depository Participants:

The 2 (two) Depository services providers in India, viz., National Securities

Depository Ltd. (NSDL) and Central Depository Services (India) Limited (CDSL)
have allowed Company Secretaries in Whole-time Practice to undertake
internal audit of the operations of Depository Participants (DPs). [Ref: NSDL
Circular No. NSDL/POLICY/2008/0072 dated October 17, 2008 and CDSL Bye
Law 16.3.1]

Reconciliation of Share Capital Audit: - Regulation 76

Company Secretary is authorised to issue quarterly certificate with regard to

reconciliation of the total issued capital, listed capital and capital held by
depositories in dematerialized form, details of changes in share capital during the
quarter, and in-principle approval obtained by the issuer from all the stock
exchanges where it is listed in respect of such further issued capital under SEBI
(Depositories and Participants) Regulations, 2018. [Regulation 76 of SEBI
(Depositories and Participants) Regulations, 2018]

Concurrent Audit of Depository Participants:

Practising Company Secretary is authorized to carry out concurrent audit of

Depository Participants which covers audit of the process of demit account
opening, control and verification of Delivery Instruction Slips (DIS).
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JAYPEE CAPITAL SERVICES LTD (NOTICEE) VS. SEBI

Cancellation of Registration of DP by SEBI -
Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’)
granted a Certificate of Registration as a Depository Participant to Jaypee Capital
Services Limited (JCSL/Noticee) in accordance with provisions of SEBI
(Depositories and Participants) Regulations, 1996 (DP Regulations) initially for
a period of five years which was valid from August 11, 2006 to August 10,
2011. The certificate of registration was, thereafter, renewed in 2011 for a further
period of five years and the renewed certificate was valid till August 10, 2016.
SEBI received a letter dated April 05, 2016 from Central Depository Services
(India) Limited (hereinafter referred to as ‘CDSL’) informing that it has
terminated the agreement with the Noticee w.e.f April 04, 2016 due to non-
compliance on the part of JCSL with the bye-laws of CDSL.

CS DEEPAK GAJRANI (Wizard of Interpretations)

JMD 1.33 Depository Act

CDSL vide the said letter also requested SEBI to cancel the certificate of
registration granted to the Noticee at act as a Depository Participant with
immediate effect. Thereafter, National Securities Depositories Limited
(hereinafter referred to as “NSDL”) vide its letter dated April 22, 2016 informed
SEBI that it has also terminated the agreement with JCSL w.e.f May 23, 2016 due
to the non-compliance on part of JCSL with the various bye-laws of NSDL.
Based on the information provided by the Depositories viz. CDSL and NSDL,
as above, it was alleged that the Noticee was no longer eligible to be admitted as a
participant of depository and had failed to inform SEBI about the termination of
its agreements with CDSL and NSDL.
Order
The failure on the part of the Noticee to inform SEBI of the termination of the
agreement by the depositories would have to be considered as a violation of
Clause 14 of the Code of Conduct for the DPs as given under third schedule
read with Regulation 20AA of the DP Regulations.
SEBI, in exercise of powers conferred under Section 19 of SEBI Act, 1992 read
with Regulation 28(2) of the SEBI (Intermediaries) Regulations, 2008, cancelled the
certificate of registration granted to the Noticee / Jaypee Capital Services
Limited (SEBI Registration No. IN-DP-NSDL-291-2008 / IN-DP- CDSL-368-
2006) with immediate effect.

CYBER SECURITY AND CYBER RESILIENCE FRAMEWORK FOR DPS AND

BROKERS -
Cyber-attacks and threats attempt to compromise the Confidentiality, Integrity and
Availability (CIA) of the computer systems, networks and databases (Confidentiality
refers to limiting access of systems and information to authorized users, Integrity is the
assurance that the information is reliable and accurate, and Availability refers to
guarantee of reliable access to the systems and information by authorized users).
Cyber security framework includes measures, tools and processes that are intended to
prevent cyber-attacks and improve cyber resilience. Cyber Resilience is an
organization’s ability to prepare and respond to a cyber-attack and to continue
operation during, and recover from, a cyber-attack.
The Frameworks inter-alia prescribes the following:
Depository Participants
 are mandated to conduct comprehensive cyber audit at least once in a financial year.
 shall submit with Stock Exchange/Depository a declaration from the MD/ CEO /

CS DEEPAK GAJRANI (Wizard of Interpretations)

JMD 1.34 Depository Act

Partners/ Proprietors certifying compliance with all SEBI Circulars and advisories
related to Cyber security from time to time, a long with the Cyber audit report.
 shall identify and classify critical assets based on their sensitivity and criticality for
business operations, services and data management. The critical assets shall
include business critical systems, internet facing applications /systems, systems
that contain sensitive data, sensitive personal data, sensitive financial data,
Personally Identifiable Information (PII) data, etc.
 shall maintain up-to-date inventory of its hardware and systems, software and
information assets (internal and external), details of its network resources,
connections to its network and data flows.
 shall carry out periodic Vulnerability Assessment and Penetration Tests (VAPT)
which inter-alia include critical assets and infrastructure components like Servers,
Networking systems, Security devices, load balancers, other IT systems pertaining
to the activities done as Depository Participants etc., in order to detect security
vulnerabilities in the IT environment and in-depth evaluation of the security
posture of the system through simulations of actual attacks on its systems and
networks.
 Brokers / Depository Participants shall conduct VAPT at least once in a FY.

CS DEEPAK GAJRANI (Wizard of Interpretations)

 Rule 19(2)(b) and 19A
of SCR Rules, 1957

Concept of –

Maximum permissible
non-public shareholding
 JMD 1 Rule 19 and 19A of SCR Rules, 1957

Rule 19(2)(b) and 19A - SCR Rules, 1957

Concept of - “Maximum permissible non-public shareholding”
Definition of PUBLIC - means persons other than –
Public
and (i) the promoter and promoter group;
Public (ii) subsidiaries and associates of the company.
Shareholding
Explanation: For the purpose of this clause the words “promoter‟
and “promoter group‟ shall have the same meaning as assigned to
them under the SEBI (ICDR) Regulations, 2018.
---*---
PUBLIC SHAREHOLDING - means equity shares of the company
held by public, and it shall include shares which are held by
custodian against depository receipts issued overseas IF two
conditions are satisfied – (i) the holder of such depository receipts
has the right to issue voting instruction and (ii) such depository
receipts are listed on an international exchange in accordance with
the Depository Receipts Scheme, 2014.

Provided that the equity shares of the company held by the trust set
up for implementing employee benefit schemes under the
regulations framed by the Securities and Exchange Board of
India shall be excluded from public shareholding.
Amended An applicant issuer company shall satisfy the stock exchange
Rule 19(2)(b)(i) that at least 25% of each class or kind of equity shares or
debenture convertible into equity shares issued by the company
was offered and allotted to public, if the post issue capital of
the company calculated at offer price is less than or equal to
1600 crore rupees;

Amended An applicant issuer company shall satisfy the stock exchange

Rule that at least such percentage of each class or kind of equity
19(2)(b)(ii) shares or debentures convertible into equity shares issued by
the company was offered and allotted to public, equivalent to
the value of 400 crore rupees, if the post issue capital of the
company calculated at offer price is more than 1600 crore
rupees but less than or equal to 4000 crore rupees;

Amended An applicant issuer company shall satisfy the stock exchange

Rule that at least 10% of each class or kind of equity shares or
19(2)(b)(iii) debentures convertible into equity shares issued by the
company was offered and allotted to public, if the post issue
capital of the company calculated at offer price is above 4000
crore rupees but less than or equal to one lakh crore rupees.

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 JMD 2 Rule 19 and 19A of SCR Rules, 1957

Newly inserted At least such percentage of each class or kind of equity shares or
Rule
debentures convertible into equity shares issued by the company
19(2)(b)(iv)
equivalent to the value of 5000 crore rupees and at least 5% of each
such class or kind of equity shares or debenture convertible into equity
shares issued by the company, if the post issue capital of the company
calculated at offer price is above one lakh crore rupees;
Provided that the company referred to in this sub-clause (iv) shall
INCREASE its public shareholding to at least 10% within a period of 2
years and at least 25% within a period of 5 years, from the date of
listing of the securities, in the manner specified by SEBI

Increase to the Provided that the company referred to in sub-clause (ii) or sub-
level of 25% clause (iii), shall increase its public shareholding to at least
25% within a period of three years from the date of listing of
the securities, in the manner specified by the Securities and
Exchange Board of India:

Insertion of New Rule 19A - FOR - (i) Old Companies, and

(ii) new companies after 16-01-2018.
Insertion of FOR ALL COMPANIES - Every listed company (other than public
Rule 19A(1) sector company) shall maintain public shareholding of at least 25%.

Continuous FOR OLD COMPANIES - Provided that ANY listed company which has
Listing public shareholding below 25% on the commencement of the Securities
Requirement Contracts (Regulation) (Amendment) Rules, 2018, shall bring the public
shareholding to the level of at least 25% within 3 years from the date of
[V. Imp.] such commencement, in the manner specified by the SEBI.

Rule 19A(2) FOR ALL COMPANIES - Where the public shareholding in a

listed company falls below 25% at any time, such company shall
bring the public shareholding to 25% within a maximum period of
12 months from the date of such fall in the manner specified by the
SEBI.

NEW Where the public shareholding in a listed company falls below twenty-
INSERTION five per cent, as a result of implementation of the resolution plan
approved under section 31 of Insolvency and Bankruptcy Code, 2016
such company shall bring the public shareholding to 25% within a
maximum period of 3 years from the date of such fall, in the manner
specified by the SEBI:
Every listed company shall maintain public shareholding of at least 5% as a
result of implementation of the resolution plan approved under section
31 of the Insolvency and Bankruptcy Code, 2016.
NEW Notwithstanding anything contained in THIS RULE 19A above, the Central
INSERTION Government may, in the public interest, exempt any listed public sector
company from any or all of the provisions of this rule 19A.

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 JMD 3 Rule 19 and 19A of SCR Rules, 1957

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 JMD 4 Rule 19 and 19A of SCR Rules, 1957

Rule 19(2)(b) of SCR RULES, 1957

Two Situations in book-building process

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 CHAPTER - 2

SEBI
(DELISTING OF EQUITY SHARES)
REGULATIONS, 2021
 JMD 2.1 DEEPAK GAJRANI

SEBI (DELISTING OF EQUITY SHARES) REGULATIONS, 2021

FIVE SITUATIONS OF DELISTING OF EQUITY SHARES OF A COMPANY

Voluntary Voluntary
Delisting of small Delisting of
Voluntary Delisting of any class of equity shares of Winding up of Compulsory
companies companies
a listed company by acquirer (& P.A.C.), IF that the listed delisting of equity
listed on
class of shares has been already listed for at least 3 R. 35 company shares by STX
Innovative
(UNDER rules of
years on any STX in India. (Acquirer shall not have Growth Resulting in SCRA), of a
sold of even one equity share OF THAT CLASS in Platform of automatic defaulter
Having paid up STX after
previous 6 months before date of I.P.A.). – R. delisting company.
capital of Rs. 10 making IPO .
4(1)(a) and R. 4(2). crore or less and Of such company (R. 32, 33 AND 34)
R. 36 as per provisions
NW Rs. 25 crore
or less and of Companies Act
From A company A company which is trading is less or 2013 or IBC, After giving
ALL which is listed getting itself delisted than 10% in past 2016. reasonable
STXs on only one from one/ more/ all STXs 12 months before opportunity of
Voluntary
in STX in India, wherever it is listed, BUT board meeting in R. 38 being heard
Delisting of
India. is getting continues to be which decision is [ROOBH].
LISTED
itself delisted listed on any STX taken for subsidiary
R. 7 to from having NTT in India, delisting. company, Delisting of INSOLVENT company
31. such STX. [i.e. NSE, BSE]
where by virtue of revival scheme [CIRP
R. 5 and 6 only LISTED under IBC] APPROVED by NCLT u/s
R.7 to 31. Exit holding 31 of IBC, 2016
opportunity company
by short-cut intends to However, this SEBI Delisting
1. Sebi (Delisting Of Equity Shares) 1. Only R. 5 procedure. convert such Regulations, 2018 is N.A.
Regulations, 2018 are applicable. and 6 are subsidiary
2. It is compulsory for Acquirer (& PAC) applicable. Reverse BB is company
to give exit opportunity to public 2. Not not into W.O.S.
shareholders by reverse B.B. applicable applicable. R.37 STX having Nationwide Trading
Terminals (NTT) in India.

GENERAL PROHIBITIONS – Section 68 and Sec. 62(1)(c) route in Companies Act, 2013 is not available [i.e. NSE, BSE]
for voluntary delisting of company *. [As explained later on page 2].
 JMD 2.2 DEEPAK GAJRANI

Example of NOT allowing buy-back u/s 68

as a tool to enter the delisting zone

My-shares Limited (listed on NSE) has total issued equity share capital of 100
shares. Mr. High Aim holds 65 shares out of such 100 shares.
My-shares Limited made PA for buy back of 20 equity shares from the open
market, but Mr. High Aim does not sell his shares to the company in buy
back offer.

Company destroyed 20 equity shares after buy-back, and share capital base
got reduced to 80 shares.

Post buy back % V.R. of Mr. High Aim increases to the level of = [(65/80) *
100] = 81.25%.

Increase is above the limit of 75%.

Mr. High Aim can not enter into delisting zone (above 75% level) through
buyback u/s 68 of Companies Act, 2013.

---*---

NOTE

Preferential allotment is not allowed as a tool to enter the delisting zone

Where the acquirer (i.e. promoters) already hold 75% equity shares in their own
listed company, then the company cannot give additional shares to such
acquirer (i.e. promoters) by preferential allotment u/s 62(1)(c) of Companies
Act, 2013 such that the acquirer (i.e. promoters) stake increases above 75%
level and the public shareholding decreases below 25% level.

---*---
 JMD 2.3 DEEPAK GAJRANI

VOLUNTARY DELISTING
In the voluntary delisting by Acquirer (including promoters), they shall give EXIT OPPORTUNITY
to other PUBLIC shareholders through Reverse Book Building Process:-

Acquirer of ABC Ltd.

Step (i)
Hold 70%
STEP (iii)
DPA in newspaper ABC Ltd.
for Reverse Book Floor Bids
Building Price (Listed on NSE)
only

Step (ii)
Other Shareholders of ABC Ltd. Hold 30%

1. D.P.A. (given by promoters) in the newspaper for reverse book building, contains floor price only and
neither any cap nor any price band.

2. Floor price shall be as per regulation 8 of SEBI Takeover Code, 2011 [R. 20(2)(3)], with
REFERENCE TO DATE on which STX is required to be informed about the board meeting in which
the decision delisting is considered and approved. Moreover, Acquirer may, in addition to Floor price,
provide an Indicative Price (Higher than floor price) in DPA.

3. Bidding shall be kept open for exact 5 working days. During the bidding period, the public
shareholders shall bid at a price equal to or higher than the floor price.

4. Discovered price shall be determined on the basis of Bids, AFTER closure of offer.

5. Discovered price shall be the price at which total shareholding of acquirer (promoter) reach the level of
90% of total share capital, or, such higher price as may be decided by acquirer (promoters) in
consultation with merchant bankers.

6. Once the discovered price is determined, acquirer shall make Public Announcement
of the Discovered price within 2 working days of closure of offer (in the same
newspapers in which DPA was given). – [Reg. 17(4)]

7. All the bids at or below discovered price are SUCCESSFUL.

8. All the bids above discovered price are UNSUCCESSFUL (if there was no indicative
price in DPA).

9. Acquirer has the option to accept or refuse such discovered price. [V. Imp.]
NOTES: 1) If Discovered price is lower than indicative price shown in DPA, then acquirer has to pay
indicative price to concerned shareholders. (In this case, Acquirer cannot reject DP at all.)

2) If Discovered price is HIGHER than indicative price shown in DPA and acquirer accepts DP, then
acquirer has to pay DISCOVERED price to concerned shareholders. (Ignore the indicative price)

3) Since, reverse book building is NOT done by the company, rather it is done by promoters in personal
capacity, therefore ABSOLUTE PROHIBITION on physically extinguishing the shares. Section 68 is
not applicable.

BY – DEEPAK GAJRANI
 JMD 2.4 DELISTING

Voluntary Delisting
(Regulation 7 to 31 - Procedure of Reverse Book Building)

STEP 1 - Acquirer shall appoint Merchant banker before making IPA (Initial Public
Announcement). [Reg. 9]
STEP 2 - Merchant Banker drafts – (i) IPA (Initial Public Announcement), (ii) the
Detailed Public Announcement (D.P.A.) and Letter of offer (L.O.O.).
STEP 3 - On the date when the acquirer(s) decides to delist the equity shares,
he/it shall make an I.P.A. to ALL the concerned STXs, and STXs
forthwith disseminate the IPA to the public. (IPA shall contain the
reasons for delisting). (Reg. 8)
STEP 4 - Acquirer shall send copy of IPA to the concerned company at its
registered office not later than 1 working day from the date of filing to
STXs.
STEP 5– BOD of the concerned company shall appoint Peer Review Company
Secretary (PCS) and provide information to him to carry out DUE
DILIGENCE EXERCISE about buying, selling and dealing in the equity
shares of company by acquirer in previous 2 Years prior to the date of
board meeting held to consider the proposal for delisting, etc. [R. 10(2)]
STEP 6 – Peer Review Company Secretary (PCS) will carry out DUE DILIGENCE
EXERCISE. [R. 10(3)]
STEP 7 –Peer Review Company Secretary (PCS) will submit DUE DILIGENCE
REPORT to BOD. [R. 10(3)]
STEP 8 – Advance intimation to STXs about proposed board meeting for voluntary
delisting, certifying that acquirer has not sold any shares of the company in
previous 6 months before the date of IPA. [Floor price is calculated on the
basis of this date of intimation to STXs].
STEP 9 - Board Resolution for voluntary delisting within max 21 days of the date of IPA.
BOD shall certify that all the legal compliances are duly made by the company
till date. [Refer Reg. 10(1) and (4)].

STEP 10- Company shall communicate the decision of BOD to delist to the concerned
STXs, alongwith Due Diligence Report of Peer review CS and Audit Report of
auditor regarding audit under R. 12(2) of Depository Regulations. [Reg. 10(5)]
STEP 11- STX will further disseminate information to public. [Refer Reg. 10(6)].
STEP 12- Pass a “Special Resolution” in the specific manner by Postal Ballot/e-
voting, within max 45 days of passing of Board Resolution. [Sec.108 / 110
read with regulation 11(1) and (4)].

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 JMD 2.5 DELISTING

STEP 13- Acquirer shall open interest-bearing escrow account, and shall deposit the
“25% of amount of consideration” payable by them on the basis of number
of equity shares of the company with the public multiplied with floor price or
indicative price (if any), whichever is HIGHER. [Reg. 14(1)] (Escrow account
shall be opened within max. 7 working days after getting Shareholders’
approval). Acquirer shall enter into tripartite agreement with Merchant banker
and the Banker and authorize Merchant banker to make payments from escrow
account to the successful bidders (concerned shareholders).
STEP 14- Company shall file application along with annexures, to the STX to obtain
“in-principle approval” for delisting, within max. 15 WORKING DAYS
from the date of passing of the special resolution or receipt of any other
statutory or regulatory approval, whichever is later. [R. 12(1)and(2)]
STEP 15-STX gives in-principle approval within 15 working days of receipt of
application. [R. 12(3)].
STEP 16-Acquirer shall deposit balance 75% in Escrow account before making
DETAILED PUBLIC ANNOUNCEMENT (DPA) in 3 newspapers. [R. 14(3)].
STEP 17- Within 1 working day after receiving in-principle approval, acquirer shall issue
D.P.A. in three newspapers for reverse book building (DPA contains only
floor price not the cap price) [R.15(1)]. [Total 20 contents given in Sch I]
Step 18- (SPECIFIED DATE SHALL BE WITHIN MAX. 1 WORKING DAY OF
DATE OF D.P.A.) – TO ASCERTAIN THE LIST OF MEMBERS TO
WHOM L.O.O. SHALL BE SENT.
STEP 19-Acquirer shall dispatch the letter of offer (LOO) to ALL the public
shareholders within max. 2 working days of the date of P.A. in newspaper.
And, put L.O.O. on website of the company and merchant banker also. Letter
of offer (LOO) shall contain full DPA, and additional disclosures such that
public shareholders can take own informed decision. (R. 16(1) and (4))

STEP 20- Acquirer may make upward revision in the Indicative Price before the start of
the bidding period and the same shall be duly disclosed to the
shareholders. [R.20(5)].
STEP 21-Date of opening of bidding period / offer of reverse book building, within
max. 7 working days of the date of PA. [BIDDING OPENS] [R.17(1)].
STEP 22 - Date of closing of bidding period / offer - [BIDDING CLOSES] - [offer
(bidding) shall be kept open for exact 5 working days]. [R.17(1)]. [Note -
custodian of ADR/GDR or ADR / GDR holder cannot participate in Bidding.]

STEP 23 - The Manager to the offer shall ensure that the outcome of the reverse
book building process is announced WITHIN 2 HOURS of the
closure of the bidding period.

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 JMD 2.6 DELISTING

NOTE – Criteria of Success or Failure of reverse book building offer –

1. A reverse book building offer is considered as SUCCESSFUL ONLY IF post-
offer shareholding of acquirer reaches the limit of 90% of total share capital of the
company, with the help of successful bidders. [R. 21]. For calculating 90% exclude
the shares held by 3 categories of shareholders (a. custodian of ADR/GDR, b. trust
created for benefit of employees, c. inactive shareholders in vanishing companies.)
2. A reverse book building offer is considered as UNSUCCESSFUL / FAILURE if
post-offer shareholding of acquirer does not reach 90% limit. [R. 23]

Example of successful reverse book building -

1. Presume - Pre-offer shareholding of Acquirer = 70% shares
2. Pre-offer public shareholding = 30% shares.
3. Criteria for post-offer shareholding of Acquirer = 90% of total share capital of
company.
Now, situation 1 = If the bidders hold aggregate 18% shares only, then reverse book
building is FAILURE, because acquirer’s shareholding reaches the level of 88% which is
below 90% level. [It is compulsory to release/give back all 18% shares, and reverse book
building is FAILURE.] Shareholders holding 12% do not participate in the bidding.
Situation 2 = If the successful bidders at or below Discovered Price hold aggregate
20% shares or more, then reverse book building is SUCCESSFUL, because acquirer’s
shareholding reaches the level of 90%. [But, acquirer may or may not accept the
discovered price; and if acquirer REFUSE to accept the cut off price, then they may give
back all received shares, and reverse book building is DEEMED TO BE FAILURE, or
otherwise within 2 working days of closure of bidding he may give counter offer.]
STEP 24 - Determination of Discovered Price (final cut off price) by the acquirer in the
consultation of Merchant Banker. [Note - After step 23, follow step 6 to step 9
on page 3.]
Step 25 - Once the discovered price is determined, acquirer shall make Public
Announcement of the Discovered price within 2 working days of closure of
offer (in the same newspapers in which DPA was given). – Reg. 17(4)
Step 26 - All the bids at or below discovered price are SUCCESSFUL. All the bids
above discovered price are UNSUCCESSFUL, if there was no indicative price
in DPA.
Step 27 - Acquirer has the option to accept or refuse such discovered price. [v. imp.]
Step 28 - After the closure of offer, there are 4 different situations, as given below –
a) If reverse book building offer is unsuccessful / failure – R. 23 - In other words,
90% level is not achieved, then the acquirer shall release all the shares received in
the bidding, to the concerned shareholders, on the date of closure of offer after

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 JMD 2.7 DELISTING

disclosure of the outcome of the reverse book building process. Company

will continue as listed company. (Note – 99% of escrow will be refunded to acquirer
within 1 working day of the date of PA of failure, and remaining 1% will be
refunded to acquirer after release / return of shares. – R. 14(8) and (9)). Thereafter, it
is NOT allowed to bring another delisting offer up to next 6 months from the date of
failure.
b) If, reverse book building offer is successful, AND acquirer accepts the discovered
price, and wants to proceed with delisting further, then he shall file the final
application under reg. 25(1) to the concerned STX within 5 working days from
the date of making the payment to the public shareholders. Then, STX will
give final delisting permission within max. 15 working days, and the equity
shares of the company are permanently delisted.
The payment shall be made to concerned shareholders through the
secondary market settlement mechanism if the discovered price is equal to
the floor price or the indicative price. [R. 24(1)]
The payment shall be made within 5 working days from the date of the PA of
success of delisting offer and of acceptance of discovered price, if the
discovered price is HIGHER THAN the floor price or the indicative price.
[R. 24(1)]
c) If, reverse book building offer is successful in achieving 90% level, but acquirer do
not accept the discovered price, -
(i) PA can be made that the price discovered through the reverse book building
process is REJECTED by the acquirer. And, the acquirer shall release all the
shares received in the bidding, to the concerned shareholders, on the date of
such PA, or
(ii) a COUNTER OFFER may be made by the acquirer to the public
shareholders within 2 working days of the closure of bidding period at a
price not less than the BOOK VALUE, with an option to withdraw. [R.
22(4)].
Note –

1. If counter offer succeeds, then acquirer shall make Payment of consideration release
to the concerned shareholders, through the secondary market settlement
mechanism, or not later than 10 working days from the closing of counter
offer, as the case may be

2. If counter offer fails, then acquirer shall release all the shares received in the bidding,
to the concerned shareholders, on the date of making PA of failure of the counter
offer.
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 JMD 2.8 DELISTING

Mumbai, the 10th June, 2021

SEBI (DELISTING OF EQUITY SHARES) REGULATIONS, 2021

CHAPTER I

PRELIMINARY

Short title and commencement

1. (1) These regulations shall be called the Securities and Exchange Board of India
(Delistingof Equity Shares) Regulations, 2021.

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions

2. (1) In these regulations, unless the context otherwise requires, the terms defined
herein shall bear the meaning assigned to them below and their cognate expressions
and variations shallbe construed accordingly,-

a) “Act” means the Securities and Exchange Board of India Act, 1992 (15 of 1992);
b) “acquirer” includes a person -
(i) who decides to make an offer for delisting of equity shares of the
company along with the persons acting in concert in accordance with
regulation 5A of the Takeover Regulations as amended from time to time
; or
(ii) who is the promoter or part of the promoter group along with the
persons acting in concert.
c) “Board” means the Securities and Exchange Board of India (SEBI) established
under section 3 of the Act;
d) “Bidding Period” means the period within which shareholders may tender
their shares in acceptance of the offer for delisting of equity shares of the
company made under these regulations;
e) “Control” shall have the same meaning as assigned to it under the Takeover
Regulations as amended from time to time;
f) “Company” means a company within the meaning of sub-section (20) of section
2 of the Companies Act, 2013 (18 of 2013) and includes a body corporate or
corporation established under any enactment for the time being in force, whose
equity shares are listed on a recognised stock exchange;
g) “Compulsory Delisting” means delisting of equity shares of a company by a
recognised stock exchange under Chapter V of these regulations;
h) "Company Secretary In Practice" means a Company Secretary as defined in
Page 8
 JMD 2.9 DELISTING

section 2(c) of the Company Secretaries Act, 1980 (56 of 1980) who is deemed
to be in practice under sub-section (2) of section 2 of the said Act;
i) “Detailed Public Announcement” means the announcement made by the
acquirer in terms of regulation 15 read with Schedule I of these regulations;
j) “Delisting” means permanent removal of equity shares of the company from the
trading platform of a recognised stock exchange, either by way of voluntary or
compulsory method;
k) “Delisting Period” means the period between the date of Initial Public
Announcement and the date of payment of consideration to the shareholders,
whose shares have been accepted in the reverse book building process or the
date on which shares have been returned upon failure of the delisting offer, as
the case may be;
l) "Discovered Price" means the price discovered through reverse book building
process in terms of Schedule II of these Regulations;
m) "Floor Price" means the minimum price offered by the acquirer, computed in
accordancewith regulation 8 of the Takeover Regulations as amended from time
to time, while making the proposal for voluntarily delisting of the equity shares
of the company;
n) “Frequently Traded Shares” shall have the same meaning as assigned to it under
the Takeover Regulations as amended from time to time;
o) "Indicative Price" means the price offered by the acquirer, which is higher than
the floor price, while making the proposal to voluntarily delist the equity shares
of the company;
p) “Innovators Growth Platform” shall have the same meaning as assigned to it
under the Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2018 as amended from time to time;
q) “Initial Public Announcement” means the first announcement, including
subsequent modifications thereto, if any, made by the acquirer to express its
intention to voluntarily delist the equity shares of the company from all the
recognised stock exchanges.
r) “Insolvency Code” means the Insolvency and Bankruptcy Code, 2016 (31 of 2016);
s) "Peer Review Company Secretary" means a Company Secretary in practice,
who is either practicing individually or as a sole proprietor or as a partner of a
Peer Reviewed Practice Unit, holding a valid certificate of peer review issued by
the Institute of Company Secretaries of India;
t) “Public Shareholding” shall have the same meaning as assigned to it under rule
2(e) of the Securities Contracts (Regulation) Rules, 1957 as amended from time
to time and “public shareholders” shall be construed accordingly;
u) “Persons Acting In Concert” shall have the same meaning as assigned to it under
the Takeover Regulations as amended from time to time;
v) “Promoter” shall have the same meaning as assigned to it under the Securities
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 JMD 2.10 DELISTING

and Exchange Board of India (Issue of Capital and Disclosure Requirements)

Regulations, 2018 as amended from time to time;
w) “Promoter Group” shall have the same meaning as assigned to it under the
Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2018 as amended from time to time;
x) “Recognised Stock Exchange” means any stock exchange that has been granted
recognition under section 4 of Securities Contracts (Regulation) Act, 1956 as
amended from time to time;
y) “Schedule” means a Schedule appended to these regulations;
z) "Securities Laws" mean the Act, the Securities Contracts (Regulation) Act, 1956
(42 of 1956), the Depositories Act,1996 (22 of 1996), the relevant provisions of
any other law to the extent it is administered by the Board and the relevant rules
and regulations made thereunder;
aa) “Takeover Regulations” mean the Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011;
bb) “Voluntary Delisting” means the delisting of equity shares of a company
voluntarily on an application made by it under Chapter III of these regulations;
cc) “valuer” shall have the same meaning as assigned to it under section 247 of the
Companies Act, 2013 (18 of 2013) as amended from time to time;
dd) “Volume Weighted Average Price” shall have the same meaning as assigned
to it under the Takeover Regulations as amended from time to time;
ee) “working days” means the working days of the Board.

(2) All other words and expressions used but not defined in these regulations, but
defined in the Act or the Companies Act, 2013 (18 of 2013), the Securities Contracts
(Regulation) Act, 1956 (42 of 1956), the Depositories Act, 1996 (22 of 1996) and/or
the rules and regulations made thereunder, shall have the same meaning as respectively
assignedto them in such Acts or rules or regulations or any statutory modification or re-
enactment thereto, as the case may be.

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 JMD 2.11 DELISTING

CHAPTER II

DELISTING OF EQUITY SHARES

Scope and applicability

3. (1) These regulations shall apply to delisting of equity shares of a company including
equity shares having superior voting rights from ALL OR ANY of the
recognised stock exchanges where such shares are listed.

(2) Nothing contained in these regulations shall apply to the delisting of equity
shares of a listed company—

(a) that have been listed and traded on the Innovators Growth Platform of a
recognised stock exchange without making a public issue;

(b) made pursuant to a resolution plan approved under section 31 of the Insolvency
Code, 2016 if such plan provides for:

(i) delisting of such shares; or

(ii) an exit opportunity to the existing public shareholders at a specified price:

Provided that the existing public shareholders shall be provided the exit
opportunity at a price which SHALL NOT BE LESS THAN THE PRICE, by
whatever name called, AT WHICH a promoter or any entity belonging to the
promoter group or any other shareholder, directly or indirectly, is provided an exit
opportunity:

Provided further that the details of delisting of such shares along with the
justification for the exit price in respect of the proposed delisting shall be disclosed
to the recognized stock exchange(s) where the shares are listed WITHIN ONE
DAY OF APPROVAL OF THE RESOLUTION PLAN under section 31 of the
Insolvency Code.

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 JMD 2.12 DELISTING

Conditions for delisting

4. (1) Neither any company shall apply for nor any recognised stock exchange shall
permit delisting of equity shares of a company:-

(a) unless a period of 3 years has elapsed since the listing of that CLASS of
equity shares on ANY recognised stock exchange;

(b) if any instrument issued by the company, which is convertible into the
same class of equity share(s) that is sought to be delisted, is outstanding;

(c) pursuant to a buyback of equity shares by the company, including a

buyback pursuant to consolidation or division of all or part of the equity
share capital of the company, unless a period of six months has elapsed
from the date of completion of such BuyBack;

(d) pursuant to a preferential allotment made by the company unless a period

of six months has elapsed from the date of such allotment:

Provided that nothing contained under clause (d) of sub-regulation (1) shall
be applicable to the delisting of equity shares made by a new acquirer(s) who
has made an offer under regulation 5A of the Takeover Regulations, or, a
new promoter(s) pursuant to re-classification in terms of the provisions of the
Securities and Exchange Board of India (Listing Obligations and
Disclosures Requirements) Regulations, 2015.

(2) No acquirer shall propose delisting of equity shares of a company, IF THE

ACQUIRER HAD SOLD THE EQUITY SHARES of the company during the
period of six months prior to the date of the Initial Public Announcement
made in terms of regulation 8(1) of these regulations.

(3) Nothing contained in sub-regulation (1)(a) and (b) above shall apply to a
delisting of equity shares falling under regulation 5 of these regulations.

(4) No acquirer shall, directly or indirectly, employ the funds of the company to
finance an exit opportunity provided under Chapter IV of these regulations
or an acquisition of shares made pursuant to regulation 33(4) of these
regulations.

(5) No acquirer shall, directly or indirectly,–

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 JMD 2.13 DELISTING

(a) employ any device, scheme or artifice to defraud any shareholder or other
person;or

(b) engage in any transaction or practice that operates as a fraud or deceit

upon anyshareholder or other person; or

(c) engage in any act or practice that is fraudulent, deceptive or manipulative;

in connection with any delisting of equity shares sought or permitted or exit

opportunity given or other acquisition of equity shares made under these regulations.

CHAPTER III - VOLUNTARY DELISTING

PART – A

Conditions and procedure for delisting where exit opportunity is not required

Delisting from some of the recognised STXs where NO exit opportunity is required

5. A company may delist its equity shares from one or more of the recognised stock
exchanges on which it is listed without providing an exit opportunity to the public
shareholders, if after the proposed delisting, the equity shares remain listed on any
recognised stock exchange that has nationwide trading terminals.

Procedure for delisting where NO exit opportunity is required

6. (1) Any company desirous of delisting its equity shares under the provisions of
REGULATION 5 of these regulations shall -

(a) obtain the prior approval of its Board of Directors;

(b) make an application to the relevant recognised stock exchange(s) for delisting
its equity shares;

(c) issue a public notice of the proposed delisting from the relevant stock
exchange(s) in at least one English national newspaper with wide circulation,
one Hindi national newspaper with wide circulation in their all India editions
and one vernacular newspaper of the region where the relevant stock
exchange(s) is located;

(d) disclose the fact of delisting in its first annual report post delisting.

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 JMD 2.14 DELISTING

(2) The public notice issued under sub-regulation (1)(c) shall mention the name(s) of
the recognised stock exchange(s) from which the equity shares of the company are
intended to be delisted, the reasons for such delisting and the fact of continuation
of listing of equity shares on the recognised stock exchange(s) having nationwide
trading terminals.

(3) An application for delisting made under clause (b) of sub-regulation (1) shall be
disposed of by the recognised stock exchange(s) within a period not exceeding thirty
working days from the date of receipt of such application that is complete in all
respects.

PART – B
Conditions and procedure for delisting where exit opportunity is required Delisting

from all the recognised stock exchanges

7. The equity shares of a company may be delisted from ALL the recognised stock
exchanges having nationwide trading terminals on which they are listed, after an
exit opportunity has been provided by the acquirer to all the public shareholders
holding the equity shares sought to be delisted, in accordance with Chapter IV of
these regulations and after following the procedure as mentioned in Part-B of this
Chapter.

Initial public announcement to Stock Exchanges, then STX to public – R.8

(1) On the date when the acquirer(s) decides to voluntarily delist the equity shares
of the company, it shall make an initial public announcement to all the stock
exchanges on which the shares of the company are listed and the stock exchanges
shall forthwith disseminate the same to the public.

(2) A copy of the initial public announcement shall also be sent to the company at its
registered office not later than 1 working day from the date of The Initial Public
Announcement.

(3) The Initial Public Announcement shall contain such information as may be
specified, including :—

(a) the reasons for delisting;

(b) an undertaking with respect to compliance with of regulation 4(2) and (5) of
these regulations.

(4) The Initial Public Announcement shall not omit any relevant information or

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 JMD 2.15 DELISTING

contain any misleading information.

Appointment of the Manager to the offer – R. 9

(1) Prior to making an initial public announcement, the acquirer shall appoint a
merchant banker registered with the Board as the Manager to the offer.
(2) The Manager to the offer appointed under sub-regulation (1) shall not be an associate
of the acquirer.
(3) The initial public announcement and the subsequent activities as required under
these regulations shall be undertaken by the acquirer through the Manager to the
offer.

Approval by the Board of Directors

10. (1) The company shall obtain the approval of its Board of Directors in respect of
the proposal of the acquirer to delist the equity shares of the company, not later than
21 days from the date of the Initial Public Announcement.

(2) The Board of Directors of the company, before considering the proposal of
delisting, shall appoint a PEER REVIEW COMPANY SECRETARY and provide
the following information to such Company Secretary for carrying out due-
diligence: -

(a) the details of buying, selling and dealing in the equity shares of the company by
the acquirer or its related entities during the period of two years prior to the
date of board meeting held to consider the proposal for delisting, including the
details of the top 25 shareholders, for the said period;

(b) the details of off-market transactions of all the above shareholders mentioned
in clause (a) for a period of 2 years;

(c) any additional information, including the information mentioned in clauses (a)
and (b) for a longer period of time, sought by the Company Secretary IF the
Company Secretary is of the opinion that the information provided under clauses
(a) and (b) is not sufficient for providing the certification in terms of sub-
regulation (3).

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 JMD 2.16 DELISTING

(3) After obtaining the information from the Board of Directors of the company under
sub- regulation 2, the Company Secretary shall carry out the due-diligence and
submit a report to the Board of Directors of the company certifying that the
buying, selling and dealing in the equity shares of the company carried out by the
acquirer or its related entities and the top twentyfive shareholders is in compliance
with the applicable provisions of securities laws including compliance with sub-
regulation (5) of regulation 4 of these regulations.

(4) The Board of Directors of the company, while considering the proposal for
delisting, shall certify that—

(a) the company is in compliance with the applicable provisions of securities

laws;

(b) the acquirer and its related entities are in compliance with the applicable
provisions of securities laws in terms of the report of the Company Secretary
including compliance with sub-regulation (5) of regulation 4 of these
regulations;

(c) the delisting, in their opinion, is in the interest of the shareholders of the
company.

(5) While communicating the decision of the Board of Directors on the proposal for
delisting of equity shares, THE COMPANY SHALL ALSO SUBMIT to the
recognized stock exchanges on which the equity shares of the company are listed,
the due - diligence report of the Company Secretary in terms of sub-regulation (3)
and the audit report in terms of sub-regulation (2) of regulation 12 of these
regulations.

(6) Upon receipt of the communication from the company under sub-regulation (5), the
stock exchanges shall forthwith disseminate the same to the public.

Approval by shareholders

11. (1) The company shall obtain the approval of the shareholders through a special
resolution, NOT LATER THAN 45 DAYS from the date of obtaining the approval
of Board of Directors.

(2) The special resolution shall be passed through postal ballot and / or e-voting as per
the applicable provisions of the Companies Act, 2013 (18 of 2013) and the rules made
thereunder.
(3) The company shall disclose all material facts in the explanatory statement sent to the
shareholders in relation to such a resolution.
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 JMD 2.17 DELISTING

(4) The special resolution shall be acted upon only if the votes cast by the public
shareholders in favour of the proposal are at least two times the number of votes
cast by the public shareholders against it.

In-principle approval of the stock exchange

12. (1) The company shall make an application to the relevant recognised stock
exchange for in-principle approval of the proposed delisting of its equity shares
in the Form specified by the recognised stock exchange from time to time, NOT
LATER THAN 15 WORKING DAYS from the date of passing of the special
resolution or receipt of any other statutory or regulatory approval, whichever
is later.

(2) The application seeking in-principle approval for the delisting of equity shares shall
be accompanied by an AUDIT REPORT as required under regulation 76 of the
Securities and Exchange Board of India (Depositories and Participants) Regulations,
2018 in respect of the equity shares sought to be delisted, COVERING A PERIOD
OF SIX MONTHS PRIOR to the date of the application.

(3) Such application seeking in-principle approval for the delisting of the equity shares
shall be disposed of by the recognised stock exchange within a period NOT
EXCEEDING, FIFTEEN WORKING DAYS from the date of receipt of such
application that is complete in all respects.

(4) The recognised stock exchange shall not unfairly withhold such an application, but
may require the company to satisfy or inform it regarding -

(a) compliance with regulations 10 and 11 above of these regulations;

(b) resolution of investor grievances by the company;

(c) payment of listing fees due to the recognised stock exchange;

(d) compliance with any provision of the Securities and Exchange Board of India
(Listing Obligations and Disclosure Requirements) Regulations, 2015 as
amended fromtime to time, that has a material bearing on the interests of its
equity shareholders;
(e) any litigation or action pending against the company pertaining to its activities
in the securities market or any other matter having a material bearing on the
interests of its equity shareholders;

(f) any other relevant matter as it may deem fit.

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 JMD 2.18 DELISTING

CHAPTER IV

EXIT OPPORTUNITY

Applicability of Chapter IV

13. The provisions of this Chapter shall apply to the proposal for delisting of equity
shares of a company from ALL the recognised stock exchanges.

Escrow account

14. (1) The acquirer shall open an interest bearing escrow account with a Scheduled
Commercial Bank, NOT LATER THAN 7 WORKING DAYS from the date of
obtaining the shareholders’ approval, and deposit therein an amount equivalent to
25% of the total consideration, calculated on the basis of the number of equity shares
outstanding with the public shareholders MULTIPLIED WITH the floor price or
the indicative price, if any given by the acquirer in terms of sub-regulation (4) of
regulation 20 of these regulations, whichever is higher.

(2) The acquirer shall enter into a TRIPARTITE AGREEMENT with the Manager to
the offer and the Bank for the purpose of opening the escrow account and shall
authorize the Manager to the offer to operate such account as per the provisions
of these regulations.

(3) Before making the detailed public announcement under regulation 15 of these
regulations, the acquirer shall deposit in the escrow account, the remaining
consideration amount being 75% calculated on the basis of the number of equity
shares outstanding with the public shareholders multiplied with the floor price or the
indicative price, if any given by the acquirer in terms of sub-regulation (4) of
regulation 20 of these regulations, whichever is higher.

(4) On determination of the discovered price and making of the public announcement
under sub-regulation (4) of regulation 17 of these regulations accepting the
discovered price, the acquirer shall forthwith deposit in the escrow account such
additional sum as may be sufficient , to make up the entire sum due and payable as
consideration in respect of equity shares outstanding with the public shareholders.

(5) The escrow account shall consist of either the cash deposited with a Scheduled
Commercial Bank OR a bank guarantee in favour of the Manager to the offer OR
a combination of both.

(6) Where the escrow account consists of a deposit with a Scheduled Commercial
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 JMD 2.19 DELISTING

Bank, the acquirer shall, while opening the account, authorize the Manager to the
offer to make fund transfers through electronic mode or such other mode
permitted by the Reserve Bank of India,and to instruct the bank to issue banker’s
cheques or demand drafts for the amount lying to thecredit of the escrow account,
for the purpose(s) mentioned in these regulations, and the amountin such account, if
any, remaining after full payment of consideration for the equity shares tendered in
the delisting offer and those tendered under sub-regulation (1) of regulation 26 of
these regulations shall be released to the acquirer.

(7) Where the escrow account consists of a bank guarantee, such bank guarantee
shall be valid till payments are made in respect of all shares tendered under sub-
regulation (1) of regulation 26 of these regulations.

(8) In case of FAILURE of the delisting offer, 99% of the amount lying in the escrow
account shall be released to the acquirer within one working day from the date
of public announcement of such failure.

(9) The remaining 1% amount lying in the escrow account shall be released post return
of the shares to the public shareholders or confirmation of revocation of lien marked
on their shares by the Manager to the offer as per the timelines provided in these
regulations.

Detailed public announcement

15. (1) The acquirer shall, within one working day from the date of receipt of in-
principle approval for delisting of equity shares from the recognised stock
exchange, make a detailed public announcement in at least one English national
newspaper with wide circulation, one Hindi national newspaper with wide
circulation in their all India editions and one vernacular newspaper of the region
where the relevant recognised stock exchange is located.

(2) The Detailed Public Announcement shall contain all material information
including the information specified in Schedule I of these regulations and shall not
contain any false or misleading statement.

(3) The Detailed Public Announcement shall also specify a date, being a day not later
than 1 working day from the date of the detailed public announcement, which shall
be the ‘SPECIFIED DATE’ for determining the names of the shareholders to whom
the letter of offer shall be sent.

(4) The detailed public announcement shall be dated and signed by the acquirer.

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 JMD 2.20 DELISTING

Explanation — If the acquirer is a company, the detailed public announcement shall be

dated and SIGNED ON BEHALF OF THE BOARD OF DIRECTORS of the company
by its Manager or Secretary, if any, and by not less than two directors of the company,
one of whom shall be the managing director where there is one.

Letter of offer

16. (1) The acquirer shall dispatch the letter of offer to the public shareholders not later
than two working days from the date of the detailed public announcement made
under regulation 15 of these regulations.

(2) The letter of offer shall be sent to ALL PUBLIC SHAREHOLDERS, holding equity
shares of the class sought to be delisted, whose names appear on the register of the
company or depository as on the date specified in the detailed public announcement.

(3) A copy of the letter of offer shall also be made available on the websites of the
company and the Manager to the offer for the benefit of the public shareholders.

(4) The letter of offer shall contain all the disclosures made in the detailed public
announcement and such other disclosures as may be necessary for the shareholders
to take an informed decision.

(5) The public shareholders shall have the right to inspect all the documents as
referred in the letter of offer and the Manager to the offer shall facilitate the
inspection.

(6) The letter of offer shall be accompanied with a Form for the use of public
shareholders for the purpose of either creating a lien or tendering the physical
shares, as the case may be.
(7) An eligible public shareholder may participate in the offer for the delisting of equity
shares and make bids even without receiving the Form or letter of offer and such
shareholder may tender shares in the manner specified by the Board in this regard.

Bidding mechanism

17. (1) The bidding period shall start not later than 7 working days from the date of
the Detailed Public Announcement and shall remain open for 5 working days.

(2) The acquirer shall facilitate tendering of shares by the shareholders and settlement
of the same, through the stock exchange mechanism as specified by the Board.

(3) The Manager to the offer shall ensure that the outcome of the reverse book building
process is announced WITHIN 2 HOURS of the closure of the bidding period.
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 JMD 2.21 DELISTING

(4) Within two working days from the closure of the bidding period, the acquirer shall,
through the Manager to the offer, make a PUBLIC ANNOUNCEMENT in the same
newspapers in which the detailed public announcement under sub-regulation (1) of
regulation 15 of these regulations was made, disclosing the success or failure of the
reverse book building process, along with the DISCOVERED PRICE accepted
by the acquirer in the event of SUCCESS of the said process.

Manner of tendering shares

18. The equity shares shall be tendered/offered by the public shareholders,

INCLUDING by way of marking a lien through the stock exchange mechanism,
in the manner specified by the Board.

Right of shareholders to participate in the reverse book building process

19. (1) Public shareholders holding the equity shares of the company, which are sought
tobe delisted, shall be entitled to participate in the reverse book building process
in the manner specified in Schedule II of these regulations.

(2) The Manager to the issue shall take necessary steps to ensure compliance with sub-
regulation (1).

(3) Any holder of depository receipts issued on the basis of underlying equity shares
and a custodian keeping custody of such equity shares SHALL NOT BE ENTITLED
to participate in the reverse book building process:

Provided that any holder of depository receipts may participate in the reverse
book building process under sub-regulation (1) after converting such depository
receipts into equity shares of the company that are proposed to be delisted.

Discovered price

20. (1) After fixation of the floor price under sub-regulation (2), the discovered price
shall be determined through the reverse book building process in the manner
specified in Schedule II of these regulations, and the Manager to the offer shall
disclose the same in the detailed public announcement and the letter of offer.

(2) The floor price shall be determined in terms of regulation 8 of Takeover Regulations
as may be applicable.

(3) The reference date for computing the floor price would be the date on which the
recognized stock exchange(s) was required to be notified of the board meeting in
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 JMD 2.22 DELISTING

which the delisting proposal was considered and approved.

(4) The acquirer shall have the OPTION to provide an indicative price in respect of the
delisting offer, which shall be higher than the floor price calculated in terms of sub-
regulation (2).

(5) The acquirer shall also have the option to revise the indicative price upwards
before the start of the bidding period and the same shall be duly disclosed to the
shareholders.

(6) The acquirer may, if it deems fit, PAY a price higher than the discovered price
determined in terms of sub-regulation (1).

Minimum number of equity shares to be acquired

21. An offer made under Chapter III of these regulations or a counter offer made by
the acquirer in terms of sub-regulation (4) of regulation 22 of these regulations, as
the case may be, shall be deemed to be successful if,-

(a) the post offer shareholding of the acquirer, along with the shares tendered /
offeredby public shareholders accepted as eligible bids at the discovered price or
the counter offer price, as the case may be, reaches 90% of the total issued
shares of that class EXCLUDING the following:-

(i) shares held by custodian(s) against which depository receipts have been
issued overseas;

(ii) shares held by a Trust set up for implementing an Employee Benefit

scheme under the Securities and Exchange Board of India (Share Based
Employee Benefits)Regulations, 2014;

(iii) shares held by inactive shareholders such as vanishing companies and

struck off companies, shares transferred to the Investor Education and
Protection Fund’s account and shares held in terms of sub-regulation (4) of
regulation 39 read with Schedule VI of the Securities and Exchange Board
of India (Listing Obligations and Disclosure Requirements) Regulations
2015:

Provided that such shareholders shall be certified by the Peer Review

Company Secretary appointed by the Board of Directors of the company for
due-diligence.

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 JMD 2.23 DELISTING

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.

Option to accept or reject the discovered price or counter offer

22. (1) The acquirer shall be bound to accept the equity shares tendered or offered in
the delisting offer, IF the discovered price determined through the reverse book
building process is equal to the floor price or the indicative price, if any, offered
by the acquirer.

(2) The acquirer shall be bound to accept the equity shares, at the indicative price, if any
offered by the acquirer, even if the discovered price determined through the reverse
book building process is higher than the floor price but less than the indicative
price.

(3) Nothing contained in sub-regulation (1) and (2) above shall apply, if the discovered
price is higher than the indicative price.

(4) In case the discovered price is NOT ACCEPTABLE to the acquirer, a COUNTER
OFFER may be made by the acquirer to the public shareholders within two
working days of the closure of bidding period and thereafter, the acquirer shall
ensure compliance with the provisions of these regulations in accordance with the
timelines provided in Schedule IV of these regulations.

(5) The counter offer price shall not be less than the BOOK VALUE of the company
as certified by the Manager to the offer.

Explanation, — For the purpose of sub-regulation (5), the book value shall be computed
on thebasis of both consolidated and standalone financial statements of the company as
per the latest quarterly financial results filed by the company on the recognized stock
exchange(s) as on the date of public announcement for counter offer, and the higher of
the values so computed shall be treated as the book value.

Failure of the offer

23. (1) The delisting offer shall be considered to have failed under the following
circumstances:-

(a) the minimum number of shares are not tendered / offered as provided under
clause (a) of regulation 21 of these regulations.

Explanation,— If a counter offer has been made by the acquirer in terms of

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 JMD 2.24 DELISTING

sub- regulation (4) of regulation 22 of these regulations, the failure of the said
counter offer shall be considered in accordance with clause (a) above; or
(b) the price discovered through the reverse book building process is REJECTED
by the acquirer.
(2) In case of failure of the delisting offer,

(a) the equity shares tendered / offered in terms of Schedule II or Schedule IV of

these regulations as the case may be, shall be released-

(i) on the date of disclosure of the outcome of the reverse book building
process under regulation 17(3) of these regulations if the minimum number
of shares as provided under regulation 21(a) of these regulations are not
tendered / offered;

(ii) on the date of making public announcement for the failure of the delisting
offer under regulation 17(4) of these regulations if the price discovered
through the reverse book building process is REJECTED by the acquirer;

(iii) in accordance with Schedule IV of these regulations if a counter offer has

been made by the acquirer:

Provided that the acquirer shall not be required to return the shares if the
offer is made pursuant to regulation 5A of Takeover Regulations.

(b) the expenses relating to the offer for delisting shall be borne by the acquirer.

(c) the acquirer, whose delisting offer has FAILED, shall not make another
delisting offer until the expiry of six months-

(i) from the date of disclosure of the outcome of the reverse book building
process under sub-regulation (3) of regulation 17 of these regulations if the
minimum number of shares as provided under clause (a) of regulation 21
of these regulations are not tendered / offered;

(ii) from the date of making public announcement for the failure of the delisting
offer under sub-regulation (4) of regulation 17 of these regulations if the
price discovered through the reverse book building process is REJECTED
by the acquirer;

(iii) from the date of making public announcement for the failure of counter offer
as provided under Schedule IV of these regulations.

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 JMD 2.25 DELISTING

(3) Nothing contained in clause (c) of sub-regulation (2) shall be applicable to the
delisting ofequity shares made by a new promoter(s) pursuant to the re-classification
in terms of the provisions of the Securities and Exchange Board of India (Listing
Obligations and Disclosures Requirements) Regulations, 2015 or a new acquirer(s)
who has made an offer under regulation 5A of Takeover Regulations.

Payment upon success of the offer

24. (1) All the public shareholders, whose bids are accepted, shall be paid the
discovered price or a higher price, if any, offered by the acquirer in terms
of sub-regulation (6) of regulation 20 of these regulations, as stated in the public
announcement in the following manner -

(i) In case the discovered price is equal to the floor price or the indicative price as
provided under regulation 20, or in case the acquirer is bound to accept the equity
shares in the delisting offer in terms of sub-regulation (2) of regulation 22 of these
regulations, the payment shall be made through the secondary market
settlement mechanism;

(ii) In case the discovered price or the price, if any, offered by the acquirer in terms
of sub-regulation (6) of regulation 20 of these regulations, is HIGHER THAN
the floor price or the indicative price, as the case may be, the payment shall be
made WITHIN FIVE WORKING DAYS from the date of the public
announcement under sub-regulation (4) of regulation 17 of these regulations.

(2) The acquirer shall be liable to pay interest at the rate of 10% per annum to all the
shareholders, whose bids have been accepted in the delisting offer, if the price payable
in terms of sub-regulation (1) is not paid to all the shareholders within the time
specified thereunder:-

Provided that in case the delay was not attributable to any act or omission of the acquirer
or was caused due to the circumstances beyond the control of the acquirer, the Board
may grant waiver from the payment of such interest.

Final application to the stock exchange after successful delisting

25. (1) WITHIN FIVE WORKING DAYS from the date of making the payment to
the public shareholders in terms of regulation 24 of these regulations, the acquirer
shall make the final application for delisting to the relevant recognised stock
exchange(s) in the Form specified by such stock exchange(s) from time to time.

(2) The final application for delisting shall be accompanied with necessary details /
information, as the recognised stock exchange(s) may require, of having provided
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 JMD 2.26 DELISTING

the exit opportunity in accordance with the provisions of this Chapter.

(3) The final application for delisting shall be disposed of by the recognised stock
exchange(s)WITHIN FIFTEEN WORKING DAYS from the date of receipt of such
application that is complete in all respects.

(4) Upon disposal of the final application for delisting by the stock exchange(s) in terms
of sub-regulation (3), the equity shares of the company shall be permanently delisted
from the stock exchange(s).

Right of the remaining public shareholders to tender equity shares

26. (1) The remaining public shareholders, whose shares were either not accepted or
werenot tendered at all during the bidding period, shall have a right to tender their
equity shares for a MINIMUM PERIOD OF ONE YEAR from the date of
delisting.

(2) The acquirer shall be under an obligation during such period to accept the shares of
the remaining public shareholders under sub-regulation (1), at the same price at
which the equity shares had been delisted.

(3) The payment of consideration for equity shares accepted under sub-regulation (2)
shall be made out of the balance amount lying in the escrow account.

(4) The Manager to the offer shall ensure that the amount lying in the escrow account
or the bank guarantee shall not be released to the acquirer for a minimum period
of one year or till the time payment has been made to the remaining public
shareholders, whichever is earlier.

Measures to protect the rights of remaining public shareholders

27. (1) The Manager to the offer, in coordination with the acquirer shall ensure that the
rights of the remaining public shareholders are protected and in furtherance of the
same shall:-

(a) publish, on a quarterly basis, an advertisement in the same newspapers in

which the detailed public announcement of the offer for delisting of equity
shares was published, inviting the remaining public shareholders to avail the
exit opportunity during the ONE YEAR EXIT WINDOW after delisting of
shares;

(b) send follow up communications to the remaining public shareholders on a

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 JMD 2.27 DELISTING

quarterly basis; and

(c) file a quarterly progress report to the stock exchange(s), which shall be
disseminated to the public thereafter by the stock exchange(s), disclosing the
following:

(i) number of remaining public shareholders at the beginning and end of

the quarter; and

(ii) details of public shareholders who availed the exit opportunity during
the quarter.

(2) The stock exchange(s) shall monitor the compliance of sub-regulation (1).

Obligations of the company

28. (1) Upon receipt of the detailed public announcement, the Board of Directors
of the company shall constitute a Committee of independent directors to provide
reasoned recommendations on the delisting offer.

(2) The Committee of independent directors shall provide its written reasoned
recommendations on the proposal for delisting of equity shares to the Board of
Directors of the company and in relation thereto, the Committee may also seek
external professional advice atthe expense of the company.

(3) The Committee of independent directors, while providing reasoned

recommendations on the delisting proposal, shall disclose the voting pattern of
the meeting in which the said proposal was discussed.

(4) The company shall publish such recommendations of the Committee of

independent directors, along with the details of the voting pattern, AT LEAST
TWO WORKING DAYS BEFORE THE COMMENCEMENT OF THE
BIDDING PERIOD, in the same newspapers in which the detailed public
announcement of the offer for delisting of equity shares was published, and
simultaneously, a copy of the same shall be sent to the stock exchange(s) and
the Manager to the offer.

Obligations of the Manager to the offer

29. (1) Before making the detailed public announcement, the Manager to the offer for
delisting of equity shares shall ensure that, —

(a) the acquirer is able to implement the delisting offer; and

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 JMD 2.28 DELISTING

(b) firm arrangements for funds through verifiable means have been made by
the acquirer to meet the payment obligations under the delisting offer.

(2) The Manager to the offer shall ensure that the CONTENTS of the initial public
announcement, the detailed public announcement, the letter of offer and the post-
bidding advertisement(s) are complete, true, fair and adequate in all material
aspects, based on reliable sources and are in compliance with the requirements
under these regulations and other applicable securities laws.

(3) The Manager to the offer shall ensure that market intermediaries engaged for the
purpose of the delisting of equity shares are registered with the Board.

(4) The Manager to the offer shall exercise due diligence, care and professional
judgment to ensure compliance with these regulations.

(5) The Manager to the offer shall not, either directly or indirectly through its
associates, deal in its own account in the shares of the company after its
appointment as Manager to the offer till the conclusion of the delisting offer.

(6) It shall be the responsibility of the Manager to the offer to ensure that the acquirer
complies with the provisions of these regulations.

Obligations of the acquirer

30. (1) Prior to making the initial public announcement of the offer for the
delisting of equity shares under these regulations, the acquirer shall ensure that firm
financial arrangementshave been made for fulfilling the payment obligations under
the delisting offer and that the acquirer is able to implement the delisting offer, subject
to any statutory approvals for the delisting offer that may be necessary.

(2) The acquirer shall ensure that the contents of the initial public announcement, the
detailed public announcement, the letter of offer and announcement about success or
failure of the offer for delisting are true, fair and adequate in all material aspects,
not misleading and based on reliable sources that shall be mentioned wherever
necessary.
(3) The acquirer and the persons acting in concert with it shall be JOINTLY AND
SEVERALLY RESPONSIBLE for the fulfilment of the applicable obligations under
these regulations.
(4) The acquirer shall ensure to acquire the shares offered by the remaining public
shareholders at the SAME PRICE at which the equity shares had been delisted for a
Page 28
 JMD 2.29 DELISTING

minimum period of one year.

(5) No acquirer or persons acting in concert with it shall sell shares of the company
DURING THE DELISTING PERIOD.

Cancellation of outstanding depository receipts

31. 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 one year of such delisting.

CHAPTER V

COMPULSORY DELISTING

Compulsory delisting by a stock exchange

32. (1) A recognised stock exchange may, by a reasoned order, delist equity shares
of a company on any ground prescribed in the rules made under the Securities
Contracts (Regulation) Act, 1956 (42 of 1956):

Provided that no order shall be issued under this sub-regulation unless the company
has been given a reasonable opportunity of being heard.

(2) The decision regarding the compulsory delisting shall be taken by A PANEL to be
constituted by the recognised stock exchange consisting of –

(a) two directors of the recognised stock exchange one of whom shall be a
public representative;

(b) one representative of an investor association recognised by the Board;

(c) one representative of the MCA or Registrar of Companies; and

(d) the Executive Director or Secretary of the recognised stock exchange.

(3) Before passing an order under sub-regulation (1), the recognised stock exchange
shall give a NOTICE in at least one English national newspaper with wide
circulation, one Hindi national newspaper with wide circulation in their all India
editions and one vernacular newspaper of the region where the relevant recognised
stock exchange is located, of the proposed delisting, giving a time period of not
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 JMD 2.30 DELISTING

less than 15 working days from the date of such notice, within which
REPRESENTATIONS, if any, may be made to the recognised stock exchange by
any person aggrieved by the proposed delisting and shall also display such notice on
its trading systems and website.

(4) The recognised stock exchange shall, while passing any order under sub-regulation
(1), consider the representation, if any, made by the company and also any
representation received in response to the notice given under sub-regulation (3),
and shall comply with the guidelines provided in Schedule III of these regulations.

(5) Where the recognised stock exchange PASSES AN ORDER under sub-regulation
(1), it shall, -

(a) forthwith publish a NOTICE in one English national newspaper with wide
circulation,one Hindi national newspaper with wide circulation in their all India
editions and one vernacular newspaper of the region where the relevant
recognised stock exchange is located, OF THE FACT OF SUCH DELISTING,
disclosing therein the name and address of the company, the fair value of the
delisted equity shares determined under regulation 33(1) of these regulations and
the names and addresses of the promoters of the company who would be liable
TO PAY FAIR PRICE under sub-regulation 33(4) of these regulations;

(b) inform all other stock exchanges where the equity shares of the company are
listed,about such delisting; and

(c) upload a copy of the said order on its website.

(6) The provisions of Chapter IV of these regulations shall not be applicable to a

compulsory delisting made by a recognised stock exchange under this Chapter.

Rights of public shareholders in case of compulsory delisting

33. (1) Where the equity shares of a company are delisted by a recognised stock
exchange under this Chapter, the recognised stock exchange shall appoint an
independent valuer(s) who shall determine the FAIR VALUE of the delisted equity
shares.

(2) The recognised stock exchange shall form a Panel of expert valuers and FROM THE
SAID PANEL, the valuer(s) for the purposes of sub-regulation (1) shall be appointed.

(3) The value of the delisted equity shares shall be determined by the valuer(s) having
regard to the factors mentioned in sub-regulation (2) of regulation 20 of these
regulations.
Page 30
 JMD 2.31 DELISTING

(4) The promoter(s) of the company shall acquire the delisted equity shares from the
public shareholders by paying them the value determined by the valuer,
WITHIN THREE MONTHS OF THE DATE OF DELISTING from the recognised
stock exchange, subject to the option of the public shareholders to retain their
shares.

(5) The promoter shall be liable to pay interest at the rate of 10% per annum to all
the shareholders, who offer their shares under the compulsory delisting offer, IF the
price payable in terms of sub-regulation (3) IS NOT PAID TO ALL the shareholders
within the time specified undersub-regulation (4):

Provided that in case the delay was not attributable to any act or omission of the
acquirer or was caused due to the circumstances beyond the control of the acquirer,
the Board may grant waiver from the payment of such interest.

Consequences of compulsory delisting

34. (1) Where a company has been compulsorily delisted under this Chapter, the
company, its whole-time directors, person(s) responsible for ensuring compliance with the
securities laws, its promoters and the companies which are promoted by any of them
shall not – (i) directly or indirectly access the securities market, or (ii) seek listing
of any equity shares, or (iii) act as an intermediary in the securities market for a period
of ten years from the date of such delisting.

(2) In case of a company whose fair value is positive -

(a) such a company and the depositories shall not effect transfer, by way of sale,
pledge, etc., of any of the equity shares held by the promoters / promoter group
and the corporate benefits like dividend, rights, bonus shares, split, etc. shall
be FROZEN for all the equity shares held by the promoters/ promoter
group, TILL THE PROMOTERS OF SUCH COMPANY PROVIDE AN
EXIT OPTION to the public shareholders in compliance with sub- regulation
(4) of regulation 33 of these regulations, as certified by the relevant
recognized stock exchange;

(b) the promoters, whole-time directors and person(s) responsible for ensuring
compliance with the securities laws, of the compulsorily delisted company
shall also not be eligible to become directors of any listed company till the
exit option as mentioned in clause (a) is provided.

(3) The stock exchange(s) shall monitor the compliance of the provisions of this
Chapter and take appropriate action for non-compliance thereof in accordance with
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JMD 2.32 DELISTING

the provisions of these regulations.

PROCEDURE OF COMPULSORY DELISTING

[UNDER R. 32, 33 AND 34]

Step (i) - Listed company is a defaulter company

Step (ii) - STX constitutes a “panel” of 5 members

Panel gives 3 newspaper notices about “proposed

Step (iii) -
decision” of delisting of defaulter company.
Within 15 w. Days

“ROOBH” will be given to Any aggrieved SH can

Step (iv) - the concerned defaulter and file objections to the
company STX.

Panel will consider all the above representations received

Step (v) - from the company and objections received from persons.

Step (vi) - Panel passes the final order for Delisting

Step (vii) - Panel gives 3 newspaper notices after passing final order [4 contents]

Step (viii) - Promoters shall pay the fair value of the shares to the public SHs.

---*---

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 JMD 2.33 DELISTING

CHAPTER VI

Part - A

SPECIAL PROVISIONS FOR SMALL COMPANIES

Delisting of equity shares of small companies

35. (1) Equity shares of a company may be delisted from all the recognised stock
exchanges where they are listed, WITHOUT following the procedure of exit
opportunity in Chapter IV of these regulations, if,-

(a) the company has a paid up capital not exceeding 10 crore rupees AND net
worth not exceeding 25 crore rupees as on the last date of preceding
financial year;

(b) the number of equity shares of the company traded on each such recognised
stock exchange during the 12 calendar months immediately preceding the
date of board meeting held for consideration of the proposal referred to in
regulation 10(4) of these regulations is LESS THAN 10% of the total
number of shares of the company:

Provided that where the share capital of a particular class of shares of the
company is not constant throughout such period, the weighted average of
the shares of such class shall represent the total number of shares of such
class of the company;

(c) 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.

(2) Delisting of equity shares may be made under sub-regulation (1) only if, IN
ADDITION TO fulfilment of the requirements of regulations 10 and 11 of these
regulations, the following conditions are fulfilled:-

(a) acquirer(s) appoints a Manager to the offer and decides an exit price after
consultation;

(b) the exit price offered to the public shareholders shall not be less than the floor
price determined in terms of regulation 8(2)(e) of the Takeover Regulations;

(c) the acquirer writes individually to all the public shareholders of the company
informing them of its INTENTION to get the equity shares delisted, the EXIT
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 JMD 2.34 DELISTING

PRICE together with the JUSTIFICATION therefor and seeking their consent
for the proposal for delisting;
(d) the public shareholders, irrespective of their numbers, holding 90% or more of
the public shareholding give their consent in writing to the proposal for
delisting, and consent either to sell their equity shares at the price offered by the
acquirer or to continue to hold the equity shares even if they are delisted;
(e) the acquirer completes the process of inviting the positive consent and
finalisation of the proposal for delisting of equity shares within 75 working
days of the first communication made under clause (c);
(f) the acquirer makes payment of consideration in cash within 15 working days
from the date of expiry of 75 working days mentioned in clause (e).

(3) The communication made to the public shareholders under clause (c) of sub-
regulation (2) shall contain justification for the offer price with particular
reference to the applicable parameters mentioned in sub-regulation (2) of
regulation 20 of these regulations AND SPECIFICALLY MENTION that consent
for the proposal would include consent for dispensing with the exit price
discovery through reverse book building method.

(4) The acquirer shall be liable to pay interest at the rate of 10% per annum to all
the shareholders, whose bids have been accepted in the delisting offer, if the price
payable in terms of sub-regulation (2) is not paid to all the shareholders within
the time specified thereunder:

Provided that in case the delay was not attributable to any act or omission of the
acquirer or was caused due to the circumstances beyond the control of the acquirer,
the Board may grant WAIVER from the payment of such interest.

(5) The relevant recognised stock exchange may delist such equity shares upon
satisfying itself of compliance with this regulation.

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JMD 2.35 DELISTING

PROCEDURE OF VOLUNTARY DELISTING OF MINI COMPANIES

[UNDER R. 35]

Step (i) - Board Meeting - BOD resolution for voluntary delisting

u/r 10

Step (ii) - Special Resolution by Postal Ballot / evoting u/r 11

Step (iii) - Appointment of Merchant Banker by acquirer.

Step (iv) - Acquirer and Merchant Banker calculate “Exit Price” as

per R. 8(2)(e) of TAKEOVER CODE

Step (v) -
Acquirer send individual notices to ALL Public
shareholders offering the exit price

If within 75 working days

Step (vi) - Public shareholders holding at least 90% of the public

shareholding agree for proposed delisting , AND either
agree to give their shares to promoters, or, continue to hold
the shares even after delisting.

Then Within next 15 working days

Step (vii) -
Acquirer shall give payment to concerned Shareholders.

---*---

Page 35
 JMD 2.36 DELISTING

Part - B

SPECIAL PROVISIONS FOR COMPANIES LISTED ON INNOVATORS

GROWTH PLATFORM

Delisting of equity shares of companies listed on innovators growth platform after

making an initial public offer

36. (1) The provisions of these regulations, shall mutatis mutandis apply to delisting
of equity shares of a company listed on innovators growth platform after making
a public issue, SUBJECT TO the provisions of sub-regulation (2).

(2) 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:
Provided that 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 applicable, 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 75% of the
total issued shares of that class AND at least 50% shares of the public
shareholders as on date of the board meeting referred to in clause (a) of sub-
regulation (2) are tendered and accepted; and
(e) the recognised stock exchange(s), on which its shares are listed, approves of
such delisting.

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 JMD 2.37 DELISTING

Part - C

SPECIAL PROVISIONS FOR A SUBSIDIARY COMPANY GETTING

DELISTED THROUGH A SCHEME OF ARRANGEMENT WHEREIN THE
LISTED HOLDING COMPANY AND THE SUBSIDIARY COMPANY ARE IN
THE SAME LINE OF BUSINESS

Delisting of equity shares of a subsidiary company pursuant to a scheme of arrangement

37. (1) Nothing contained in these regulations shall apply to the delisting of equity
shares of a subsidiary company, pursuant to a scheme of arrangement by an order
of a Court or Tribunal WITH ITS LISTED HOLDING COMPANY, whose equity
shares are frequently traded, AND where the listed holding company and the
subsidiary company are in the same line of business.

(2) The delisting of the equity shares of a subsidiary company in terms of sub-
regulation (1) shall be permitted subject to the following:-

a) the listed holding company shall provide for the issue of its equity shares in
lieu of cancellation of any equity shares in the delisting subsidiary company;

b) upon such delisting becoming effective, the subsidiary company shall

become a wholly owned subsidiary of the listed holding company;

c) compliance with regulations 11, 37 and 94 of the Securities and Exchange

Board of India (Listing Obligations and Disclosure Requirements)
Regulations, 2015 and the Circulars issued thereunder;

d) e-voting from shareholders of both listed companies wherein votes cast by

public shareholders of the LISTED SUBSIDIARY in favour of the proposal
are at least two times the number of votes cast against it; and the votes cast
by the public shareholders of theLISTED HOLDING COMPANY in favour of
the proposal are more than the number of votes cast by the public shareholders
against it;
e) the shares of the listed holding company and the subsidiary company are listed
for atleast 3 years and shall not be suspended at the time of taking this route;

f) the subsidiary company has been a listed subsidiary of the listed holding
company for the past three years;

g) no adverse orders have been passed by the Board in the past 3 years against

Page 37
 JMD 2.38 DELISTING

the listed holding company and the listed subsidiary company;

h) no further restructuring shall be undertaken by the listed holding company

for a period of 3 years from the date of the Order of the Court or Tribunal
approving the scheme of arrangement;

i) the equity shares of the listed subsidiary so delisted, shall not be allowed to
seek relisting for a period of three years from the date of delisting and such
relisting shall be in terms of sub-regulation (3) and (4) of regulation 40 of these
regulations; and,

j) the valuation of shares of the listed subsidiary per share shall not be less than
60 days volume weighted average price.

Explanation,— The Reference Date for computing the volume weighted average
price would be the date on which the recognized stock exchange(s) was required to
be notified of the board meeting in which the delisting proposal of the subsidiary
was considered and approved.

Part – D

SPECIAL PROVISIONS FOR DELISTING BY OPERATION OF LAW

Delisting in case of winding up of a company and de-recognition of a stock exchange

38. (1) In case of winding up proceedings of a company whose equity shares are listed
on a recognised stock exchange, the rights, if any, of the shareholders of such
company shall be in accordance with the laws applicable to those proceedings.

(2) Where the Board withdraws recognition granted to a stock exchange or refuses
renewal of recognition to it, the Board may, in the interest of investors pass
appropriate order(s) in respectof the status of equity shares of the companies listed
on that stock exchange.

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 JMD 2.39 DELISTING

CHAPTER VII

MISCELLANEOUS

Recognised stock exchanges to monitor compliance

39. The respective recognised stock exchange(s) shall adhere to the provisions of these
regulations, monitor compliance with the provisions of these regulations and shall
report to the Board any non-compliance which comes to their notice.

Listing of delisted equity shares

40. (1) No application for listing shall be made in respect of equity shares of a company,-

(a) which have been delisted under Chapter III or under Chapter VI of these
regulations, for a period of three years from the delisting;

(b) which have been delisted under Chapter V of these regulations, for a period of ten
yearsfrom the delisting.

(2) Notwithstanding anything contained in sub-regulation (1), an application for listing

of delisted equity shares may be made in respect of a company:

(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 of these
regulations.

(3) While considering an application for listing of equity shares of a company which
had been delisted earlier, the recognised stock exchange shall give due regard to
the facts and circumstances under which such equity shares were delisted.

(4) An application for listing made in respect of delisted equity shares shall be deemed
to be an application for fresh listing of such equity shares and shall be subject to
provisions of law relating to listing of equity shares of unlisted companies:

Provided that the company shall make appropriate disclosures in the offer document
about the reasons for seeking listing after delisting.
Page 39
 JMD 2.40 DELISTING

CHAPTER VIII

Power of the Board to issue clarifications

41. In order to remove any difficulties in the application or interpretation of these

regulations, the Board may issue clarifications and guidelines from time to time.

Power to relax strict enforcement of the regulations.

42. (1) The Board may, in the interest of investors or for the development of the
securities market, relax the strict enforcement of any requirement of these
regulations, if the Board is satisfied that-

a. the requirement is procedural in nature; or

b. any disclosure requirement is not relevant for a particular class of industry
or company; or
c. the non-compliance was caused due to factors beyond the control of the acquirer.

(2) For seeking relaxation under sub-regulation (1), the acquirer or the company shall
file an application with the Board, supported by a duly sworn affidavit, providing
details of such relaxation of the regulations and the grounds on which the
relaxation has been sought.

(3) The acquirer or the company, as the case may be, shall along with the application
referred to under sub-regulation (2) pay a non- refundable fee of rupees one lakh, by
way of direct credit in the bank account through electronic modes including payment
gateways or such other modeallowed by the Reserve Bank of India.

(4) The Board may also exempt any person or class of persons from the operation of all
or anyof the provisions of these regulations for a period as may be specified but not
exceeding twelve months, for furthering innovation 1[***] relating to testing new
products, processes, services, business models, etc. in live environment of
regulatory sandbox in the securities markets.

(5) Any exemption granted by the Board under sub-regulation (5) shall be subject to the
applicant satisfying such conditions as may be specified by the Board including
conditions to be complied with on a continuous basis.

Explanation,— For the purposes of these regulations, "regulatory sandbox" means a live
testingenvironment where new products, processes, services, business models, etc. may
be deployed on a limited set of eligible customers for a specified period of time, for
furthering innovation in the securities market, subject to such conditions as may be
specified by the Board.

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 JMD 2.41 DELISTING

Directions by the Board

43. Without prejudice to provisions of the Act and those of the Securities Contracts
(Regulation) Act, 1956 (42 of 1956), the Board may in case of any violation of these
regulations and in the interests of the investors and the securities market issue such
directions as it deems fit.

Repeal and Savings

44. (1) The Securities and Exchange Board of India (Delisting of Equity Shares)
Regulations, 2009, stand repealed from the date on which these regulations come
into force.

(2) Notwithstanding such repeal,—

(a) anything done or any action taken or purported to have been done or taken
including in-principle approval given by the recognised stock exchanges,
relaxation or exemption granted by the Board, fee collected, any
adjudication, enquiry or investigation commenced or show cause notice
issued under the repealed regulations, prior to such repeal, shall be deemed
to have been done or taken under the corresponding provisions of these
regulations;

(b) the previous operation of the repealed regulations or anything duly done or
suffered thereunder, any right, privilege, obligation or liability acquired,
accrued or incurred under the repealed regulations, any penalty, forfeiture or
punishment incurred in respect of any contravention or offence committed
against the repealed regulations, or any investigation, proceeding or remedy
in respect of any such right, privilege, obligation, liability, penalty, forfeiture
or punishment as aforesaid, shall remain unaffected as if the repealed
regulations had never been repealed;

(c) nothing contained in clause (a) shall apply to any delisting offer in respect of
which a public announcement has been made under the repealed
regulations, and such delisting offer shall be required to be continued and
completed under the repealed regulations.

(3) subsequent to the repeal of Securities and Exchange Board of India (Delisting of
equity shares) Regulations, 2009, any reference thereto in any other regulations,
guidelines or circulars issued by the Board shall be deemed to be a reference to the
corresponding provisions of these regulations.

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 JMD 2.42 DELISTING

SCHEDULE I

See regulation 15(2)

CONTENTS OF THE DETAILED PUBLIC ANNOUNCEMENT

1. The floor price and the offer price and how they were arrived at.

2. The indicative price, if any, given by the acquirer.

3. The dates of opening and closing of the bidding period.

4. The name of the stock exchange from which the equity shares are sought to be delisted.

5. The manner in which the delisting offer can be accepted by the shareholders.

6. Disclosure regarding the minimum acceptance condition for success of the offer.

7. The name(s) of the Manager to the offer and other intermediaries together with the
helpline number for the shareholders.

8. The specified date fixed as per sub-regulation (3) of regulation 15 of these regulations.

9. The object of the proposed delisting.

10. The proposed time table from opening of the delisting offer till the payment of
considerationor return of equity shares.

11. Details of the escrow account and the amount deposited therein.

12. Listing details and stock market data including:

(a) high, low and average market prices of the equity shares of the company during
thepreceding three years;

(b) monthly high and low prices for the six months preceding the date of the detailed
publicannouncement; and,

(c) the volume of equity shares traded in each month during the six months
preceding the date of detailed public announcement.

13. Present capital structure and shareholding pattern of the company.

14. The expected post-delisting shareholding pattern of the company.

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 JMD 2.43 DELISTING

15. The aggregate shareholding of the acquirer with persons acting in concert and of the
directors of the acquirer where the acquirer is a company and of persons who are in
control of the company.
16. A statement, certified to be true by the Board of Directors of the company,
disclosing material deviation, if any, in utilisation of proceeds of issues of securities
made during the five years immediately preceding the date of detailed public
announcement, from the stated objectsof the issues.

17. A statement by the Board of Directors of the company confirming that all material
information which is required to be disclosed under the provisions of continuous listing
requirement have been disclosed to the stock exchanges.

18. List of documents copies of which shall be available for inspection by the public
shareholders at the registered office of the Manager to the offer during the working days.

19. A statement by the Board of Directors of the company certifying that:-

(a) the company is in compliance with the applicable provisions of securities laws;

(b) the acquirer or its related entities have not carried out any transaction during the
aforesaid period to facilitate the success of the delisting offer which is not in
compliance with the provisions of sub-regulation (5) of regulation 4 of these
regulations;

(c) the delisting, in their opinion, is in the interest of the shareholders.

20. Name of compliance officer of the company.

Page 43
 JMD 2.44 DELISTING

SCHEDULE II

See regulation 20(1)

THE REVERSE BOOK BUILDING

PROCESS

1. The reverse book building process shall be made through an electronically linked
transparent facility and the acquirer shall enter into an agreement with a stock
exchange for this purpose.

2. The detailed public announcement and letter of offer shall be filed without delay with
the stock exchange mentioned in clause 1 and such stock exchange shall forthwith
post the same on its website.

3. The minimum number of bidding centres shall be:

(a) the four metropolitan centres situated at Mumbai, Delhi, Kolkata and Chennai;

(b) such cities in the region in which the registered office of the company is situated,
as arespecified by the stock exchange mentioned in clause 1.

4. There shall be at least one electronically linked computer terminal at all bidding centres.

5.The shareholders may withdraw or revise their bids upwards not later than one day
before the closure of the bidding period. Downward revision of bids shall not be
permitted.

6.The acquirer shall appoint ‘trading members’ at the bidding centres, whom the public
shareholders may approach for placing bids on the on-line electronic system.

7.The shareholders holding dematerialized shares, desirous of availing the exit

opportunity may enter their bid by way of marking a lien in favour of the special
depositories account opened by the Manager to the offer.

8.The Manager to the offer shall ensure that the equity shares in the said special
depositories account are not transferred to the account of the acquirer unless the
bids in respect thereof are accepted and payments in respect thereof are made.

9.The holders of physical equity shares shall ensure that the bidding form, together
with the share certificate and transfer deed, is RECEIVED BY THE SHARE
TRANSFER AGENT APPOINTED FOR THE PURPOSE BEFORE THE LAST
DATE OF BIDDING PERIOD. The share transfer agent shall deliver the certificates,
Page 44
 JMD 2.45 DELISTING

which are found to be genuine, to the Manager to the offer, who shall not hand it
over to the acquirer unless the bids in respect thereof are accepted and payment in
respect thereof is made. The bids in respect of the certificates which are found to be
non-genuine shall be deleted from the system.

10. The verification of physical certificates for making the public announcement
under regulation 17 of these regulations shall be completed on the day on which
they are received by the share transfer agent.

11. The bids placed in the system shall have an audit trail which includes stock broker
identification details, time stamp and unique order number.

12. Clauses 1 to 11 shall not be applicable in respect of the book building process where
settlement is carried out through stock exchange mechanism as specified in sub-
regulation (2) of regulation 17 of these regulations.

13. The discovered price shall be determined as the price at which shares are accepted
through eligible bids, that takes the shareholding of the acquirer (along with
the persons acting in concert) to 90% of the total issued shares of that class
excluding the shares which are held by following:

(i) a custodian(s) holding shares against which depository receipts have been
issued overseas;

(ii) a trust set up for implementing an Employee Benefit scheme under the
Securities and Exchange Board of India (Share Based Employee Benefits)
Regulations, 2014;

(iii) inactive shareholders such as vanishing companies, struck off companies,

shares transferred to Investor Education and Protection Fund account and
shares held in terms of sub-regulation (4) of regulation 39 read with
Schedule VI of Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations 2015.

Page 45
 JMD 2.46 DELISTING

14. An illustration for arriving at the discovered price is given in the table below:

Bid Number Demand Cumulativ

pric of (Number edemand
e(₹) investor ofshares) (Number
s ofshares)

550 5 2,50,000 2,50,000

565 8 4,00,000 6,50,000

575 10 2,00,000 8,50,000

585 4 4,00,000 12,50,000

595 6 1,20,000 13,70,000

600 5 1,30,000 15,00,000 Final Offer Price

605 3 2,10,000 17,10,000

610 3 1,40,000 18,50,000

615 3 1,50,000 20,00,000

620 1 5,00,000 25,00,000

Total 48 25,00,000 Not applicable

Assuming floor price of ₹550/- per share, shareholding of the acquirer at 75%
and number of shares required for successful delisting as 15,00,000, the
discovered pricewould be the price at which the acquirer reaches the threshold
of 90%, i.e., it would be ₹600/- per share.

Page 46
 JMD 2.47 DELISTING

SCHEDULE III

See regulation 32 (4)

GUIDELINES FOR COMPULSORY DELISTING

1. The recognised stock exchange shall take into account the grounds prescribed in the
rules made under the Securities Contracts (Regulation) Act, 1956 (42 of 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, with a view to ensuring
compliance with sub-regulation (4) of regulation 33.

3. The recognised stock exchange shall consider the nature and extent of the alleged
non- compliance 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 (18 of 2013) and the rules
and regulations made thereunder, by the company with the office of the concerned
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 another 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 (42 of 1956) or
any other law for the time being in force against identifiable promoters and directors 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 (18 of 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.

Page 47
 JMD 2.48 DELISTING

SCHEDULE IV
See regulation 22(4)

Timelines for counter offer

Sr. Activity Timelines

No.
1. Public announcement of counter offer by Within two working days from the
theacquirer through stock exchange date of closure of reverse book
building bidding process
mechanism
2. Publication of counter offer public Within four working days from
announcement (COPA) in the same the closure of the reverse book
newspapers where the detailed public building g bidding process
announcement was made
3. Option to withdraw the shares tendered Within ten working days from the
during the reverse book building process counter offer public announcement
4. Dispatch of “Letter of offer for counter Within four working days from the
offer”. closure of the reverse book building
bidding process
5. Opening of counter offer bidding process Not later than seven working days
from the date of public announcement
6. Closing of counter offer bidding process Not later than five working days from
theopening of counter offer bidding
process
7. Public announcement of success/failure of Not later than five working days of
counter offer in the same newspaper in the closing of the counter offer bidding
which detailed public announcement under process
sub-regulation (1) of regulation 15 was made
8. 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
9 Release of equity shares On the date of making public
announcement of the Success or
failure of the counter offer

Page 48
 JMD 2.49 DELISTING

Delisting of Securities u/s 21A of SCRA

A recognised stock exchange may delist the securities, after recording the reasons therefor, from
any recognised stock exchange on any of the ground or grounds as may be prescribed under this
Act. However the securities of a company shall not be delisted unless the company concerned
has been given a reasonable opportunity of being heard.
A listed company or an aggrieved investor may file an appeal before the Securities Appellate
Tribunal against the decision of the recognised stock exchange delisting the securities within
15 days from the date of the decision of the recognised stock exchange delisting the securities.
However, the Securities Appellate Tribunal may, if it is satisfied that the company was
prevented by sufficient cause from filing the appeal within the said period, allow it to be filed
within a further period not exceeding one month.

COMPULSORY DELISTING -
Rule 21(1) of the Securities Contracts (Regulation) Rules, 1957 deals with delisting of
securities. A recognized stock exchange may, without prejudice to any other action that may be
taken under the Act or under any other law for the time being in force, delist any securities
listed thereon on any of the following grounds in accordance with the regulations made by
the SEBI, namely:–

(a) the company has incurred losses during the preceding three consecutive years and it
has negative networth;
(b) trading in the securities of the company has remained suspended for a period of more
than six months;
(c) the securities of the company have remained infrequently traded during the preceding
three years;
(d) the company or any of its promoters or any of its director has been convicted for failure
to comply with any of the provisions of the Act or the SEBI Act, 1992 or the
Depositories Act, 1996 or rules, regulations, agreements made thereunder, as the case
may be and awarded a penalty of not less than rupees one crore or imprisonment of not
less than three years;
(e) the addresses of the company or any of its promoter or any of its directors, are not
known or false addresses have been furnished or the company has changed its
registered office in contravention of the provisions of the Companies Act, 2013; or
(f) shareholding of the company held by the public has come below the minimum level
applicable to the company as per the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 and the company has failed to raise public holding
to the required level within the time specified by the recognized stock exchange.
However, no securities shall be delisted unless the company concerned has been given a
reasonable opportunity of being heard.
Page 49
 JMD 2.50 DELISTING

(2) If the securities are delisted ABOVE -

(a) the company, promoter and director of the company shall be jointly and severally liable
to purchase the outstanding securities from those holders who wish to sell them at a
fair price determined in accordance with regulations made by the SEBI, under the Act;
and
(b) the said securities shall be delisted from all recognized stock exchanges.

VOLUNTARY DELISTING BY LISTED COMPANY - Rule 21(3)

A recognized stock exchange may, on the request of the company, delist any securities listed
thereon in accordance with the regulations made under the Act by the SEBI, subject to the
following conditions, namely:
(a) the securities of the company have been listed for a minimum period of three years on the
recognized stock exchange;
(b) the delisting of such securities has been approved by the two-third of public shareholders;
and
(c) the company, promoter and/or the director of the company purchase the outstanding
securities from those holders who wish to sell them at a price determined in accordance with
regulations made by SEBI under the Act.
However, the condition at (c) may be dispensed with by SEBI if the securities remain listed at
least on the NSE or BSE.

Penalty for failure to comply with provision of listing conditions or delisting conditions or
grounds. (Sec. 23E of SCRA)

If – 1. a company, or 2. any person managing collective investment scheme, or 3. mutual fund,

or 4. real estate investment trust, or 5. infrastructure investment trust, or 6. alternative investment
fund, fails to comply with listing conditions or the delisting conditions or grounds or commits a
breach thereof, it or he shall be liable to a penalty which shall not be less than 5 lakh rupees
but which may extend to 25 crore rupees.

ROLE OF CS IN DELISTING –

The Board of Directors of the company, before considering the proposal of delisting, shall appoint a
Peer Review Company Secretary, who shall carry out the due-diligence and submit a report to the Board
of Directors of the company certifying that the buying, selling and dealing in the equity shares of the
company carried out by the acquirer or its related entities and the top twenty five shareholders is in
compliance with the applicable provisions of securities laws including compliance with these
regulations.
The SEBI has widen the area of responsibilities of a Company Secretary by mandating a listed
company to appoint Company Secretary to act as compliance officer under the SEBI (LODR)
Regulations. Being a compliance officer, it is the responsibility of a Company Secretary to look after
and ensure timely compliances of various SEBI regulations. In case of non-compliance with the listing

Page 50
 JMD 2.51 DELISTING

regulation a stock exchange may delist the securities of a company.

Apart from this, a Company Secretary has to appoint and co-ordinate with various
intermediaries, regulators, etc. and advise the Board of Directors, the various requirements of
Delisting.
---*---
Autoriders Finance Ltd. - Appellant … v. … NSE (Respondent)

Facts of the Case:

The National Stock Exchange of India Limited (‘NSE’) issued a show cause notice dated
August 26, 2020 to the appellant Company to show cause as to why the appellant Company
should not be compulsorily delisted under (now) Regulation 32(1) of the Delisting Regulations
on the ground of continuous non-compliance with respect to the requirements under the Listing
Regulations. Thereafter, the respondent sent an e-mail to the appellant Company on September
4, 2020 stating therein that reply has not been received by the respondent.
It transpires that the Delisting Committee considered the matter on September 24, 2020 and
thereafter passed the impugned order on November 27, 2020 directing compulsorily delisting
of the appellant Company under(now) Regulation 32(1) of the Delisting Regulations. The
appellant company is aggrieved by the order dated November 27, 2020.

The appellant contends that no opportunity of hearing was provided by the Delisting Committee
before passing the impugned order and therefore the said order is violative of the principles of
natural justice as embodied under Article 14 of the Constitution of India.
The proviso to Regulation 22(1) of the Delisting Regulations clearly indicates that no order
directing delisting of the shares of the Company shall be made unless the Company is given a
reasonable opportunity of being heard.
SAT Order:
SAT opined that the impugned order is violative of principles of natural justice since no notice
of hearing or opportunity of hearing was provided to the appellant Company. The proviso
clearly stated that no order shall be passed under (now) Regulation 32(1) unless the Company
has been given a reasonable opportunity of being heard.
It means that the Delisting Committee is required to give a notice for hearing which
admittedly no such notice was issued.
SAT HELD THAT, for the reasons stated aforesaid, the impugned order of NSE cannot be
sustained and is quashed.
---*---

Page 51
#1 Results in CS Foundation, Executive and Professional Level
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IA RAN K-HOLDERS IN CS FOUND

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ACL
: 80 Taare Zameen Par
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ACL ECL
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CL : 79 CL : 74 CL : 74 C L : 72 IL/GL
: 92

na Tanw
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ECL
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ECL
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6

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SL : 72 SL : 71 SL : 70 SL : 70 IL/GL
: 87 CR : 71 SL : 72

SL : 80 : 77 : 76 :8
IL/GL IL/GL ECL
: 74 IL/GL 1 DD : 81

ka Rana
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DD : 7
2 DD : 7 CR : 7
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ACL
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CR : 77

dules with full amendments

nc hin g new mo upto J
e are lau une
2018
• W
 NPS Chawla
Vice President Associate Partner

Preeti V. Arora
Associate Director

Kamini Sharma
Company Secretary

Nidhi Kalra
Company Secretary

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Company Secretary

Harry Arora
Company Secretary

AMTEK
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