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Primary Market - Public Issues - Delisting of Securities
Securities and Exchange Board of India (Delisting of Securities) Guidelines 2003
Schedules to the Guidelines
Schedule 1 & Guideline 7.2 - Contents of the Public Announcement
The floor price and how it was reached The dates of opening and closing of the bidding The name of the exchange or exchanges from which the securities are sought to be delisted. The names and addresses of the trading members as well as the bidding terminals and centres through which bids can be placed. Description of the methodology to be adopted for determination of acceptable price Period for which the offer shall be valid The necessity and the object of the delisting A full and complete disclosure of all material facts. The proposed time table from opening of the offer till the settlement of the transfers. Details of the escrow account and the amount deposited therein. Listing details and stock market data:
high, low and average market prices of the securities of the company during the preceding three years; monthly high and low prices for the six months preceding the date of the public announcement; and,
the volume of securities traded in each month during the six months preceding the date of public announcement. Present capital structure and shareholding pattern. The likely post-delisting capital structure. The aggregate shareholding of the promoter group and of the directors of the promoters, where the promoter is a company and of persons who are in control of the company. Name of compliance officer of the company. It should be signed and dated by the promoter.
Schedule II & Guideline 8.1 - The Book Building Process
The book building process shall be made through an electronically linked transparent facility. The number of bidding centres shall not be less than thirty, including all stock exchange centres and there shall be at least one electronically linked computer terminal at all bidding centres. The promoter shall deposit in an escrow account, 100 per cent of the estimated amount of consideration calculated on the basis of the floor price indicated and the number of securities required to be acquired. The provisions of clause 10 of the Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998 shall be applicable mutatis mutandis to such escrow account. The offer to buy shall remain open to the security holders for a minimum period of three days. The security holders shall have a right to revise their bids before the closing of the bidding. The promoter or acquirer shall appoint ‘trading members’ for placing bids on the on-line electronic system Investors may approach trading members for placing offers on the on-line electronic system. The format of the offer form and the details that it must contain shall be specified. The security holders desirous of availing the exit opportunity shall deposit the shares offered with the trading members prior to placement of orders. Alternately they may mark a pledge for the same to the trading member. The trading members in turn may place these securities as margin with the exchanges/clearing corporations. The offers placed in the system shall have an audit trail in the form of confirmations which gives broker ID details with time stamp and unique order number. The final offer price shall be determined as the price at which the maximum number of shares has been offered. The acquirer shall have the choice to accept the price. If the price is accepted then the acquirer shall be required to accept all offers upto and including the final price but may not have to accept higher priced offers, subject to clause 15. An illustration is given below:
| Offer Quantity |
Offer Price |
Remarks |
| 50 |
120 |
Floor price |
| 82 |
125 |
|
| 108 |
130 |
Final price (as quantity
offered is maximum) |
| 27 |
135 |
|
| 5 |
140 |
|
If final price is accepted the acquirer shall have to accept offers up to and including the final price i.e. 240 shares at the final price of Rs. 130/- At the end of the book build period the merchant banker to the book building exercise shall announce in the press and to the concerned exchanges the final price and the acceptance (or not) of the price by the acquirer. The acquirer shall make the requisite funds available with the exchange/clearing corporation on the final settlement day (which shall be three days from the end of the book build period). The trading members shall correspondingly make the shares available. On the settlement day the funds and securities shall be paid out in a process akin to secondary market settlements. The entire exercise shall only be available for demat shares. For holders of physical certificates the acquirer shall keep the offer open for a period of 15 days from the final settlement day for the shareholders to lodge the certificates with custodian(s) specified by the merchant banker
[Note: S.No 9 in the Schedule is repeated]
Schedule III & Guideline 15.2 - Norms and Procedure for Delisting of Securities
by the Stock Exchanges
A. Norms
The percentage of equity capital (floating stock) in the hands of public investors.
This may be seen with reference to ---
Existing paid-up equity capital Market lot Share price – very high, medium, low Market Capitalisation SEBIs Takeover Regulations-Regulation 21(3) Clause 40A of the Listing Agreement The minimum trading level of shares of a company on the exchanges. There should be some liquidity in every trading cycle. There should be some volume of trading for price discovery on the market. The Company should appoint market makers. Criteria of no-trading may be considered. Financial aspect/Business aspects
The company should generate reasonable revenue/income/profits. It should be operational/working. It must demonstrate earning power through its financial results, profits, reserves, dividend payout for last 2/3 years. If there is hardly any public interest in the securities the company then it is for consideration whether its "listed company" label needs to be retained any more. The company should have some tangible asset. It is for consideration as to what value of assets the company should own in order to be listed continuously listed. Track records of compliance of the Listing Agreement requirements for the past three years.
Submission of audited/unaudited results, annual report, other documents required to be furnished to the Exchange, Book closure Record date with due notice Payment of listing fee Service to investors especially with regard to timely return of shares duly transferred, timely payment of dividend, communication of price sensitive information, etc. Failure to observe good accounting practises in reporting earnings and financial position Publishing half yearly unaudited/audited results Frequent changes in –
Share transfer agent Registered office Name Promoters’ Directors’ track record especially with regard to insider trading, manipulation of share prices, unfair market practises (e.g. returning of share transfer documents under objection on frivolous grounds with a view to creating scarcity of floating stock, in the market causing unjust aberrations in the share prices, auctions, close-out, etc. (Depending upon the trading position of directors or the firms). If whereabouts of the company, its promoters directors are not available and even the letters sent by the Exchange return undelivered and the company fails top remain in touch with the Exchange. The company has become sick and unable to meet current debt obligations or to adequately finance operations, or has not paid interest on debentures for the last 2-3 years, or has become defunct, or there are no employees, or liquidator appointed, etc. On the basis of the above norms and other relevant information available about the company, its promoters/directors, project, litigations, etc., a profile of the company should be prepared and then a decision on delisting should be taken by an Exchange.
B. Procedure
The decision on delisting should be taken by a panel to be constituted by the Exchange comprising the following :
Two directors/officers of the Exchange (one director to be a public representative), One representative of the investors One representative from the Central Government (Department of Company Affairs)/ Regional Director / Registrar of Companies Executive Director / Secretary of the Exchange Due notice of delisting and intimation to the company as well as other Stock Exchanges where the company’s securities are listed to be given Notice of termination of the Listing Agreement to be given An appeal against the order of compulsory delisting may be made to the SEBI.
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