The Indian securities market regulator, the Securities Exchange
Board of India (SEBI) has overhauled the regulatory regime for
voluntary delisting of companies in India. Delisting of Indian
companies is governed by the SEBI (Delisting of Equity Shares)
Regulations, 2009 (Delisting Regulations). While SEBI had initially
announced amendments to these regulations on 19 November 2014,
these were notified only on 24 March 2015. SEBI's intent behind
these amendments has been two - fold i.e., to make the cumbersome
delisting process easier for companies and simultaneously align it
with the investors' interests.
Regulation 17 of Delisting Regulations which enlists the
conditions for success of a delisting offer was amended to include
an additional condition which required participation by minimum 25%
of public shareholders (holding shares in the dematerialised form
on the date of the board meeting approving the relevant delisting)
(Relevant Public Shareholders). This additional requirement would
not be applicable if the acquirer and merchant banker were able to
demonstrate that they have delivered the
letter of offer to all the public shareholders with proof
Given the increase in price post intimation of board's
decision regarding delisting, some shareholders exit in the stock
market at a higher price. Further, certain public shareholders are
untraceable and this is evident from non-encashment of dividend or
correspondence to shareholders' returns undelivered, etc.
Therefore, it was extremely challenging to meet the condition
regarding participation by Relevant Public Shareholders. Further,
it is common for listed companies in India to have shareholders
whose communication address and details may not be updated and such
shareholders may not be traceable. Therefore, it is even more
challenging to ensure actual delivery to each and every public
The issue regarding what would constitute delivery
under the proviso to Regulation 17(b) was contested in the
delisting offer in the case of Fulford (India) Limited1.
Subsequent to filing of an appeal with the Securities Appellate
Tribunal against bona fide attempts not being accepted by
the stock exchange as deemed compliance of Regulation 17(b) and
making an application to SEBI for a specific exemption, SEBI issued
a clarification to the stock exchanges clarifying as follows:
If the acquirer or the Merchant
Banker sends the letter of offer to all the shareholders by
registered post or speed post through India Post and is able to
provide a detailed account regarding the status of delivery of the
letters of offer (whether delivered or not) sent through India
Post, the same would be considered as a deemed compliance with the
proviso to regulation 17(b) of the Delisting Regulations.
If the Acquirer and Merchant
Banker are unable to deliver the letter of offer to all the
shareholders by modes other than speed post or registered post of
India Post, efforts should be made by them to deliver the letter of
offer by speed post or registered post of India Post. In that case,
a detailed account regarding the status of delivery of letter of
offer (whether delivered or not) provided from India Post would
also be considered as deemed compliance with the proviso to
regulation 17(b) of the Delisting Regulations.
This above position has been clarified in the Frequently Asked
Questions (FAQ) recently issued by SEBI. The FAQs can be accessed
The ambiguity regarding what constituteddeliveryfor the purpose of
Regulation 17(b) was a major concern for successful completion of a
We expect that the practical ramifications of the clarifications
above, will go a long way to make voluntary delisting by the listed
companies, a success, which would have otherwise been almost
This clarification by SEBI also clearly indicates the proactive
approach adopted by them to achieve their primary objective of
making the delisting process less cumbersome for both the company
1. KCO acted as Legal Counsel to Morgan Stanley India
Company Private Limited, being the Manager to the Delisting
The content of this document do not necessarily reflect the
views/position of Khaitan & Co but remain solely those of the
author(s). For any further queries or follow up please contact
Khaitan & Co at firstname.lastname@example.org
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The Ministry of Corporate Affairs notified on June 5, 2015 that certain provisions of the Companies Act, 2013 shall not apply to private limited companies or shall apply with such exceptions or modifications as directed in the notification.
Whilst trade and barter have existed since early times, the modern practice of forming business relationships through the means of contract has come into existence only since the industrial revolution in the West.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).