Sebi nearly halves time taken for delisting to 76 working days

Capital market regulator Securities and Exchange Board of India (Sebi) has reduced the number of days taken for completing the process of delisting of a company from the bourses to 76 from the current 137 days, in order to make delisting of companies a less cumbersome process.

The Sebi board at its meeting today approved the revamped norms that reduce the time taken by nearly half.

"Timelines for completing the delisting process has been reduced from 137 calendar days (approximately 117 working days) to 76 working days," the regulator said in a release.

The changes are aimed at making the existing regulatory framework on delisting more effective, Sebi said.

Sebi also decided to retain the reverse book building process for discovering the price of shares for the purpose of delisting.

Delisting will be considered successful only when the shareholding of the acquirer together with the shares tendered by public shareholders reaches 90 per cent of the total share capital of the company.

Besides, at least 25 per cent of the number of public shareholders holding shares in dematerialised mode as on the date of the board meeting, which approves the delisting proposal, tender in the reverse book building process, Sebi said.

To ensure that a delisting plan has been decided in a fair manner, the board should approve the same only after due diligence process, for which it can appoint a merchant banker on behalf of the company and the promoter, Sebi said.

Further, the board should certify that the company is in compliance with applicable securities law and that it would be in the interest of shareholders.

Sebi said that an acquirer would have the option to delist the shares of the company directly through delisting regulations pursuant to triggering takeover norms.

The Sebi board, which met in Mumbai today also deliberated on the Justice Sodhi Committee Report and public comments received thereon on the draft insider trading regulations.

The new regulations are intended to strengthen the legal and enforcement framework, align Indian regime with international practices, provide clarity with respect to the definitions and concepts and facilitate legitimate business transactions.

The definition of insider has been made wider by including persons connected on the basis of being in any contractual, fiduciary or employment relationship that allows such person access to unpublished price sensitive information (UPSI). However directors, employees and all other persons in the deeming category covered under 1992 regulations would continue to be covered. Insider will also include a person who is in possession or has access to UPSI. Now, immediate relatives will be presumed to be connected persons, with a right to rebut the presumption. In 1992 regulations, definition of connected person was largely position based. 

Clear prohibition on communication of unpublished price sensitive information (UPSI) has been provided except legitimate purposes, performance of duties or discharge of legal obligations.

 The requirement of communication of UPSI in the case of legitimate business transaction has been recognized in law and a carve-out with safeguards has been provided.

Disclosure of UPSI in public domain has been made mandatory before trading, so as to rule out asymmetry of information in the market, as prevalent in other jurisdictions.

A provision of Trading Plans on the lines of US has been introduced for insiders with necessary safeguards. Such a plan has to be for bona fide transactions and has to be disclosed on stock exchange platform in advance.

Clarity has been brought to the definition of UPSI by aligning it with listing agreement and making the definition inclusive.

To facilitate legitimate business transactions, unpublished price sensitive information (UPSI) can be communicated with safeguards.

Insiders who are liable to possess UPSI all round the year would have the option to formulate pre-scheduled trading plans. Trading plans would, however, to be disclosed on the stock exchanges and have to be strictly adhered to. Trading plans shall be available for bona fide transactions.

Principle based Code of Fair Disclosure and Code of Conduct has been prescribed.

In given cases, certain circumstances which can be demonstrated by an insider to prove his innocence have been provided.

Repeated disclosures have been removed so as to ease compliance burden and to align with Takeover Code. Disclosure of any change of 2% for persons holding more than 5 per cent shares or voting rights has been removed as they are prescribed under Takeover Code.