Delisting of Shares
Delist Company from One/ All Stock Exchange
The process of taking a company’s shares off the stock exchange is delisting. A Listed company desirous of getting unlisted must Delist its shares through an open offer to its shareholders for delisting and stop trading of its shares thereafter. The Public shareholder is being provided with an opportunity to exit through this Open Offer in which promoters is required to acquire at least 90 % stake before delisting securities from a stock exchange.
Compulsory Delisting: A listed company is compelled to delist its securities due to non-compliance with the listing agreement.
Voluntary Delisting: A company seeking delisting from a stock exchange on its own motion.
- For a company with paid-up capital up to one crore and its shares were not traded for one year in any recognized stock exchange, Delisting under CHAPTER VII (SMALL ROUTE) is applicable.
- It is also applicable, where a company has not more than three hundred public shareholders with the paid up share value of up to 1 crore. A merchant banker is appointed to decide an exit price which is offered to the public shareholders.
- A proposal is sent to all public shareholders seeking their consent for delisting.
- Positive consent from at least 90% shareholders is required before finalizing of the proposal.
- Payment is made in cash within the stipulated period to complete the delisting process.
- Reverse book-building route makes delisting easier for companies. It reduces the timeline for delisting to 76 working days which was earlier 117 calendar days.
- Five working days are be given to stock exchange to give in-principle approval for delisting.
- Participation of Minimum 25 % public shareholders is needed in the reverse book building process.
- A notice is issued to the Board of Directors for convening a meeting to pass a resolution for Board approval for Delisting.
- For member approval, a notice is sent twenty-one days before convening the General meeting.
- A certified copy of the board resolution is submitted to the stock exchange.
- It is followed by the filing of required forms with the concerned registrar within 30 days along with the requisite fee, explanatory statement, notice of convening meeting, and certified copy of the resolution.
- Public notice is published mentioning the floor price, process of determination of this price, exchange from which the company is delisting, opening and closing date of the offer, bidding centers, market price of the securities for preceding three years, and shareholding pattern. This notice should be signed by the promoter.
- Arrangements are made for buying back the securities from the holders. The purchase price is calculated as per SEBI Guidelines.
- Circular (offer to buy shares) is sent to every shareholder of the company from the stock exchange where it is delisting.
- The service of a Merchant Banker are required for determining exit & final offer price, appointment of trading members, arrangement of biding centers, and settlement process.
Steps in Open Offer:
- Appointment of Merchant Banker
- Trigger Event (Share Purchase Agreement/ Resolution for allotment of Securities/ Acquisition of Shares beyond Threshold)
- Submission of Public Announcement
- Escrow Account For takeover transaction
- Publication of Detailed Public Statement
- Public Announcement of Open Offer
- Recommendation by the BOD of the target company
- Filing of Letter of Offer with the SEBI
- Incorporation of Observations of SEBI
- Dispatch of Offer Document/ Letter of Offer to shareholders
- Opening of Offer
- Post offer advertisement
- Settlement through Special Escrow Account
- Acquisition of shares and submission of Post Offer Monitoring report
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