SEBI Defines ‘Same Line of Business’ Under Delisting Norms
The Securities and Exchange Board of India (SEBI) has come up with a standard operating procedure (SoP) for subsidiary companies planning to get delisted through a ‘Scheme of Arrangement’ wherein the listed parent holding company and the listed subsidiary are in the same line of business.
The capital market regulator, defining ‘same line of business, said that at least 50 per cent of revenue from the operations of the listed holding and listed subsidiary company must come from the same line of business as per last audited annual financial results submitted by both the companies in compliance with SEBI (LODR) Regulations, 2015.
Further, not less than 50 per cent of the net tangible assets of the listed holding and listed subsidiary must have been invested in the same line of business as per last audited annual financial results submitted by both companies.
In case of change of name of the listed entities, within the last one year, at least 50 per cent of the revenue, calculated on a restated and consolidated basis, for the preceding one full year has to be earned by it from the activity indicated by its new name.
“The listed holding company and the listed subsidiary have to provide a self certification with respect to both the companies being in the same line of business,” said the SEBI circular.
In terms of Regulation 37(2)(e) and (f) of the SEBI (Delisting of Equity Shares) Regulations, 2021, the shares of the listed holding company and the subsidiary company shall be listed for at least 3 years and the subsidiary company shall be a listed subsidiary of the listed holding company for a period of 3 years.
In June, the SEBI notified the amendments made to the SEBI (Delisting of Equity Shares) Regulations, 2021 wherein, in Chapter VI, Part C, and Regulation 37, special provisions for a listed subsidiary company getting delisted through a scheme of arrangement have been inter-alia inserted with respect to a listed holding company and the listed subsidiary company who are in the ‘same line of business’.