APR 22, 2016

SEBI’s Clarification with regard to reckoning Success of Delisting in Small Company Voluntary Delisting Offers

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The Capital Market Regulator, SEBI, vide its Notification dated 21st April 2016 issued another set of FAQs on SEBI (Delisting of Equity Shares) Regulation, 2009 (“Delisting Regulations”) in line with the remarkable and well-reasoned judgment passed by Hon’ble Securities Appellate Tribunal (SAT) in the matter of M/s. Trichy Distilleries and Chemicals Limited on 4th November, 2011.

The said judgment deliberated upon the issue with reference to Delisting of Small Companies. As per the Delisting Regulations, these small companies can apply for voluntary delisting, without following the Reverse Book Building Process, provided at least 90% of such public shareholders give their positive consent in writing to the proposal for delisting under the Small Companies route [Reg 27(3)(d) of Delisting Regulations].

In the above mentioned case, it had been decided that the provisions of Regulation 27(3)(d) of SEBI (Delisting of Equity Shares) Regulations, 2009 should be interpreted to mean that a company would become eligible for delisting if the public shareholders holding ninety per cent or more of the public shareholding in value give their positive consent to delisting.

Now, SEBI by giving due regard to the above mentioned judgement, has provided a clarity in the form of FAQs whereby the promoter of a small company would be considered to have complied with the condition under regulation 27(3)(d) if the public shareholders, irrespective of their numbers, holding ninety percent or more of the public shareholding give their positive consent in writing to the proposal for delisting with the intent to remove ambiguity in the Regulations.

Our Viewpoint:

In our view, SEBI’s directive in the form of FAQs will surely provide a clarity to the companies that were falling within the ambit of Small Companies, but were in dilemma with regard to garnering the consent of 90% of the public shareholders in numbers or value.