Delisting: Shareholders get one year to tender shares

Shareholders of a de-listed company will be allowed at least one year after the date of delisting to tender their shares to the promoters of the company, according to the delisting regulations that were notified this week.

The existing delisting guidelines of SEBI, after which the notified regulations have been fashioned, allow a period of six months only. Rules under the Securities Contracts Regulations Act have also been prescribed to legally enable the process of delisting which subject is covered by this Act.

The regulations make delisting possible at every level of promoter shareholding in a company. To make for a successful delisting, the minimum stake to be held by promoters and persons acting in concert must be brought to 90 per cent, or the level to which half of the shares to be tendered would take their holding to, whichever is higher.

This would mean that the 90 per cent limit would apply to companies with up to 80 per cent promoter shareholding, while the second situation would apply when promoter stakes are above 80 per cent.

At least two-thirds of the public shareholders must approve by postal ballot, the Board resolution for delisting of the company.

The earlier meaning of promoter shareholding has been narrowed down to “persons other than promoters.” Earlier, it was “persons other than promoters/acquirers/persons acting in concert.”

The regulations are silent on whether the promoters’ stake rising to 90 per cent as a result of their buying the unsubscribed portion of a rights issue would entitle them to acquire the balance shares for delisting. This would imply that such a promoter would have to go through the entire bidding process (where shareholders quote a selling price in a reverse bid) for delisting.

Promoters should not use the funds of the company for acquisition for delisting purposes.