Sebi relaxes takeover, delisting norms for insolvent companies
05 June 2018
Market regulator Securities and Exchange Board of India (Sebi) has laid down fresh norms for substantial acquisition of shares and takeover of entities facing insolvency proceedings and also relaxed requirements for complying with delisting for such entities.
These relaxations will be applicable to companies facing insolvency proceedings, provided the resolution plan lays down the procedure for delisting such entities from the exchanges, Sebi stated in separate releases.
The move is expected to provide relief to various listed companies that have been referred for resolution under the Insolvency and Bankruptcy Code (IBC). More than 750 entities, including many listed firms, are facing insolvency proceedings.
In a notification issued on 1 June, the markets regulator said norms pertaining to delisting of equity shares would not be applicable to any entity that is getting delisted pursuant to a resolution plan approved under the IBC.
The exemption would be subject to conditions that the resolution plan “lays down any specific procedure to complete the delisting of such shares” or that the plans provide an exit option to the existing public shareholders at a specified price.
As per the notification, the exit for the shareholders should be at a price that is not below the liquidation value determined after paying off dues. The value is decided as per regulations of the Insolvency and Bankruptcy Board of India (IBBI).
In case the existing promoters or any other shareholders are to be provided an opportunity to exit under the resolution plan at a price higher than the price determined, then at least the same price should be offered for the existing public shareholders of that particular entity, as per the notification.
“… the details of delisting of such shares along with the justification for exit price in respect of delisting proposed shall be disclosed to the recognised stock exchanges within one day of [the] resolution plan,” it said.
Sebi has also relaxed certain norms in respect to substantial acquisition of shares and takeovers of insolvent entities as well as issue of capital and disclosure requirements, according to separate notifications.