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UNRAVELING DELISTING DYNAMICS: AN IN-DEPTH ANALYSIS OF SEBIS SECURITIES LAW FRAMEWORK
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UNRAVELING DELISTING
DYNAMICS: AN IN-DEPTH ANALYSIS OF SEBI'S SECURITIES LAW FRAMEWORK
AUTHORED BY - DEVESHI GUPTA
ABSTRACT
India, being one of the oldest stock market in Asia, has had a
transcending journey in the securities market. By surpassing all the
vicissitudes in order to establish a transparent and fair regulatory framework
for the stock exchanges and its participants. Securities and Exchange Board of
India(SEBI) was formed in the year 1992 with the intention to protect
investor’s interest due to the fact that huge population of Indians invest in
stock markets. With maturing of the securities market, it was necessary to
introduce regulatory framework on delisting to maintain a balance between
promoter’s interest in owning the company and public shareholder’s rights to
contribute in the growth. It was the Securities Contract Regulation Act that
paved the way for formation of delisting regulations in the year 2009[1].
Considering the situation of investors in case their invested stocks are not
being traded or are illiquid, SEBI has come to their rescue by formulating the
regulations for voluntary delisting. Delisting in the process wherein the
stocks which are listed on the stock exchange are permanently removed. It may
be voluntary or compulsory. While, voluntary delisting is when stockholder
wants to delist its shares and compulsory delisting takes place when the SEBI
itself delists the company’s stock from the stock exchange as a punishment
further affecting the reputation of the company. However, the delisting process
is cumbersome and thus not in investor’s interest.
Over the years, SEBI has been
amending these regulations owing to the dynamic environment for creating a
win-win situation for all. This paper commences with the detailed evolution of
the regulatory framework pertaining to delisting by dissecting the regulations
and complexities involves in the process. Further, it examines the
applicability as well as the effectiveness of the laws in existence. Moreover,
evaluation is made in relation to investor protection, market fluctuations and
economy growth. It also sheds light on the challenges, amendments and trends in
market by case studies. Ultimately, the paper calls for an approach to bring
about transparency in the market while safeguarding the interests of all the
market participants in the financial ecosystem.
Keywords: Delisting, investor’s interest, transparency, regulatory, framework,
SEBI
INTRODUCTION
In the dynamic ecosystem of the global
securities market, listing and delisting of securities have a significant
position, acting as a yardstick to the investor interests, economic
fluctuations, as well as the regulatory implications. Delisting Regulations was
laid down as an output of amendment in the Securities Contract Regulation Act,
1956[2] in
the year 2005. Further, which were enforced in the year 2009 were called namely
SEBI (Delisting of Equity Shares) Regulations, 2009. Delisting is a process
wherein ma public company voluntarily or mandatorily removes its shares from
the stock exchanges. It is a complicated process which involves myriad of
aspects pertaining to economic, legal and regulatory compliances. Delisting is
defined as, “removal of securities of a
listed company from a stock exchange. As a consequence of delisting, securities
of that company would no longer be traded at that stock exchange.[3]” Delisting can be done voluntarily and
compulsorily. While in case of former, the reputation of the company is not
affected.
The Securities and Exchange Board of
India (SEBI) is the regulatory body which was established in the year 1992
under the SEBI Act, 1992[4].
Its role was to regulate the securities market in India. SEBI plays a role of
paramount significance in formulating the statutory norms for the Indian
financial market. It ensures seamless functioning of the stock markets. The
other regulators include Reserve Bank of India as well as the Ministry of
Finance which performs ancillary functions in the securities market. The Board
works as a watchdog of the securities market ensuring that no participant is
being exploited.
The paper discusses about the
intricacies of the delisting process within the securities market of India. It
seeks to highlight on the multitudinal aspects pertaining to the process itself
as well as SEBI’s role as a regulator and facilitator of the securities in the
market. Delisting though a corporate decision is influenced by the health of
company’s finances and strategic objectives which is webbed to wide market
dynamics and interest of the market participants.
MONEY MARKET: A BRIEF DESCRIPTION
The money market, which is renowned
for its minimal volatility and stability, is an integral component of the
broader financial structure. This facility allows both debtors and lenders to
promptly meet their financial obligations. This market provides secure and
liquid short-term investment opportunities for retail investors, money
managers, and banks with excess funds.
Additionally, it grants consumers access to low-cost funds from
non-financial corporations, banks, broker-dealers, and hedge funds.
The term "money market"
encompasses a variety of markets in which lenders and creditors engage in
particular transactions. The money markets were significantly impacted in terms
of the visibility of various segments due to the global fiscal crisis. Although certain sectors exhibited resilience
amidst economic volatility, others revealed themselves to be precarious.
Money markets comprise instruments of
short-term finance with maturities spanning from one day to one year. These
instruments are specifically engineered to offer substantial liquidity and are
readily convertible into currency. Money market instruments include term
certificates of deposit, interbank loans, money market mutual funds, commercial
paper, Treasury bills, securities financing, and repurchase agreements (repos).
According to the Flow of Funds Survey carried out by the Federal Reserve Board,
money market instruments constitute approximately one-third of the credit in
circulation within the United States financial system.[5]
In addition to their distinct qualities, these instruments exhibit variation in
their regulatory and trading environments.[6]
Some are classified as securities, whereas others are not, and their degree of
dependence on collateral value differs.
1.
Bank
deposits and interbank loans
Bank deposits are a
prevalent money market instrument that does not fall under the classification
of securities. Certificates of deposit (CDs), despite being transacted
similarly to securities at times, are contingent on the creditworthiness of the
issuing bank. During this scenario,
speculative funds are entrusted to the bank by depositors, who take into
account various factors including the creditworthiness of the institution and
the provision of government deposit insurance.
Conversely, interbank
loans are unsecured and require creditworthiness assessments of borrowers due
to the absence of collateral as security. Amidst the fiscal crisis, the London
Interbank Offered Rate (LIBOR) market in England, which signifies the mean
interest rate at which prominent banks extend loans to each other, experienced
challenges. These difficulties prompted inquiries into the reliability of
interbank funding sources and the credibility of the rate-setting procedure.
2.
Government
and Commercial Paper Securities
Commercial paper is
unsecured promissory notes issued by significant nonfinancial institutions and
well-established financial institutions. To assure repayment, investors rely on
the creditworthiness of the issuer.
Commercial paper is frequently issued in denominations and maturities
ranging from one hundred seventy days to two hundred seventy days, which
surpass the financial capabilities of individual retail investors.
3.
Repurchase
and Lending Agreements for Securities (Repos)
As a vital element of the
money market, repos offer advantageous interest rates that facilitate lending
and borrowing over brief periods of time. Generally, these transactions are
completed in less than two weeks, and overnight arrangements are not uncommon.
A creditor sells a security in return for cash during a repo transaction, with
the stipulation that it will be repurchased at a prearranged date and price.
Interest charges are included in this price for the duration of the borrowing
period. The security provides the lender with a guarantee. These markets are
critical for short selling, which involves the sale of non-existent securities
by investors. The short seller must
temporarily borrow or acquire the security via repo transaction in order to finalize
this transaction. The security must be returned to the lender at the conclusion
of the transaction; the short seller may repurchase or borrow it back,
profiting if the security's price has decreased.
4.
MMMFs
(Money Market Mutual Funds)
Money market mutual funds
(MMMFs) are a type of mutual fund whose principal investment strategy consists
of money market instruments—commercial paper, repos, certificates of deposit,
and Treasury bills, among others. Regulatory entities for these funds include
the European Union and the United States as investment corporations. A yield
with short-term maturities is extended to both institutional and retail
investors, entailing minimal risk. MMMFs
typically invest in highly rated, short-term, liquid instruments. As opposed to
alternative mutual funds that allocate their investments towards equities or
bonds, these funds generally maintain a net asset value of $1 per share, thus
guaranteeing negligible fluctuations in value.
5.
Complex
Sectors: Asset-Backed Commercial Paper and Tripartite Repo Transactions
While many money market
sectors are straightforward, some are more complex than others. Asset-backed
commercial paper (ABCP) and specific tripartite repo transactions fall under
this category. ABCP is utilized by businesses with limited financial assets,
such as mortgages and loans, to eliminate these assets from their balance
sheets or reduce financing costs.
Special-purpose entities are able to acquire these assets more
efficiently through the issuance of ABCP, which is backed by the underlying
assets. Nevertheless, the transparency of the procedure and the
creditworthiness of the issuer might be diminished in comparison to
conventional commercial paper issuers. The markets' insolvency pertaining to
privately issued mortgage-backed securities impeded tripartite repo
transactions. A significant proportion
of the collateral on the tripartite repo market consisted of these securities,
which led to increased discounts and challenges in pricing due to the lack of a
market price. Consequently, financing difficulties arose for banks, securities
firms, and hedge funds that were reliant on these money markets. Numerous
participants—including governments, banks, and other sizable
organizations—provide for their short-term financial needs on the money market.
It facilitates industrial development, supports central bank policies, finances
commerce, and ensures the self-sufficiency of commercial banks, among other
vital functions. It is essential to comprehend the intricacies of money market
instruments and their individual functions in order to navigate the financial
landscape with proficiency.
The money market is an
intricate financial landscape wherein a wide range of products are provided to
fulfill the urgent funding and investment requirements of financial industry
participants. Financial instruments, including commercial paper and Treasury
bills, exert a significant influence on the wider financial system, affecting a
multitude of facets including trade financing and central bank policy. By
attaining a comprehensive comprehension of the complexities inherent in the
money market, individuals engaged in market activities can with assurance
augment their financial strategies and investments.
Delisting: Historical Perspective
Delisting is the process of removing
a listed company's securities from the Stock Exchange's listing. Delisting is
not the same as the temporary suspension or revocation of admission to trade
listed securities.
A suspension of trading in securities
denotes a brief period during which no trades may be made in the company's
securities. Suspension is an action taken by the Stock Exchanges against the
Company, not at the Company's request[7].
corporation, typically for failing to comply with SEBI-mandated listing
requirements Regulations, 2015 (Listing Obligations and Disclosure Requirements)
(LODR Regulations). After the business satisfies the listing requirements under
LODR, Regulations, the stock exchange lifts the trade ban and allows trading.
Exchanges of stocks may levy penalties or put a promoter's or promoter group's
holdings of specified securities on hold. as might be appropriate while working
with depositories in cases of noncompliance with the LODR Rules.
Conversely, "delisting"
securities entails removing the company's name from the stock exchange and
prohibiting trading in the delisted company's securities. Securities may be
delisted voluntarily by the firm or by the stock exchange, without request.
Typically, stock exchanges seek to enforce harsh penalties for businesses that
force the compulsory delisting of any company's securities last option. The
company's reputation is impacted by mandatory delisting. Securities can be
delisted in two ways: voluntarily and involuntarily. Obligatory delisting, when
a corporation decides to delist voluntarily, it looks for its independently for
the delisting of its securities; nevertheless, in the event of a forced
delisting, The securities of the company are delisted by the Stock Exchange.
Circular No.6/9/SE/78, dated 28.6.79[8],
was issued by the Ministry of Finance's Department of Economic Affairs, Stock
Exchange Division, in 1979. It instructed stock exchanges to allow delisting
provided the following requirements were met.
a)
According
to the audited reports, the listed firm lost money over the previous three
years, and its net value is now less than its paid-up capital;
b)
The
company's shares haven't changed hands much in the three years prior; (c) The
company's shares are still listed, at least on the relevant regional stock
exchange.
Any business that doesn't meet one of
the aforementioned criteria may bring the matter to the central government and
ask for permission to be delisted.
A listed company may be delisted by a
recognized stock exchange if the number of public shareholders falls below 5
for every one lakh rupees of capital offered or if the public shareholding
falls below 50% of the public offer, according to a Ministry of Finance
circular Cir. No. F/14(2)/SE/85 dated September 23, 1985. The circular also
included more requirements about the company's capital sufficiency and investor
liquidity. Minimum public holdings are currently covered by Securities
Contracts (Regulation) Rules 19(2)(b).
CHANDRATRE COMMITTEE[9]
Under the direction of Dr. K.R. Chandratre,
SEBI established a committee on February 19, 1997, to investigate and offer
recommendations on a range of topics related to a company's securities being
delisted. The following were the Committee's terms of reference:
(a)
to
assess the current circumstances surrounding the delisting of corporate
securities listed on reputable stock exchanges and recommend guidelines and
practices therein;
(b)
to
investigate strategies for maintaining the securities' listing on an ongoing
basis and safeguarding investors' interests;
(c)
to
examine the process by which businesses pay listing fees to stock exchanges and
make recommendations regarding the timing and mode of payment;
(d)
to
suggest modifications to laws, rules, regulations, etc. to ensure their implementation
to the suggestions made regarding the aforementioned issues.
The Committee concluded that neither
of these two circulars addressed the fundamental issue of delisting on the
basis of merits, or the lack thereof. While acknowledging that a company's
delisting can only occur after it has completed its shareholders' approval, the
board suggested that an option be supplied to the businesses in order for them
to terminate their Stock Exchange agreements.
Committee noted that the following
are the most frequent reasons that could result in both mandatory and voluntary
delisting:
The primary reasons for mandatory
delisting could be:
1.
Failure
to pay listing fees
2.
Failure
to adhere to listing criteria
3.
Failure
to abide by the terms of the listing agreement
4.
There
is no trading or very little trading
5.
Investor
complaints not being addressed in spite of numerous reminders
6.
Unfair
trading methods carried out at the managers' or promoters' request
7.
Additional
wrongdoings, such as the management's purposeful issuance of duplicate, forged,
or authentic share certificates
8.
The
company's whereabouts and those of its directors and promoters are unknown
9.
A
decline in the quantity of securities held by the general public.
On December 10, 1997, the Committee
turned in its report, which was included as an Annexure.
SEBI published Circular SMRDP/CIR-14/98[10] on April 29, 1998, in response to the
Chandratre Committee's recommendations. The circular outlined the different
clauses that allowed for the voluntary or involuntary delisting of a company's
securities from stock exchanges. The aforementioned two Ministry of Finance
circulars from 1979 and 1985[11] were
withdrawn along with the release of the aforementioned circular.
PRATIP KAR COMMITTEE
Many multinational corporations are
increasingly removing their shares from Indian stock exchanges, and this trend
has drawn attention from the general public, the media, investor associations,
and government authorities due to the potential negative effects on the securities
market. It was thought that investors were feeling uneasy and anxious about
delisting. Many shareholders voiced the opinion that, in weak market
conditions, the exit price offered typically does not fairly reflect the
company's value and results in a permanent loss of investment opportunity.
Thus, in order to handle the
following issues, SEBI formed a committee, which is chaired by Executive
Director Shri Pratip Kar:
(a)
Should
regulations be enacted to forbid or discourage companies from delisting from
stock exchanges.
(b)
Does
the current price mechanism exit option, which is available for companies to
voluntarily delist under various SEBI regulations/guidelines, need to be
further refined to provide shareholders with adequate compensation, particularly
in light of the fact that delisting implies a complete loss of investment
opportunity for shareholders.
(c)
if
price regulation of this kind would be sufficient to safeguard the interests of
minority shareholders and deter shares from being delisted; and whether such
price regulation would be at odds with the free pricing regime that SEBI is
currently pursuing in the primary market;
(d)
if
rules or policies that deter one class of businesses, like MNCs, from delisting
should be implemented;
(e)
if
distinct pricing rules for companies delisting would create a regulatory
arbitrage opportunity with the share acquisition provisions, which are
exclusively regulated by the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997;
(f)
whether
other classes of a company's securities, such as debentures, should likewise be
delisted when one class of securities, such as equity, is delisted.
REGULATORY FRAMEWORK FOR DELISTING
Certain procedural safeguards are
included in the Delisting Regulations to safeguard the interests of
shareholders, particularly minority shareholders. Among them is the designation
of a peer review company secretary, who must attest that the proposed delisting
isn't the result of any dishonest or fraudulent scheme. Furthermore, the
company's board of directors must attest that the proposed delisting is in the
company's best interests and complies with all relevant legal requirements.
Aside from this, the number of votes cast by public shareholders in favor of
the proposed delisting should be at least twice that of those voting against
it. The purpose of this numerical threshold is to prevent minority shareholders
from being coerced into accepting the proposed delisting. However, because only
postal ballots or electronic voting are allowed, and because a small percentage
of shareholders use these voting methods, minority shareholders' interests in
delisting resolutions are not effectively communicated.
Because of this, the reverse
book-building procedure serves as a crucial safety net for minority
shareholders. Ever since the Delisting Regulations were introduced in 2003,
SEBI has consistently emphasized the advantages of the reverse book-building
procedure over the fixed price method. This is because the former guarantees
price determination transparency and shields investors from losses resulting
from market fluctuations. The implementation of a comprehensive price discovery
mechanism based on three types of prices—the floor price, which is the lowest
price offered; the indicative price, which is the minimum price plus a premium
offered by the promoter/acquirer; and the discovered price, which is the price
determined through bids—further strengthened this transparency and protection.
The indicative price may be equal to, greater than, or lower than the
discovered price. The acquirer/promoter may reject the discovered price if it
is higher than the indicative price and make a counteroffer that will not be
lower than the company's book value as confirmed by the offer's manager. India
is the only country with such a comprehensive system based on the interactions
of three distinct prices.
Additionally, 90% of the company's
issued shares must be received by the acquirer/promoter cumulatively for a
delisting to be successful. The 90% threshold and the detailed price mechanism
are typically used by minority shareholders to thwart delisting proposals. They
purchase enough shares to guarantee that the 90% benchmark is not met, and they
limit the proposed delisting by either placing an outrageously high bid above
the indicative price or declining the counteroffer, if one is made. In 2020,
this tactic proved effective in the delisting proposal of Vedanta Resources
Ltd.
I think a switch to the fixed price
method might render minority shareholders completely defenseless, at the whim
of the company's board, given the use of the reverse book building process as a
defense tactic. Whether the delisting was driven by the promoter or by an
acquisition, the exit price of the shares would be determined solely by the
board, which was made up of the majority of the company's shareholders (given
India's controlled shareholding pattern) and may have worked in concert with
the promoter or acquirer. The minority shareholders would not be involved in
this decision-making process. Minority shareholders would then only have the
minimal protection provided by SEBI's mandate that boards fairly consider the
diverse interests of all shareholder groups and the general directorial duties
of reasonable care and good faith in their dealings. The effectiveness of these
general principles in safeguarding the interests of minority shareholders would
remain uncertain because there is no explicit duty of loyalty to the minority
shareholders in cases of delisting.
Minority shareholders are not able to
challenge the proposed delisting by approaching SEBI, nor do they have any veto
rights to oppose it under the current delisting framework. Minority
shareholders can effectively protect their interests in such a scenario by
utilizing the framework established by the reverse book building procedure
along with other Delisting Regulations provisions. Although I applaud SEBI's
emphasis on improving business accessibility, minority shareholders' interests
shouldn't be sacrificed in the process. Because the fixed price method could
have an impact on good corporate governance, SEBI must reconsider its proposal
to introduce it.
VOLUNTARY DELISTING
Vedanta Limited
Delisting is a crucial process and
have been practised by various companies in order to delist themselves from the
National Stock Exchange as well as the Bombay Stock Exchange.
Vedanta Limited operates as a
subsidiary of Vedanta Resources Limited, a company specialising in natural
resources and managing the complete value chain, including primary metal
exploration, refining, and conversion into products with added value[12].
Voluntary delisting was pursued by Vedanta Limited because going private
enabled management to concentrate more intently on maximizing returns, make
quicker decisions, and so forth. As indicated by Moody's, its complex structure
and negative ratings were factors. Additionally, the prospective delisting
would have granted direct access to cash held on the books of Hindustan Zinc
Limited. It would have effectively prevented the possibility of dividend
leakage.
Nevertheless, Vedanta Limited
ultimately failed to achieve delisting status due to the limited number of
offers received (125.47 crore shares versus the required 134 crore shares for a
successful procedure).
RECENT AMENDMENTS
Earlier the delisting process from
the stock exchanges in India was governed by SEBI (Delisting of Securities)
Guidelines, 2003 issued by SEBI under the 1992 Act[13].
A pressing need for a comprehensive framework for delisting was felt with the
growth of stock markets in the nation. A structure wherein an equilibrium was
being established between promoter’s enthusiasm to own and public shareholder’s
participation rights in company’s growth. With the amendment of Securities
Contract Regulation Act, 1956 in 2005 which put forth the path for delisting
norms. Further, guiding the government to notify SEBI (Delisting of Equity
Shares) Regulations, 2009 providing procedural aspects to the concept of
delisting itself.
Bringing a paradigm shift the new
norms are comparatively more promoter oriented as well as shareholder
benefitted. Introducing measures providing transparency, essence of time,
however until proper implementation the success of the same cannot be
predicted. The Consultation paper by SEBI titled “Review of Voluntary Delisting
Norms under SEBI (Delisting of Equity Shares) Regulations, 2021” released on 14th
August, 2023 provided for a comprehensive approach to the whole aspect.
SEBI has proposed introduction of
fixed price delisting as an alternate path to Reverse Book Building process.
Fixed price delisting process would be allowed for company’s whose shares are
frequently traded as defined under the Takeover code. PMAC (Primary Market Advisory
Committee) has put forth recommendations include processes alternate approaches
to determine delisting prices through Reverse Book Building. The Regulator has
also proposed introduced of fixed price delisting as an alternative to Reverse
Book Building. SEBI planned to amend for certain stocks, currently, company’s
voluntarily delisting shares extend an exit opportunity to public shareholders.[14] Exit
price is established when promoter’s cumulative shareholding in addition to
public shares tendered reaches 90% of total issues shares through Reverse Book
Building(RBB). When the promoter finds the discovered price acceptable, all
tendered shares are accepted at that rate. If not, promoter can propose a
counter offer to public shareholders or reject the discovered price.
Pertaining to certain challenges with
the current delisting norms and SEBI’s plan to amend the same are convincing.
Challenges arise when promoter/acquirer’s post offer sharing (shareholding)
doesn’t meet 90% threshold preventing them from making counter offers to public
shareholders. Resulting in, failed delisting offer even when majority of public
shareholders favoured delisting.
In order to address the issues, the
committee suggests lowering threshold for counteroffers would enable acquirer
to propose counteroffers based on public shareholders’ bids. The proposal is
also aimed at permitting listed holding company’s to delist by way of a swap of
listed shares they own and distribution of cash for other assets. Considering
the tax aspects, share swap and cash payment for unlisted assets will be
treated as a deemed dividend to extent of accumulated profits of holding
company. Any excess received by public shareholders will be treated as Capital
Gains. Public shareholders will need to consider whether benefits under section
112A[15]
and availability of January 2018 price as the grandfathered cost will be
available for capital gains. Shares of listed company received as part of share
swap, public shareholder will need to evaluate whether, on a subsequent sale of
shares benefits under section 112 A will be available or not. For holding
company, whether transfer of shares in the listed investor company to its
shareholders can be taxed as capital gains will be important to examine.
Moreover, grounds for non -taxability will need to be built adequately.
SEBI has performed reforms in 4 key
segments as far as delisting of listed companies is concerned. The basic
primary thrust seems to be to try and make it easier for company’s to delist. Thus,
instead of RBB process which has been in some cases a bit of a thorn for
company’s trying to delist. It has proposed in the consultation paper itself
that there should be a fixed price option as well. Further, in CNBC-TV18’s
discussion with the Former Ex. Director SEBI, JN Gupta with regards to the new
reforms, he was of the view that, “earlier
counter offer was only possible if the price was not liked by the acquirer but
90% threshold plus shares were rendered. So here was a situation where even 90%
shares were not rendered but there was a possibility of counter offer reason
being, because in initial delisting offer then only the shareholders were
having such a high expectation that a company is desperate to delist so they
will pay any price so sometimes some investors were bidding at irrational
prices.[16]” Further,
it is also provided in the consultation paper that based on promoter and public
shareholding what is the minimum that to bring some sort of semblance to the
process one needs to calculate the volume weighted average of the bids that
upto 90% more than 90% has come that happens till 90%. However, if it is less
than 90%, then calculation happens at upto entire bid.
Although such regulations are not
definite in nature owing to the fact that whenever regulations are put to
market test then some irritants happen thus making regulations to go through
reforms everytime this occurs. Therefore, success of this facilitation is
dependent on market and time.
Furthermore, there is no short-changing
of investors because the option is available where there is a price which has
been discovered based on demand and supply position of the market. It is only
after 90% threshold is reached then there will be a situation where either
investor render at that price or remains at listed price. Idea is that neither
side should be suffering from.
Changes suggested by SEBI in the
consultation paper in delisting norms:
|
ALTERNATIVES TO REVERSE BOOK BUILDING PROCESS
|
|
|
PROPOSED
|
EXISTING
|
|
Promoters can propose a fixed price
for delisting
|
Delisting price decided based on
price at which shareholder tender shares
|
|
COUNTER OFFER FRAMEWORK
|
|
|
PROPOSED
|
EXISTING
|
|
Threshold can be reduced for
counter delisting offer
|
Achieve 90% shares of company to
execute delisting.
|
|
ELIGIBILITY TO MAKE COUNTER OFFER
|
|
|
PROPOSED
|
EXISTING
|
|
Bids received in first offer is
higher than:
- Difference between acquirer
shareholding and 75%
- 50% of public shareholding
|
It can be made irrespective of bid
received in first offer
|
|
REFERNCE DATE TO DETERMINE “FLOOR PRICE”[17]
|
|
|
PROPOSED
|
EXISTING
|
|
Date of Board Meeting
|
Date of intimating stock exchanges
on proposed board meet.
|
Further, SEBI has also proposed to
bring out separate delisting regulations for investment holding companies under
which transfer of shares in listed companies held by Investment holding company
will be done to public shareholders also cash payments to public shareholders
of the investment holding company will be done against investments in unlisted
companies, this is to ensure that delisting price for investment holding
companies reflects its right intrinsic value.
ROLE OF RESERVE BANK OF INDIA IN MONEY MARKET
India's central bank, the Reserve
Bank of India (RBI), was founded in 1935 while the country was still a British
colony. It is essential to the economic growth of India and acts as the
guardian of the nation's financial and monetary system. We will examine the
RBI's responsibilities, its contribution to preserving financial stability, and
its effects on the Indian economy in this extensive guide.
The RBI's main responsibilities
include creating and carrying out monetary policy. The RBI controls the amount
of money in the economy using a number of measures, including interest rates
and open market operations. Maintaining price stability while making sure there
is enough credit available to promote economic expansion is its primary goal.
Issuing and Managing Currency
The RBI is in charge of controlling
and issuing money in India. In order to satisfy the demands of the general
public and the banking system, it guarantees a sufficient supply of coins and
currency notes. In order to stop counterfeiting and preserve the integrity of
the currency, the central bank also takes action.
Regulation and Oversight of Banking
Supervising and regulating the Indian
banking industry is one of the RBI's most important responsibilities. To
preserve the stability of the banking system, it issues licenses to banks,
establishes requirements for capital sufficiency, and keeps an eye on how they
are operating. Under RBI supervision, banks are guaranteed to adhere to
prudential standards and safeguard depositor interests.
Development of Financial Markets
An essential part of the growth and
management of India's financial markets is the RBI. It creates regulations to
encourage the expansion of financial markets, such as those for currency,
government securities, and foreign exchange. These marketplaces are necessary
for the economy's effective distribution of resources.
Management of Foreign Exchange
The RBI's management of India's
foreign exchange reserves is one of its most important duties. To protect the
Indian rupee's value and the nation's external financial condition, it
intervenes in the foreign exchange market. Foreign exchange control policies
are also developed by the RBI.
Government banker
The RBI serves as the Indian
government's banker and financial advisor as well as that of the state
governments. It promotes government borrowing, aids in account management, and
supports the execution of fiscal policy. On behalf of the government, the
central bank also issues securities.
Development and Financial Inclusion
The RBI has made financial inclusion
a top goal. It strives to guarantee that banking and financial services are
available to all facets of society. Additionally, the central bank backs
programs aimed at expanding and strengthening financial markets to increase
public accessibility.
Systems of Payment and Settlement
To guarantee the security and
effectiveness of India's payment and settlement systems, the RBI keeps an eye
on them. It runs the National Electronic Funds Transfer (NEFT) and Real-Time
Gross Settlement (RTGS) systems, which make financial transfers and interbank
transactions easier.
Customer Defence
Another essential role of the RBI is
safeguarding the interests of consumers in the financial industry. It manages
complaints about banking services and establishes standards for ethical banking
operations. Additionally, the central bank encourages consumer awareness and
financial literacy.
Investigation and Information Sharing
The RBI produces reports and data and
carries out research on several facets of the Indian economy. It offers
insightful information about monetary policy, financial stability, and economic
developments. The public, financial institutions, and politicians need to know
this information.
CONCLUSION
To sum up, the analysis of SEBI's
securities law framework and how it affects the dynamics of delisting offers
important new perspectives on the regulatory environment that oversees the
Indian capital markets. By carefully examining the regulations and how they
affect market players, we have been able to observe how intricate and
complicated delisting procedures are. SEBI's strict delisting regulations and
guidelines, which are designed to protect shareholder rights and guarantee
transparency in corporate actions, demonstrate the organization's role as a
guardian of investor interests, market integrity, and fair practices.
According to the study, SEBI's delisting
framework is complex and balances the interests of various parties, such as
minority shareholders, promoters, and the market as a whole. The rules support
corporate transparency, but they also recognize that there must be some wiggle
room to take into account special circumstances and commercial realities. The
examination of delisting cases under SEBI's jurisdiction shows that regulatory
decisions are frequently customized to particular situations, finding a middle
ground between safeguarding minority shareholders and enabling promoters to
leave the company. However, the analysis has brought to light a few issues and
potential areas for development in the current framework. Concerns about
equitable valuation procedures, protracted delisting procedures, and
ambiguities in regulatory language are a few of the problems that require
ongoing attention. Improving investor confidence, market efficiency, and the
allure of Indian equities all depend on addressing these issues.
SEBI needs to adjust to the new challenges
and trends due to the ever-changing global financial landscape. Maintaining
investor confidence and cultivating a vibrant and competitive capital market
ecosystem in India will require persistent efforts to optimize the delisting
procedure, improve transparency, and advance strong corporate governance. The
delisting process under SEBI's securities law framework is governed by a
complicated and dynamic regulatory environment that strikes a careful balance
between advancing investor convenience and protecting investor interests.
Collaboration among regulatory bodies, market players, and other relevant
parties is essential to tackling current issues and guaranteeing the
sustainability and integrity of the Indian securities industry. This framework's
analysis of delisting dynamics provides a useful starting point for future
debates, investigations, and policy improvements.
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·
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·
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·
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·
SEBI (Delisting of Equity Shares) Regulations, 2021.
·
SEBI (Listing Obligations and Disclosure Requirement)
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·
SEBI (Substantial Acquisition of Shares and Takeovers)
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·
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Article Information
UNRAVELING DELISTING DYNAMICS: AN IN-DEPTH ANALYSIS OF SEBIS SECURITIES LAW FRAMEWORK
Authors: DEVESHI GUPTA
- Journal IJLRA
- ISSN 2582-6433
- Published 2024/03/02
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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- License CC 4.0
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