SEBI issues new delisting norms through an open offer under takeover regulations

Notification No. SEBI/LAD-NRO/GN/2021/60, Dated: 06-12-2021

The market regulator, SEBI has amended the regulatory framework for delisting of equity shares pursuant to open offer as provided under Regulation 5A of the SEBI Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Regulations). The amendment provides that if the open offer is for an indirect acquisition, the declaration of the intent to delist shall be made initially only in the detailed public statement.

The Amendment specifies that the acquirer shall not, in target company during preceding 2 years from the date of public announcement, be

(i) a promoter/promoter group/person in control, or

(ii) directly/indirectly associated with the promoter or any person in control, or

(iii) a person holding more than 25% shares or voting rights and that the acquirer shall not acquire joint control along with an existing promoter/person in control.

The amendment regulations provide that where a competing offer is made in terms of Regulation 20(1) of these Regulations, the acquirer shall not be entitled to delist the target company, and will not be liable to pay interest to the shareholders on account of delay due to the competing offer.

The Amendment Regulations prescribes that where the target company fails to get delisted pursuant to a delisting offer, but which results in the shareholding of acquirer exceeding the maximum permissible non-public shareholding threshold, the acquirer may undertake a further attempt to delist the target company in accordance with the Delisting Regulations during 12 months from the date of completion of the open offer, subject to the acquirer continuing to exceed the said maximum permissible non-public shareholding

The amended norms further provide that delisting attempt shall be successful subject to the fulfillment of the condition that the delisting threshold under regulation 21 of the Delisting Regulations is fulfilled, and 50% of the residual public shareholding is acquired, however, upon failure of the further delisting attempt, the acquirer shall ensure compliance of the minimum public shareholding requirement of the target company under the Securities Contract (Regulation) Rules, 1957 within the stipulated time.

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