Description
This is a presentation about the need of delisting, guidelines of delisting and different types of delisting,
Group 4
Definition
“DELISTING" of securities means permanent removal of securities of a listed company from a stock exchange. As a consequence of delisting, the securities of that company would no longer be traded at that stock exchange. …………. SEBI
Why Delisting
• when a substantial acquisition of shares by acquirer takes place and an exit offer made • through mergers/ acquisitions • compulsory delisting enforced by the stock exchange.
Guidelines from SEBI
1
2
The offer price should have a floor price (a minimum base price) which will be the average of 26 weeks traded price and without a maximum price;
Market forces will determine the price above the base price. Stock exchanges will provide the infrastructure to ensure transparency whereby investors can see the prices on screens;
3
4
To reduce risk of price manipulation, the scrip will be under watch by the exchanges;
Comprehensive provisions should include procedures governing the entire subject of delisting of securities of companies, and should cover cases in which companies on their own seek delisting of their securities from all or some of the stock exchanges, as well as those where the stock exchanges can compulsorily delist the securities of a company.
Types of Delisting
Voluntary delisting Compulsory delisting
Public shareholding falling due to acquisition
Public shareholding falling due to management consolidation
Voluntary Delisting
To delist from the stock exchange-
listed for a minimum period of 3 years
exit opportunity has been given to the investors
Procedure for Voluntary Delisting
(a)
• obtain the prior approval of shareholders of the company by a special resolution passed at its general meeting;
(b)
• make a public announcement
(c)
• make an application to the delisting exchange in the form specified by the exchange, annexing therewith a copy of the special resolution
(d)
• comply with such other additional conditions of the concerned stock exchanges from where securities are to be delisted.
Public Announcement
Before making application for delisting, the promoters or the acquirers of the company shall make a public announcement. The public announcement shall contain inter-alia information specified in Schedule I. Before making the public announcement, the promoter shall appoint a merchant banker registered with the Board, who is not an associate of the promoter.
Exit Price
1. 2. 3. 4.
Exit price for delisting of securities to be calculated using the book building process. The offer price shall have a floor price, which will be the average of 26 weeks traded price preceding the date of the public announcement and without any ceiling The stock exchange shall provide the infrastructure facility for display of the price at the terminals of the trading members to enable the investors to access the price on the screen to bring transparency to the delisting process.
After the securities have been delisted, the acquirer shall allow a period of 6 months for any remaining shareholders to tender securities at the same price
Contd
5. 6. 7. 8. 9.
The stock exchanges shall monitor the possibility of price manipulation and keep special watch on the securities which are to be delisted. Registrar and Transfer Agent to co-operate with the Clearing House / Clearing Corporation to determine the quality of the papers upfront. If public shareholding does not fall below the statutory level the company shall remain listed. The paid up share capital shall not be extinguished as in the case of buyback of securities; In case of partly paid-up securities, the price determined by the book building process shall be applicable to the extent the call has been made and paid. Settlement of tendered and accepted securities to be in cash price
10.
Rights of Promoter
The promoter need not accept the securities at the offer price. When this is the case(a) he shall not make an application to the exchange for delisting of the securities; and (b) the public shareholding is to be brought up to the minimum limits within a period of 6 months from the date of such decision This maye be done by: (a) issue of new shares by the company (b) the promoter making an offer for sale of his holdings (c ) the promoter making sale of his holdings through the secondary market in a transparent manner If the public shareholding is not raised within six months, promoter has to offer portion of his holdings for sale to the public to bring to minimum limits at the price determined by the Central Listing Authority.
Public Announcement of Final Price
On determination of the final price pursuant to the book building, the promoter or the acquirer shall within a period of two working days from such determination:
• make a public announcement in the newspapers of the final price as discovered by the book building process and whether or not the promoter or the acquirer has accepted the price; and, • communicate to, exchange or exchanges from which delisting is sought to be made, the final price discovered and whether the promoter has accepted the price.
Reverse Book Building
• It means that current owners dictate the price at which they will sell to the firm.
• According to Indian rules, a firm that wishes to delist has to offer to buy back all shares; however, not all shareholders need to turn in their shares (some do retain their shares because they expect the firms that are delisting still remain a good investment); a firm can delist if it owns more than 90% of its shares.
• iGate Global Solutions Ltd, a mid-sized software services company, announced its plans to delist its shares from Indian stock exchanges in a move that its CEO Phaneesh Murthy said was an effort by the company’s parent iGate Corp. to clean up the “capital structure” of the company.
Delisting from one or more Stock Exchanges
When a company which is listed on any stock exchange or stock exchanges other than the stock exchanges having nationwide trading terminals, seeks delisting, an exit offer shall be made to the shareholders in accordance with these guidelines.
There shall not be any compulsion for the existing company to remain listed on any stock exchange merely because it is a regional stock exchange.
Delisting of One or All Class of Securities
A company may delist one or all of its class of securities subject to the following provisions• If the equity shares of a company are delisted, the fixed income securities may continue to remain listed on the stock exchange. • A company which has a convertible instrument outstanding, it shall not be permitted to delist its equity shares till the exercise of the conversion options.
Compulsory Delisting
1.
• The Stock Exchanges may delist companies which have been suspended for a minimum period of six months for non-compliance with the Listing Agreement. • The Stock Exchanges may also delist companies as per the norms provided in Schedule III.
2.
3.
• The Stock Exchange shall give adequate and wide public notice through newspapers ( including one English national daily of wide circulation) and through display of the notice on the notice board/ website/ trading systems of the Exchange.
4.
• The stock exchange shall give a show cause notice to a company.
Contd
5.
• The exchange shall provide a time period of 15 days within which representation may be made to the exchange by any person who may be aggrieved by the proposed delisting. • The stock exchange may, after consideration of the representations received from aggrieved persons, delist the securities of such companies.
6.
7.
• Where the stock exchange delists the securities of a company, it shall ensure that adequate and wide public notice of the fact of delisting is given through newspapers and on the notice boards/trading systems of the stock exchange and shall ensure disclosure in all such notices of the fair value of such securities.
8.
• The stock exchange shall display the name of such company on its website.
Rights of Security Holder in Compulsory Delisting
Where the securities of the company are delisted by an exchange, the promoter of the company shall be liable to compensate the security-holders of the company by paying them the fair value of the securities held by them and acquiring their securities, subject to their option to remain security-holders with the company.
Procedure of Compulsory Delisting
Panel for the decision to delist comprises of• Two directors/officers of the Exchange (one director to be a public representative) • One representative of the investors • One representative from the Central Government • Executive Director / Secretary of the Exchange
Notice of delisting, intimation to the company, and other Stock Exchanges where the company’s securities are listed to be given.
Notice of termination of the Listing Agreement to be given. An appeal against the order of compulsory delisting may be made to the SEBI.
Delisting Pursuant to Rights Issue
In case of rights issue, allotment to the promoters or the persons in control of the management shall be allowed even if they subscribe to unsubscribed portion which may result in public shareholding falling below the permissible minimum level.
• Provided that the adequate disclosures have been made in the offer document to that effect. • Provided that they agree to buy out the remaining holders at the price of rights issue or make an offer for sale to bring the public shareholding at the level specified in the listing conditions or listing agreement to remain listed.
In case the rights issue is not fully subscribed, which may result in the public shareholding falling below the permissible minimum level as specified in the listing condition or listing agreement, the promoters of the company shall be required to delist by providing an exit opportunity or may be required to make offer for sale of their holdings so that the public shareholding is raised to the minimum level specified in the listing agreement within a period of 3 months.
Reinstatement of Delisted Securities
Reinstatement of delisted securities should be permitted by the stock exchanges with a cooling period of 2 years. In other words, relisting of securities should be allowed only after 2 years of delisting of the securities. It would be based on the respective norms/criteria for listing at the time of making the application for listing and the application will be initially scrutinized by the Central Listing Authority.
DSP Merrill Lynch – An Example
Members of the Exchange are hereby informed that pursuant to the SEBI (Delisting of Securities) Guidelines 2003, the company has complied with the formalities for delisting of securities. Accordingly the trading in the scrip of DSP Merrill Lynch Ltd. (Scrip Code: 509516) will be discontinued w.e.f Thursday, April 20, 2006. (DR-014/2006-07) Further the scrip of the above company will be delisted from the Exchange records w.e.f Friday, April 28, 2006. (DR020/2006-07) Members may further note that the exit option will be kept open at the rate of Rs. 2143/- per share, being the exit price determined to the remaining public shareholders for a period of six months from the date of delisting by the acquirer Merrill Lynch Holdings (Mauritius). Shareholders may send their option forms to the company at the below mentioned address: Sharepro Services Pvt. Limited, Satam Estate, 3rd Floor, Cardinal Gracious Road, Chakala, Andheri (E), Mumbai 400 099Tel No. +91 22 2821 5168/ 2832 9828; Fax No. +91 22 2837 5646 Email [email protected] Members of the Exchange are requested to take a note of the above.
doc_168130194.ppt
This is a presentation about the need of delisting, guidelines of delisting and different types of delisting,
Group 4
Definition
“DELISTING" of securities means permanent removal of securities of a listed company from a stock exchange. As a consequence of delisting, the securities of that company would no longer be traded at that stock exchange. …………. SEBI
Why Delisting
• when a substantial acquisition of shares by acquirer takes place and an exit offer made • through mergers/ acquisitions • compulsory delisting enforced by the stock exchange.
Guidelines from SEBI
1
2
The offer price should have a floor price (a minimum base price) which will be the average of 26 weeks traded price and without a maximum price;
Market forces will determine the price above the base price. Stock exchanges will provide the infrastructure to ensure transparency whereby investors can see the prices on screens;
3
4
To reduce risk of price manipulation, the scrip will be under watch by the exchanges;
Comprehensive provisions should include procedures governing the entire subject of delisting of securities of companies, and should cover cases in which companies on their own seek delisting of their securities from all or some of the stock exchanges, as well as those where the stock exchanges can compulsorily delist the securities of a company.
Types of Delisting
Voluntary delisting Compulsory delisting
Public shareholding falling due to acquisition
Public shareholding falling due to management consolidation
Voluntary Delisting
To delist from the stock exchange-
listed for a minimum period of 3 years
exit opportunity has been given to the investors
Procedure for Voluntary Delisting
(a)
• obtain the prior approval of shareholders of the company by a special resolution passed at its general meeting;
(b)
• make a public announcement
(c)
• make an application to the delisting exchange in the form specified by the exchange, annexing therewith a copy of the special resolution
(d)
• comply with such other additional conditions of the concerned stock exchanges from where securities are to be delisted.
Public Announcement
Before making application for delisting, the promoters or the acquirers of the company shall make a public announcement. The public announcement shall contain inter-alia information specified in Schedule I. Before making the public announcement, the promoter shall appoint a merchant banker registered with the Board, who is not an associate of the promoter.
Exit Price
1. 2. 3. 4.
Exit price for delisting of securities to be calculated using the book building process. The offer price shall have a floor price, which will be the average of 26 weeks traded price preceding the date of the public announcement and without any ceiling The stock exchange shall provide the infrastructure facility for display of the price at the terminals of the trading members to enable the investors to access the price on the screen to bring transparency to the delisting process.
After the securities have been delisted, the acquirer shall allow a period of 6 months for any remaining shareholders to tender securities at the same price
Contd
5. 6. 7. 8. 9.
The stock exchanges shall monitor the possibility of price manipulation and keep special watch on the securities which are to be delisted. Registrar and Transfer Agent to co-operate with the Clearing House / Clearing Corporation to determine the quality of the papers upfront. If public shareholding does not fall below the statutory level the company shall remain listed. The paid up share capital shall not be extinguished as in the case of buyback of securities; In case of partly paid-up securities, the price determined by the book building process shall be applicable to the extent the call has been made and paid. Settlement of tendered and accepted securities to be in cash price
10.
Rights of Promoter
The promoter need not accept the securities at the offer price. When this is the case(a) he shall not make an application to the exchange for delisting of the securities; and (b) the public shareholding is to be brought up to the minimum limits within a period of 6 months from the date of such decision This maye be done by: (a) issue of new shares by the company (b) the promoter making an offer for sale of his holdings (c ) the promoter making sale of his holdings through the secondary market in a transparent manner If the public shareholding is not raised within six months, promoter has to offer portion of his holdings for sale to the public to bring to minimum limits at the price determined by the Central Listing Authority.
Public Announcement of Final Price
On determination of the final price pursuant to the book building, the promoter or the acquirer shall within a period of two working days from such determination:
• make a public announcement in the newspapers of the final price as discovered by the book building process and whether or not the promoter or the acquirer has accepted the price; and, • communicate to, exchange or exchanges from which delisting is sought to be made, the final price discovered and whether the promoter has accepted the price.
Reverse Book Building
• It means that current owners dictate the price at which they will sell to the firm.
• According to Indian rules, a firm that wishes to delist has to offer to buy back all shares; however, not all shareholders need to turn in their shares (some do retain their shares because they expect the firms that are delisting still remain a good investment); a firm can delist if it owns more than 90% of its shares.
• iGate Global Solutions Ltd, a mid-sized software services company, announced its plans to delist its shares from Indian stock exchanges in a move that its CEO Phaneesh Murthy said was an effort by the company’s parent iGate Corp. to clean up the “capital structure” of the company.
Delisting from one or more Stock Exchanges
When a company which is listed on any stock exchange or stock exchanges other than the stock exchanges having nationwide trading terminals, seeks delisting, an exit offer shall be made to the shareholders in accordance with these guidelines.
There shall not be any compulsion for the existing company to remain listed on any stock exchange merely because it is a regional stock exchange.
Delisting of One or All Class of Securities
A company may delist one or all of its class of securities subject to the following provisions• If the equity shares of a company are delisted, the fixed income securities may continue to remain listed on the stock exchange. • A company which has a convertible instrument outstanding, it shall not be permitted to delist its equity shares till the exercise of the conversion options.
Compulsory Delisting
1.
• The Stock Exchanges may delist companies which have been suspended for a minimum period of six months for non-compliance with the Listing Agreement. • The Stock Exchanges may also delist companies as per the norms provided in Schedule III.
2.
3.
• The Stock Exchange shall give adequate and wide public notice through newspapers ( including one English national daily of wide circulation) and through display of the notice on the notice board/ website/ trading systems of the Exchange.
4.
• The stock exchange shall give a show cause notice to a company.
Contd
5.
• The exchange shall provide a time period of 15 days within which representation may be made to the exchange by any person who may be aggrieved by the proposed delisting. • The stock exchange may, after consideration of the representations received from aggrieved persons, delist the securities of such companies.
6.
7.
• Where the stock exchange delists the securities of a company, it shall ensure that adequate and wide public notice of the fact of delisting is given through newspapers and on the notice boards/trading systems of the stock exchange and shall ensure disclosure in all such notices of the fair value of such securities.
8.
• The stock exchange shall display the name of such company on its website.
Rights of Security Holder in Compulsory Delisting
Where the securities of the company are delisted by an exchange, the promoter of the company shall be liable to compensate the security-holders of the company by paying them the fair value of the securities held by them and acquiring their securities, subject to their option to remain security-holders with the company.
Procedure of Compulsory Delisting
Panel for the decision to delist comprises of• Two directors/officers of the Exchange (one director to be a public representative) • One representative of the investors • One representative from the Central Government • Executive Director / Secretary of the Exchange
Notice of delisting, intimation to the company, and other Stock Exchanges where the company’s securities are listed to be given.
Notice of termination of the Listing Agreement to be given. An appeal against the order of compulsory delisting may be made to the SEBI.
Delisting Pursuant to Rights Issue
In case of rights issue, allotment to the promoters or the persons in control of the management shall be allowed even if they subscribe to unsubscribed portion which may result in public shareholding falling below the permissible minimum level.
• Provided that the adequate disclosures have been made in the offer document to that effect. • Provided that they agree to buy out the remaining holders at the price of rights issue or make an offer for sale to bring the public shareholding at the level specified in the listing conditions or listing agreement to remain listed.
In case the rights issue is not fully subscribed, which may result in the public shareholding falling below the permissible minimum level as specified in the listing condition or listing agreement, the promoters of the company shall be required to delist by providing an exit opportunity or may be required to make offer for sale of their holdings so that the public shareholding is raised to the minimum level specified in the listing agreement within a period of 3 months.
Reinstatement of Delisted Securities
Reinstatement of delisted securities should be permitted by the stock exchanges with a cooling period of 2 years. In other words, relisting of securities should be allowed only after 2 years of delisting of the securities. It would be based on the respective norms/criteria for listing at the time of making the application for listing and the application will be initially scrutinized by the Central Listing Authority.
DSP Merrill Lynch – An Example
Members of the Exchange are hereby informed that pursuant to the SEBI (Delisting of Securities) Guidelines 2003, the company has complied with the formalities for delisting of securities. Accordingly the trading in the scrip of DSP Merrill Lynch Ltd. (Scrip Code: 509516) will be discontinued w.e.f Thursday, April 20, 2006. (DR-014/2006-07) Further the scrip of the above company will be delisted from the Exchange records w.e.f Friday, April 28, 2006. (DR020/2006-07) Members may further note that the exit option will be kept open at the rate of Rs. 2143/- per share, being the exit price determined to the remaining public shareholders for a period of six months from the date of delisting by the acquirer Merrill Lynch Holdings (Mauritius). Shareholders may send their option forms to the company at the below mentioned address: Sharepro Services Pvt. Limited, Satam Estate, 3rd Floor, Cardinal Gracious Road, Chakala, Andheri (E), Mumbai 400 099Tel No. +91 22 2821 5168/ 2832 9828; Fax No. +91 22 2837 5646 Email [email protected] Members of the Exchange are requested to take a note of the above.
doc_168130194.ppt