With a view to make it easier for promoters to delist their companies from stock exchanges, market regulator SEBI is mulling shortening the delisting process to two months.
Public comments sought (till May 30) by the Securities and Exchange Board of India (SEBI) on the delisting process are currently being analysed and final rules will be announced very soon, according to official sources.
The new norms will help companies save cost and time with a faster process and also check any manipulation in share price associated with a longer time-frame.
Currently, a delisting process takes a minimum of 137 days for completion and at times, it take more than a year.
As per the new rules, the whole process could be completed in about two months from the day a company informs exchanges or convenes a board meeting in this regard. This includes completion of offer in one month and an additional one month for formalities for shares to get delisted by the exchanges and for various other approvals.
Besides, a company has to make a public announcement regarding the delisting process soon after the board meeting and letter of offer has to be dispatched within a week. The delisting offer would be for a period of four to five days.
According to new norms, a company has to make payment or return the shares within a month as against the current practice, which takes about three months.
The new rules on the matter come against the backdrop of concerns raised by various entities about existing delisting process which at times is also seen as time-consuming.
Last month, SEBI had floated a discussion paper on proposed new delisting norms, including reduced time-frame and broader price discovery mechanism.
SEBI proposed that the delisting offer may be considered successful if the holding of the promoter (or acquirer) reaches 90 per cent post offer.
Current rules require the acquirer to either reach higher of 90 per cent of the total issued share capital or acquire at least 50 per cent of the offer size.
The regulator proposed for doing away with the requirement for shareholder nod and stock exchange approval for the delisting process.
SEBI has suggested the offer price could be determined on a ‘fixed-price’ basis or a two-step process through which the promoter could make a counter offer.
“…first step remains the same as in the case of current RBB (reverse book building) process i.e. shares can be tendered in the RBB process and the price is discovered. In case this discovered price is at a significant premium to the floor price or the price is not acceptable to the promoter, the acquirer may be given an option to make a counter offer to public shareholders instead of rejecting the discovered price and the offer failing,” it said.
Shareholders can either accept or reject this second offer.