The Securities Exchange Board of India ("SEBI") amended the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 ("Delisting Regulations") by a notification dated January 12, 2016 ("SEBI Notification") to revise the applicability of exemptions provided to small companies in relation to obligations under Chapter IV, which deals with "exit opportunity" to be given to the public shareholders during delisting. Chapter IV of the Delisting Regulations deals with obligations relating to, inter alia, public announcements, opening of escrow account before making the public announcement, dispatching letter of offer to the public shareholders and price determination through book building process.
Amongst the conditions to be satisfied by small companies to avail of the exemption from compliance with Chapter IV of the Delisting Regulations, the SEBI Notification now requires that the equity shares of the company traded on each recognised stock exchange is less than 10% (ten percent) of the total number of shares, during the 12 (twelve) calendar months preceding the date of the board meeting approving the delisting of shares, as opposed to the earlier requirement that the equity shares of the company were not traded in any recognised stock exchange for a period of 1 (one) year immediately preceding the date of board meeting. In the event the share capital of the particular class shares is not identical throughout the 12 (twelve) calendar months' period mentioned above, the weighted average of the shares of such shares will represent the total number of shares of such class of shares of the company.
With regard to the exit price offered to the public shareholders during such delisting, it cannot be less than the floor price determined as per the Delisting Regulations read with the relevant provisions of and the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ("Takeover Regulations") in relation to the determination of offer price for infrequently traded shares. Prior to the amendment, such price could not be less than the price arrived at in consultation with the merchant banker.
The SEBI Notification stipulates a specified percentage that must the adhered to in order to avail the exemption. The condition for formulation the floor price in accordance with the relevant provisions for the Takeover Regulations for infrequently traded shares will ensure uniformity in price determination under various SEBI regulations and that the interests of the public shareholders are protected.
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