The Securities and Exchange Board of India (SEBI) has proposed to bring changes to delisting regulations in a bid to enhance disclosures to help investors to make informed investment decisions and plug gaps in the process.
The capital market regulator has proposed that the promoters or acquirers shall make the public announcement — to be Initial Public announcement — of their intention to voluntarily delist the company to all the stock exchanges on which the company is listed, on the same day, when their said intention is intimated to the company.
The IPA shall be made by the promoter through the manager to the delisting offer.
“The IPA shall inter-alia contain the information — (a) reasons for delisting; (b) compliance with the provisions of Regulations 4(1A), 4(4) and 4(5) of the Delisting Regulations,” said the SEBI proposal.
The SEBI has also proposed that upon receipt of the delisting proposal, the company shall convene the board meeting within 21 working days from the date of receipt of delisting proposal to consider and approve the delisting proposal.
The Board of Directors, while communicating their decision of granting approval of delisting, shall also disclose to the stock exchanges the merchant banker’s due diligence report and the audit report.
The SEBI, in its proposal, also said that it has been represented that presently the board only certifies that the delisting is in the interest of the shareholders, without providing any justification.
The regulator has proposed that the committee of independent directors in line with the SAST provisions may be required to provide their reasoned recommendations on the proposal for delisting.
Voting pattern of the committee of the independent directors shall also be disclosed, while giving reasoned recommendations on the proposal of delisting.
Similar disclosures should also be provided for in the SAST regulations. Expenses relating to seeking expert opinion by the committee of independent directors can be borne by the company, the SEBI proposed.
Another proposal made by the SEBI is that promoters shall open an escrow account within seven working days of the shareholders’ approval and deposit therein an amount equivalent to 25 per cent of the total consideration, calculated on the basis of the floor price or indicative price.
The remaining amount may be deposited as per the existing provisions contained in Regulation 11(1).
The promoter shall enter into tripartite agreement between the manager to the offer and the bank for the purpose of opening the escrow account and shall empower the manager to the offer to operate the account as per the requirement of the delisting regulations.
In case of failure of the delisting offer, 99 per cent of the amount lying in escrow account shall be released within one working day of public announcement of the failure of the voluntary delisting and the remaining 1 per cent shall be released post returning the shares or revoking the lien as per the timelines and ensuring the compliance thereofby the merchant banker.