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Brief History: From Guidelines to Regulations:
In the earlier days, the public issues of shares and their pricing was looked after by the Controller of Capital Issues (CCI). Eversince the abolition of CCI in the year 1992, the same is being looked after by Securities and Exchange Board of India (SEBI).
The purpose of establishing SEBI and the SEBI Act, 1992 was to protect the interests of the investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith or incidental thereto.
Eversince then, it has been the continuous endeavour of SEBI for prescribe procedures, formulate strategies and formulate laws. In one of such attempts, SEBI in the year 2002 constituted a committee on delisting of shares to inter-alia examine and review the conditions for delisting of securities of companies listed on recognized stock exchanges and suggest norms and procedures in connection therewith. The Report of the Committee was considered and accepted by SEBI Board. Pursuant to the same, SEBI vide Circular SMD/Policy/CIR – 7/ 2003 dated February 17, 2003 issued the SEBI (Delisting of Securities) Guidelines, 2003.
The salient features of the said Guidelines were:
- Public Shareholders to be given an exit option if the company or its promoters propose to delist its securities from all the stock exchanges on which they were listed. However, no exit opportunity was required to be given in case the company continues to remain listed at stock exchanges having Nationwide trading terminals.
- Price discovery by Reverse Book Building process.
- Eligibility to participate in the book building process was available only to demat shareholders.
- Option available to the promoters to accept or reject the price determined by the book building process.
- The exit option to remain open for a period of 6 months after the closure of the offer.
The said Guidelines, although, to a great extent covered the issues involved in Delisting of Securities. However, there were certain areas over which hue and cry was made from various quarters. Various representations and views, from intermediaries, stock exchanges, shareholders’ associations, chambers of commerce etc were given to the Regulators on the operational issues and procedural complications in the guidelines. Based on such representations, it was proposed to look into and suggest changes in the guidelines.
In the month of April 2004, the initial changes proposing more systemic clarity were put up for public comments. Comments were received from various quarters and opinions were received on crucial provisions.
On the basis of the same, SEBI, in December 2006, circulated the Concept Paper on the proposed SEBI (Delisting of Securities) Regulations, 2006, asking for public comments on the proposed Regulations.
SEBI received various comments, opinions and suggestions on the subject. And finally, by its publication dated 10th June 2009 in the Official Gazette, SEBI notified the much awaited SECURITIES AND EXCHANGE BOARD OF INDIA (DELISTING OF EQUITY SHARES) REGULATIONS, 2009.