New regulations for delisting equity shares

Just when things were looking good for promoter shareholders wanting to delist company equity shares, the Securities and Exchange Board of India (SEBI) notified new regulations for doing so. These took effect from 10 June and replace the SEBI (Delisting of Securities) Guidelines, 2003, in relation to the delisting of equity shares. Other listed securities are still covered by the 2003 guidelines.

The establishment of full regulations for delisting of equity shares is welcome. The regulations retain the basic framework of the guidelines yet clarify the procedure for delisting equity shares. They also introduce more stringent requirements for voluntary delisting of equity shares, making it much more difficult for promoters to delist entities they control.

Whether a voluntary delisting offer can be made by a person other than the promoter of a listed company is debatable. Unlike the guidelines, in which the loose term “acquirer” indicated that any person could make such an offer, the regulations suggest that a voluntary offer may only be made by a promoter to the public shareholders of the company. Where a company has more than one promoter, it appears that the exit opportunity will be available only to the public shareholders, to the exclusion of the other promoters.

Akila Agrawal is a partner at Amarchand & Mangaldas & Suresh A Shroff & Co.