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Delisting Norms get Investor-Friendly

SEBI has empowered investors against promoters wishing to delist their companies

Here is another investor-friendly rule change that the market regulator, the Securities and Exchange Board of India (SEBI) has come up with in order to make minority shareholders a part of the delisting process.

In a recent announcement, SEBI has said that non-promoter shareholder’s votes in favor of the delisting proposal should be at least two times the number of votes cast against it by them, said Economic Times.

As a result, companies thinking of delisting from stock exchanges might be in for tougher times.

While the earlier proposal was very easy to carry out, the new proposal would pose varied problems for the company promoters. However, at the same time, public shareholders, when given the option of an exit at a premium, would be more than happy to accept, aver some analysts.

The amount of time that shareholders can now take to tender their shares to promoters of the company has been increased to a year, after delisting,. Earlier period was just 6 months.Also, a minimum of two-thirds of public shareholders must give their approval to the Board’s resolution on delisting by postal ballot.

Apart from this, SEBI has also clarified on the definition of a successful open offer before delisting, insisting that promoters bag a higher number of shares than before to successfully delist. The new norms have moved the delisting threshold higher at 90 per cent.

The market regulator said that as far as calculation of floor price in the delisting open offer is concerned, higher of the average of the weekly high and low of the share’s closing prices during the 26 weeks or two weeks, before the date on which the stock exchanges were notified of the board’s proposal to de-list, would be taken.