PUBLIC ANNOUNCEMENT IN THE PROCESS OF DELISTING OF EQUITY SHARES

[Mr. M. GOVINDARAJAN]

Delisting

The term ‘delisting’ is defined by Regulation 2(1)(j) of Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021 (notified on 10.06.2021) (‘Regulations’ for short) as  permanent removal of equity shares of the company from the trading platform of a recognized stock exchange, either by way of voluntary or compulsory method.

A company may delist its equity shares from one or more of the recognized stock exchanges on which it is listed without providing an exit opportunity to the public shareholders, if after the proposed delisting, the equity shares remain listed on any recognized stock exchange that has nationwide trading terminals.

Initial Public announcement

The expression ‘Initial Public announcement’ is defined by Regulation 2(1)(q) as the first announcement, including subsequent modifications thereto, if any, made by the acquirer to express its intention to voluntarily delist the equity shares of the company from all the recognized stock exchanges.

On the date when the acquirer(s) decides to voluntarily delist the equity shares of the company, it shall make an initial public announcement to all the stock exchanges.  The stock exchanges shall disseminate the same to the public.  The initial public announcement shall contain such information as may be specified, including:-

• the reasons for delisting;
• an undertaking with respect to compliance with sub-regulations (2) and (5) of regulation 4 of these regulations.

A copy of the initial public announcement shall also be sent to the company at its registered office not later than one working day from the date of the initial public announcement.

Detailed Public announcement

The expression ‘detailed public announcement’ is defined by Regulation 2(1)(i) as the announcement made by the acquirer in terms of regulation 15 read with Schedule I of these regulations.

The acquirer shall, within one working day from the date of receipt of in-principle approval for delisting of equity shares from the recognized stock exchange, make a detailed public announcement in at least one English national newspaper with wide circulation, one Hindi national newspaper with wide circulation in their all India editions and one vernacular newspaper of the region where the relevant recognised stock exchange is located.   The detailed public announcement shall be dated and signed by the acquirer.

Contents of detailed public announcement

Regulation 15(2) provides that  the detailed public announcement shall contain all material information including the information specified in Schedule I of these regulations and shall not contain any false or misleading statement.  The information specified in Schedule I is as below-

• The floor price and the offer price and how they were arrived at.
• The indicative price, if any, given by the acquirer.
• The dates of opening and closing of the bidding period.
•  The name of the stock exchange from which the equity shares are sought to be delisted.
•  The manner in which the delisting offer can be accepted by the shareholders.
•  Disclosure regarding the minimum acceptance condition for success of the offer.
• The name(s) of the Manager to the offer and other intermediaries together with the helpline number for the shareholders.
• The detailed public announcement shall also specify a date, being a day not later than one working day from the date of the detailed public announcement, which shall be the ‘specified date’ for determining the names of the shareholders to whom the letter of offer shall be sent.
• The object of the proposed delisting.
• The proposed time table from opening of the delisting offers till the payment of consideration or return of equity shares.
• Details of the escrow account and the amount deposited therein.
• Listing details and stock market data including:

• high, low and average market prices of the equity shares of the company during the preceding 3 years;
• monthly high and low prices for the 6 months preceding the date of the detailed public announcement; and,
• the volume of equity shares traded in each month during the 6 months preceding the date of detailed public announcement.

• Present capital structure and shareholding pattern of the company.
• The aggregate shareholding of the acquirer with persons acting in concert and of the directors of the acquirer where the acquirer is a company and of persons who are in control of the company.
• A statement, certified to be true by the Board of Directors of the company, disclosing material deviation, if any, in utilization of proceeds of issues of securities made during the five years immediately preceding the date of detailed public announcement, from the stated objects of the issues.
• A statement by the Board of Directors of the company confirming that all material information which is required to be disclosed under the provisions of continuous listing requirement have been disclosed to the stock exchanges.
• List of documents copies of which shall be available for inspection by the public shareholders at the registered office of the Manager to the offer during the working days.
• A statement by the Board of Directors of the company certifying that:-

• the company is in compliance with the applicable provisions of securities laws;
• the acquirer or its related entities have not carried out any transaction during the aforesaid period to facilitate the success of the delisting offer which is not in compliance with the provisions of sub-regulation (5) of regulation 4 of these regulations;
•  the delisting, in their opinion, is in the interest of the shareholders.

• Name of compliance officer of the company.

The other information to be provided in the detailed public statement are-

• After fixation of the floor price the discovered price shall be determined through the reverse book building process and the Manager to the offer shall disclose the same in the detailed public announcement and the letter of offer.
• The cut-off date for determination of inactive shareholders shall be the date on which the in-principle approval of the Stock Exchange is received, which shall be adequately disclosed in the public announcement.

Obligations of the acquirer

Prior to making the initial public announcement of the offer for the delisting of equity shares the acquirer shall ensure that firm financial arrangements have been made for fulfilling the payment obligations under the delisting offer and that the acquirer is able to implement the delisting offer, subject to any statutory approvals for the delisting offer that may be necessary.  The acquirer shall ensure that the contents of the initial public announcement, the detailed public announcement are true, fair and adequate in all material aspects, not misleading and based on reliable sources that shall be mentioned wherever necessary.

Before making the detailed public announcement, the acquirer shall deposit in the escrow account, the remaining consideration amount being 75% calculated on the basis of the number of equity shares outstanding with the public shareholders multiplied with the floor price or the indicative price, if any given by the acquirer, whichever is higher.

Obligations of the Manager

Before making the detailed public announcement, the Manager to the offer for delisting of equity shares shall ensure that-

• the acquirer is able to implement the delisting offer; and
• firm arrangements for funds through verifiable means have been made by the acquirer to meet the payment obligations under the delisting offer.

he Manager to the offer shall ensure that the contents of the initial public announcement, the detailed public announcement, are complete, true, fair and adequate in all material aspects, based on reliable sources and are in compliance with the requirements under these regulations and other applicable securities laws.

Impact of detailed public statement

Some of the actions taken during the process of delisting is impacted on the detailed public announcement.

Obligations of the company

Upon receipt of the detailed public announcement, the Board of Directors of the company shall constitute a Committee of independent directors to provide reasoned recommendations on the delisting offer.  The Committee of independent directors shall provide its written recommendations on the delisting proposal and also indicate the voting pattern.  The company shall publish such recommendations of the Committee of independent directors, along with the details of the voting pattern, at least 2 working days before the commencement of the bidding period, in the same newspapers in which the detailed public announcement of the offer for delisting of equity shares was published, and simultaneously, a copy of the same shall be sent to the stock exchange(s) and the Manager to the offer.

Letter of offer

The acquirer shall dispatch the letter of offer to the public shareholders not later than two working days from the date of the detailed public announcement made.   The letter of offer shall contain all the disclosures made in the detailed public announcement and such other disclosures as may be necessary for the shareholders to take an informed decision.

Bidding

The bidding period shall start not later than 7 working days from the date of the detailed public announcement and shall remain open for 5 working days.  Within 2 working days from the closure of the bidding period, the acquirer shall make a public announcement in the same newspapers in which the detailed public announcement was made, disclosing the success or failure of the reverse book building process, along with the discovered price accepted by the acquirer in the event of success of the said process.

Quarterly Advertisement

The Manager to the offer, in coordination with the acquirer shall ensure that the rights of the remaining public shareholders are protected and in furtherance of the same shall publish, on a quarterly basis, an advertisement in the same newspapers in which the detailed public announcement of the offer for delisting of equity shares was published, inviting the remaining public shareholders to avail the exit opportunity during the one year exit window after delisting of shares.

Success or failure of offer

Within 2 working days from the closure of the bidding period, the acquirer shall, through the Manager to the offer, make a public announcement in the same newspapers in which the detailed public announcement was made, disclosing the success or failure of the reverse book building process, along with the discovered price accepted by the acquirer in the event of success of the said process.

Further delisting offer

The acquirer, whose delisting offer has failed, shall not make another delisting offer until the expiry of 6 months from the date of making public announcement for the failure of the delisting offer if the price discovered through the reverse book building process is rejected by the acquirer.

Counter offer

Public announcement of counter offer may be made by the acquirer through stock exchange mechanism within 2 working days from the date of closure of reverse book building bidding process.   Publication of counter offer public announcement shall be made in the same newspapers where the detailed public announcement was made within 4 working days from the closure of the reverse book building bidding process.

The book value shall be computed on the basis of both consolidated and standalone financial statements of the company as per the latest quarterly financial results filed by the company on the recognized stock exchange(s) as on the date of public announcement for counter offer, and the higher of the values so computed shall be treated as the book value.

Option to withdraw the shares tendered during the reverse book building process is within 10 working days from the counter offer public announcement.

Opening of counter offer bidding process is Not later than seven working days from the date of public announcement.

Public announcement of success/failure of counter offer shall be made in the same newspaper in which detailed public announcement was made.  The equity shares shall be released on the date of making public announcement of the success or failure of the counter offer.