Government notifies share delisting rules for companies

15 June 2009

The government of India today notified new rules on delisting of shares by companies, which are either making losses for three consecutive years or whose shares were not traded for more than six months, the finance ministry said.

A finance ministry statement said the notification is aimed at implementing the rules for delisting issued by the Securities and Exchange Board of India (SEBI) last week.

"The Securities Laws (Amendment) Act, enacted in 2005, incorporated section 21(A) in the Securities Contract Regulation Act (SCRA) to allow delisting of securities necessitating the creation of a delisting framework. In order to provide statutory backing for the delisting framework, rules dealing primarily with the substantive aspects and regulations dealing primarily with the procedural aspects for delisting are also being notified simultaneously by the government and the Securities and Exchange Board of India, respectively," a government release said.

Delisting of securities may be done by a recognised exchange on any of the following grounds:

(a) the company has incurred losses during the preceding three consecutive years and it has negative net worth;

(b) trading in the securities of the company has remained suspended for a period of more than six months;