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Investors identify flaws in capital market delisting process
Source : http://www.thenews.com.pk/Todays-News-3-168787-Investors-identify-flaws-in-capital-market-delisting-process Date : 02 Apr 2013  
LAHORE: Investors have identified flaws in the delisting process in the capital market and have asked the regulators to follow the norms adopted by the developed capital markets to protect the interest of small investors. “In most developed markets most regulators have fixed an ownership level of 90-95 percent by an acquirer before the minority shareholders can be squeezed out without their vote. And most countries require an independent appraiser to determine the fair price for the shares of the minority shareholders,“a stock market analyst said. Some countries even allow the minority shareholders themselves to determine the price. Moreover, he said, most countries require either prior court approval of the price paid to the minority shareholders, or permit the minority shareholders to challenge the final price in a court proceeding. In The Netherlands, the acquirer must disclose ownership at the following percentage levels: 5, 10, 15, 20, 25, 30, 40, 50, 60, 75 and 95. After achieving this percentage of ownership, the majority shareholder can apply for delisting, he said. The deal is subject to the approval of the Enterprise Chamber of the Amsterdam Court of Appeal. Minority shareholders have ongoing notice of the acquirers intent and have the added protection of prior court approval of the fairness of the transaction by a court of appeal with the expertise in financial matters. In the United States, the acquirer must acquire at least 90 percent of the shares and the transaction is generally subject to a “fairness“ test, including a fair price. The burden is on the directors of the company to show fairness, and this determination may be challenged by the minority shareholders in the court. In India, the acquirer must have 90 percent shares of the company. After that he is required to first receive approval of at least two-thirds of the public shareholders who are not affiliated with the acquirer. The price for the shares of the minority shareholders is then determined by a reverse book building process and the price is set at the price at which the maximum number of shares is tendered. The floor price for the shares is the highest of the average price on the exchange in the prior 26 weeks or prior two weeks, he said. In Germany, the acquirer must hold at least 95 percent of the shares and the remaining shareholders must receive reasonable cash. Pakistani law permits delisting at 75 percent ownership and price determined according to a formula without giving the minority shareholders any say. Unilever offered minority shareholders to buyback the share at Rs9,700, while the Karachi Stock Exchange (KSE) recommended Rs15,000 per share as the buyback price. They, however, asserted that according to the global norms, fair price is that, which is negotiated between willing buyers and sellers. Girish Bhakoo, partner at Acacia Partners, which holds 4.1 percent shares of Unilever Pakistan, said, that all shareholders of Unilever Pakistan must thank the exchange for showing its concern over a flawed delisting process by requesting a higher price.

 
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