The Securities and Exchange Board of India (SEBI), vide circular dated 30 May 2012, issued guidelines facilitating the exit of de-recognised / non-operational stock exchanges and exit to the shareholders of Exclusively Listed Companies (ELCs) by allowing them to get listed on Nation-wide Stock Exchanges (NWSEs) after complying with the diluted listing norms of the NWSEs, failing which they would be moved to the Dissemination Board (DB).

Thereafter, SEBI,  vide circular dated 22 May 2014,  provided that the ELCs that are listed on de-recognised / non-operational stock exchanges, could also opt for voluntary delisting by following the existing delisting norms prescribed by SEBI. It was also specified in the said circular that if the ELCs fail to comply with the same, they will be moved to the DB.

Subsequently, SEBI,  vide circular dated 17 April 2015, granted the ELCs on the DB a period of 18 months  to obtain listing upon compliance with the listing requirements of the NWSEs.

Based on the representations received, SEBI, vide circular dated 10 October 2016 (Circular), has provided a relaxed criterion for issue of further capital to enable listing of equity shares of such companies on the NWSEs, failing which they must provide an exit option to the public shareholders.

Procedure for listing of the ELCs on the NWSEs

The NWSEs have prescribed a relaxed criterion for listing by the ELCs. However, many ELCs were unable to list their equity shares on the NWSEs as their paid up capital was less than minimum capital required for listing on the NWSEs. In order to overcome this situation, the ELCs have now been allowed to raise capital through a preferential allotment route under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended (SEBI ICDR Regulations). As majority of these companies may not be able to fulfill each criterion for preferential allotment as prescribed under the SEBI ICDR Regulations, the Circular provides that the SEBI ICDR Regulations must be followed to the extent possible. The designated Stock Exchanges (i.e. the NWSE which is hosting the ELC on its DB) will accord in-principle approval for the same.

Exemption from Takeover Regulations

The Circular provides for exemption from applicability of provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended (Takeover Regulations) on the acquirer subject to promoter group holding not exceeding 75%.

In case the ELC fails to get its shares listed on the NWSEs, the promoters of the said ELC will be required to provide an exit option to public shareholders (Exit Option).

Exit Option

Who will provide

The Exit Option shall be provided by the promoters of the ELCs.

Price at which the Exit Option will be provided

The Exit Offer shall be provided at fair value to be determined by an independent valuer who has been emplaned by the designated stock exchange (Exit Price).


  1. A public announcement (PA) is required to be published in a national daily and regional daily where the exited stock exchange was located. The PA will have justification for the Exit Price and procedure for participation;
  1. Prior to opening of the exit offer, an escrow account for total consideration (Exit Price multiplied by the number of shares held by the public shareholders) shall be opened by the promoter of the ELC. The escrow account shall consist of either cash deposited with a scheduled commercial bank or a bank guarantee, or a combination of both.
  1. The exit offer will remain open for minimum of 5working days;
  1. Payment is required to be made within a period of 15 working days after the closure of the exit offer;
  1. Promoters shall continue to provide exit offer to all shareholders from the date of completion of offer; and
  1. The ELC will be removed from DB once the Designated Stock Exchange is satisfied that appropriate procedures have been followed for providing the Exit Offer.

Timeline for Implementation of Circular by an ELC

Within 3 months of the date of the Circular (i.e. by 9 January 2017), the ELCs have to indicate their intention and submit their plan of action to either list the said ELC on NWSEs or provide an Exit Option, to the designated stock exchanges, failing which such ELC shall be liable for the following actions:

  • The ELC, its directors, its promoters and the companies which are promoted by any of them shall not directly or indirectly associate with the securities market or seek listing for any equity shares for a period of 10 years from the exit from the DB;
  • Freezing of shares of the promoters/ directors of the ELC;
  • List of the directors, promoters etc. of all non-compliant companies as available from the details of the company with nationwide stock exchanges shall be disseminated on SEBI's website and shall also be shared with other respective agencies;
  • Attachment of bank accounts / other assets of promoters / directors of ELC so as to compensate the investors.


This is a welcome Circular issued by SEBI which provides for relaxed mechanism for listing an ELC and also a simplified procedure for providing the Exit Option in such cases. The procedure for providing the Exit Option as given in the Circular is much simpler compared to providing an exit option under the SEBI (Delisting of Equity Shares) Regulations, 2009, as amended, as there is no requirement of board and shareholder approval, due-diligence by merchant bankers, reverse book building for price discovery, appointment of a merchant banker etc.  Exemption from Takeover Regulations is also a big relief as it will be difficult for many ELCs to attract outside investors and in such cases promoters can pump in money without triggering an open offer.

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