SEBI Consultation paper on reviewing ‘Delisting norms for equity shares’
SEBI recently introduced a consultation paper, inviting feedback on a review of existing delisting norms SEBI (Delisting of Equity Shares) Regulations, 2021 for stocks. The Primary Market Advisory Committee (PMAC) has put forth recommendations, including alternate approaches to determine delisting prices through reverse book-building processes. The regulator has proposed the introduction of fixed-price delisting as an alternate path to Reverse Book Building (RBB) process. Fixed price delisting process would be allowed for companies whose shares are frequently traded as defined under the takeover code.
Under the current system, companies voluntarily delisting shares extend an exit opportunity to public shareholders. The exit price is established when the promoter's cumulative shareholding, along with public shares tendered, reaches 90 percent of total issued shares through reverse book-building. When the promoter finds the discovered price acceptable, all tendered shares are accepted at that rate. If not, the promoter can either propose a counteroffer to the public shareholders or reject the discovered price.
In cases where the aggregate post-offer shareholding of the promoter/acquirer does not reach the 90% threshold, the current delisting regulations do not allow them to make a counter offer to public shareholders. This may lead to a scenario where majority of the public shareholders have tendered their shares and are in favour of delisting, but the delisting offer fails since the required thresholds are not met.
In such cases, the acquirer does not have the option to make a counter-offer to public shareholders. Further, the acquirer will be required to wait for six months to make another delisting offer. Considering the above mentioned constraints in the current framework, the committee proposed to lower the threshold required to make a counter-offer.
Comments may be submitted by September 04, 2023.
