Delisting norms: Sebi provides relaxations for insolvent firms

Sebi has relaxed requirements to comply with delisting norms for companies facing insolvency proceedings provided the resolution plan lays down the procedure for delisting that particular entity from the exchanges.

The move is expected to provide succour for various listed companies that have been referred for resolution under the Insolvency and Bankruptcy Code (IBC).

More than 750 entities, including many listed firms, are facing insolvency proceedings.

In a notification, the markets regulator said norms pertaining to delisting of equity shares would not be applicable to any entity that is getting delisted pursuant to a resolution plan approved under the IBC.

The exemption would be subject to conditions that the resolution plan "lays down any specific procedure to complete the delisting of such shares" or that the plans provides an exit option to the existing public shareholders at a specified price.

The notification was issued on June 1.

According to Sebi, the exit for the shareholders should be at a price that is not less than the liquidation value determined after paying off dues. The value is decided as per regulations of the Insolvency and Bankruptcy Board of India (IBBI).

In case the existing promoters or any other shareholders are to be provided an opportunity to exit under the resolution plan at a price higher than the price determined, then at least the same price should be offered for the existing public shareholders of that particular entity, as per the notification.

"... the details of delisting of such shares along with the justification for exit price in respect of delisting proposed shall be disclosed to the recognised stock exchanges within one day of resolution plan," it added.

Certain relaxations have also been extended to insolvent entities with respect to regulations pertaining to substantial acquisition of shares and takeovers as well as issue of capital and disclosure requirements, according to separate notifications.