Sebi to take call on delisting on June 30

NEW DELHI: A legal framework for mandatory delisting of companies from the stock exchanges could soon become operational. A final decision on delisting rules and regulations is set to be taken within 10 days when the Sebi board meets next.

The draft rules and regulations that were framed by finance ministry and Sebi respectively were released in October 2006 for public comments. The meeting would now take a final call on implementation of delisting rules and regulations at its meeting on June 30, a government source said.

The legal framework will address the issue of penal delisting. Listing on a bourse is a mark of respectability for a company and since there is no provision for delisting as a punitive consequence, the framework will protect the interest of shareholders.

According to the draft rules, a minimum listing period of three years and approval from three-fourths of the shareholders has been made mandatory before delisting. The existing Sebi guidelines are not legally binding and were being interpreted differently in different situations when a company applied for delisting.

Industry bodies had given several representations to the government on the need for creation of a clear legal framework. In fact, JJ Irani committee on company law in 2004 had made certain recommendations in this regard including a one-time buyback offer for shareholders of a delisted company within three years of delisting to provide an exit route for shareholders who do not participate in the original delisting exercise.

The draft rules that will be taken up suggest the promoters and directors have to commit purchase of outstanding shares from minority and non-promoter shareholders. The draft Sebi regulations have detailed how the process would be carried and to ensure the exiting shareholders get a fair exit price.