The Securities Contracts (Regulation) Act, 1956, was amended in 2005 to lay out a path for the creation of a delisting framework. On 15 June the government of India notified the Delisting Rules, which deal with the substantive aspects of delisting, while on 10 June, the Securities and Exchange Board of India (SEBI) announced the SEBI (Delisting of Equity Shares) Regulations, 2009, that pertain to the procedural nuances of delisting.
Under the new delisting framework, for a voluntary delisting of equity shares by the promoters of a company to be successful, the process should result in the promoters acquiring either 90% of the entire shareholding (post all acceptance) or 50% of the delisting offer size, whichever is higher.
A new qualitative threshold has also been introduced, specifying that the shareholders’ agreement should be determined by a special resolution passed by at least 75% of the shares held in the company through postal ballot, provided that the public shareholder votes in favour are at least two times the votes against.
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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.
