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How to Delist

Process

A recognized stock exchange may, by order, delist any equity shares of a company on any ground prescribed in the rules made under section 21A of the Securities Contracts (Regulation) Act, 1956 .

Constitution of Panel (Regulation 22 (2))

The decision regarding compulsory delisting shall be taken by a panel to be constituted by the recognized stock exchange consisting of -

1. Two directors of the recognized stock exchange (one of whom shall be a public representative);
2. One representative of the investors;
3. One representative of the Ministry of Corporate Affairs or Registrar of Companies; and
4. The Executive Director or Secretary of the recognized stock exchange.

Public notice before delisting order (Regulation 22 (3))

Before making a delisting order the recognized stock exchange shall give a notice in one English national daily with wide circulation and one regional language newspaper of the region where the concerned recognized stock exchange is located and shall also display such notice on its trading systems and website.

Time period of making representation (Regulation 22 (3))

Time period of not less than fifteen working days from the notice, be given to any person who may be aggrieved by the proposed delisting within which he can made representations to the recognized stock exchange which has issued a notice for the delisting.

Delisting Order by the Recognised Stock Exchange (Regulation 22 (4))

The recognized stock exchange passes an order under sub-regulation (1) after considering the representations, if any made by the company and any aggrieved person in response to the notice and after considering the following points:-

1. Nature and extent of the alleged non-compliance of the company and the number and percentage of shareholders who may be affected by such non-compliance.
2. The status of compliance of the company with the office of the concerned Registrar of Companies.

Public notice after Delisting Order (Regulation 22 (6))

Where the recognized stock exchange passes the delisting order, it shall, -

(a) Forthwith publish a notice in one English national daily with wide circulation and one regional language newspaper of the region where the concerned recognized stock exchange is located.

(b) Inform all other stock exchanges where the equity shares of the company are listed, about such delisting and the surrounding circumstances.

Disclosures to be made in the notice

• Facts of such delisting,
• The name and address of the company,
• The fair value of the equity shares determined under sub-regulation (1) of regulation 23 and
• The names and addresses of the promoters of the company who would be liable under sub-regulation (3) of regulation 23.

EXIT Price Determination by an Independent Valuer (Regulation 23 (1))

• The recognized stock exchange shall form a panel of expert valuers from whom the valuer or valuers shall be appointed .
• The promoter of the delisted company shall acquire equity shares from the public shareholders by paying them the value determined by the valuer, subject to their option of retaining their shares.

Important points:-

1. No open offer is required to be given by the Delisted company in the case of compulsory delisting made by a recognized stock exchange.
2. Where a company has been compulsorily delisted the company, its whole time directors, its promoters and the companies which are promoted by any of them shall not directly or indirectly access the securities market or seek listing for any equity shares for a period of ten years from the date of such delisting.

Special Powers to the recognized stock Exchanges (SCHEDULE III)

1. The recognised stock exchange can file prosecutions under relevant provisions of the Securities Contracts (Regulation) Act, 1956 or any other law for the time being in force against identifiable promoters and directors of the company for the alleged non-compliances.
2. The recognised stock exchange can also file a petition for winding up the company under section 433 of the Companies Act, 1956 (1 of 1956) or make a request to the Registrar of Companies to strike off the name of the company from the register under section 560 of the said Act.