Sebi to revise delisting norms

Current norms facilitate removal of securities of listed company from stock exchange with promoters buying out shares held by minority shareholders

Capital markets regulator Sebi may soon revise its delisting regulations to make it easier for publicly listed companies looking to go private, while safeguarding the interest of minority shareholders.

The current delisting regulations were put in place in 2009 and facilitates removal of the securities of a listed company from a stock exchange with promoters buying out shares held by minority shareholders.

The changes in Sebi's delisting norms are being considered to harmonise them with other regulations, including the new Companies Act, 2013 and other regulations of Sebi itself such as takeover and buyback norms, sources said.

An internal committee at the Securities and Exchange Board of India (Sebi) is currently looking into possible changes required in the delisting norms, pursuant to which comments can be sought from the general public and other stakeholders depending on the panel's recommendations.

Sebi has also received representations from industry bodies and various companies to make delisting norms easier and cost-effective for them, sources said, while adding that any changes in these regulations would be made while keeping in mind the interest of minority shareholders.

The main area of concern for the companies has been the norms related to offer price at which promoters are required to buy out the shares of public shareholders.

Any major relaxation is unlikely in the norms for cases of voluntary delisting, while there is a view that the process can be made easier and more cost-effective for cases when promoters are forced to delist their companies on account of factors like persistent losses, long-running trading suspension and major violations to regulations.

The grounds on which delisting are allowed include: the company having incurred losses during three consecutive years and having a negative networth, trading in shares having remained suspended for more than six months, infrequent trading for three years, and promoters or directors having been convicted for various rules with considerable penalties.

Besides, the companies are also required to get delisted in the event of their public shareholding falling below minimum threshold limits, which is 25% for private sector and 10% for public sector companies.

A voluntary delisting needs a special resolution to be passed by public shareholders, where votes cast in favour of the proposal requires to be at least two times the number of votes cast against it. The company promoters are required to purchase all outstanding shares of willing shareholders at a price determined in accordance with various norms.