SEBI Guidelines
SECURITIES AND EXCHANGE BOARD OF INDIA (DELISTING OF SECURITIES) GUIDELINES-2003
SEBI Delisting Guidelines 2003 – Simplified Overview
The Securities and Exchange Board of India (SEBI) introduced the Delisting of Securities Guidelines, 2003 to protect investors when companies remove their shares from the stock exchange.
Here’s a simple breakdown of the key points:
What is Delisting?
Delisting means a company’s shares are removed from a stock exchange — they stop being publicly traded.
There are two types:
1)Voluntary delisting → The company/promoters choose to delist.
2)Compulsory delisting → The stock exchange forces the delisting, often due to non-compliance.
When Do These Guidelines Apply?
1)When promoters want to voluntarily delist the company.
2)When public shareholding falls below the required minimum (due to takeovers or share acquisitions).
3)When the exchange itself initiates delisting for non-compliance.
Conditions for Voluntary Delisting
1)Shares must have been listed for at least 3 years.
2)Shareholders must approve the delisting through a special resolution.
3)An exit opportunity (buyback offer) must be provided to public shareholders, except when shares remain listed on national-level exchanges like NSE or BSE.
How is the Exit Price Decided?
1)Determined through a book-building process (collecting investor bids to discover price).
2)Minimum price (floor) = 26-week average of share prices.
3)For illiquid (infrequently traded) shares, valuation follows SEBI’s takeover regulations.
Key Steps in Voluntary Delisting
1)Shareholder approval via special resolution.
2)Public announcement with full details (price, dates, process).
3)Application submitted to the stock exchange.
4)Merchant banker (SEBI-registered, independent) appointed to manage the process.
5)Exit offer made, with a 5-month window for remaining shareholders to tender shares.
Rights of Promoters
Promoters are not obligated to accept the final exit price from the book-building process. If they reject it, they must ensure public shareholding returns to the minimum required level (via share sales or fresh issues) within 6 months.
Compulsory Delisting
If a company is suspended from trading for over 6 months, exchanges can delist it. Exchanges must give public notices and allow time for objections before delisting. Promoters must compensate remaining shareholders at a fair value determined by experts.
Other Highlights
1)Convertible instruments → A company can’t delist equity shares if convertible securities are outstanding.
2)Relisting → Once delisted, a company must wait 2 years before applying for relisting.
3)Rights issues → If promoters’ subscription reduces public shareholding below the minimum, they must either delist or restore public shareholding within 3 months.
What’s Announced in a Delisting Offer?
A public announcement must clearly state:
Floor price & price discovery method
Offer period (dates)
Stock exchanges involved
Merchant banker details
Shareholding pattern
Reasons and objectives of delisting
Timelines & escrow details