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Listing of SME’s on Stock Exchange



The BSE SME Exchange has been setup by the Bombay Stock Exchange to provide Small and Medium Sized Enterprises a platform for raising equity capital for their growth and expansion. SMEs are the backbone of a nation’s economy and Indian SMEs provide employment to 70 million people through 30 million enterprises. In 2010, The Prime Minister’s Task Force recommended the setting up of a dedicated Stock Exchange for SMEs and SEBI also laid down the regulations for the governance of a SME Exchange. Based on the above, the BSE SME Exchange was established to provide opportunity to Entrepreneurs to raise equity capital for the growth and expansion of SMEs. In this article, we look at how to list on the BSE SME Exchange with listing requirements.

BSE SME Exchange – Listing Requirements

The following are the listing requirements for the BSE SME Exchange:

1. The SME must be a Limited Company.

2. The issuer or SME must have a post-issue face value capital of Rs.1 crore to Rs.25 crores. Entities having a post-issue face value of over Rs.25 crores has to be necessarily listing on the Main Board of the BSE.

3. Net Tangible Assets of the SME must be atleast Rs.1 crore, as per latest audited financial results.

4. Net Worth (excluding revaluation reserve) must be atleast Rs.1 crore as per the latest audited financial statements.

5. The company must have a track record of distributable profits in terms of Section 205 of the Companies Act, 1956, for atleast two out of the immediately preceding three financial years. Otherwise, networth must be atleastRs. 3 crores.

6. The company must mandatorily facilitate trading in DEMAT securities and enter into agreement with both Depositories, namely, Central Depository Services Limited and National Securities Depository Limited.

7. The company must have a website.

8. The company should not have any reference before the Board for Industrial and Financial Reconstruction (BIFR).

9. The company should not have any winding up petition that has been accepted by a Court.

10. The issue must be a 100% underwritten issue. Merchant Banker must underwrite 15% on their own accounts.

11. The Merchant Banker to the issue is responsible for market making for a minimum of three years through a stock broker who is registered as market maker with the SME Exchange.

12. The company must have a minimum of 50 investors while listing through IPO.

Procedure for Listing on the BSE SME Exchange

Listing on the BSE SME Exchange involves five different steps, namely:

Step 1: Appointment of Merchant Banker
The issuer Company must consult and appoint a Merchant Banker in an advisory capacity for the listing on the BSE SME exchange.

Step 2: Due Diligence and Documentation
The Merchant Banker would then conduct a due diligence regarding the Company i.e checking the documentation including all the financial documents, material contracts, Government Approvals, Promoter details etc. and prepare documentation for the IPO. Planning and documentation by the Merchant Banker must include IPO structure, share issuances and financial requirements

Step 3: Application to BSE SME Exchange
Once the due-diligence and documentation is completed by the Merchant Banker, the draft prospectus and DRHP is submitted to the Exchange as per SEBI requirements.

After submission of the required application and documents to BSE, BSE verifies the documents and processes the same. A visit to the company’s site is also undertaken by the BSE Exchange Officials. Post site visit, the Promoters are called for an interview with the Listing Advisory Committee.

On satisfactory completion of the site visit and interview by BSE officials, BSE issues an in-principle approval on the recommendation of the Committee, provided all the requirements are compiled by the issuer Company. On obtaining in-principle approval, the Merchant Banker would file the Prospectus with the ROC indicating the opening and closing date of the issue. On obtaining approval from ROC, they intimate the Exchange regarding the opening dates of the issue along with the required documents.

Step 4: Initial Public Offering (IPO)
The Initial Public Offer (IPO) opens and closes as per schedule. After the closure of IPO, the company submits the documents as per the checklist to the BSE SME Exchange for finalization of the basis of allotment. On completion of the allotment, BSE issues the notice regarding listing and trading.

Trading on the BSE SME Exchange

After listing on the BSE SME exchange, existing members of the Exchange are eligible to participate in SME Platform and trade on the share of the SME. However, trading on the SME exchange is constrained by the following trading lot sizes:

a) The minimum application and trading lot size shall not be less than Rs. 1,00,000/-

b) The minimum depth shall be Rs 1,00,000/- and at any point of time it shall not be less than Rs 1,00,000/-

c) The investors holding with less than Rs 1,00,000/- shall be allowed to offer their holding to the Market Maker in one lot.

d) However in functionality the market lot will be subject to revival after a stipulated time.

Documents Required for Listing on the BSE SME Exchange

A. Along with the application for using the name of the Exchange in the offer document, the following documents/information shall to be filed by the Company with the Exchange:

1. 10 copies of the draft offer document.

2. Soft copy of the Prospectus for uploading on website

3. Copy of resolution passed by the Board of Directors for issue of securities

4. Copy of the shareholders resolution under 62(1)(c) of Companies Act, 2013

5. Certificate from the Managing Director / Company Secretary or PCS / Statutory or Independent Auditors stating the following:

a. The Company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR).

b. There is no winding up petition against the company, which has been admitted by the court or a liquidator has not been appointed.

c. There has been no change in the promoter/s of the Company in the preceding one year from date of filing application to BSE for listing on SME segment.

6. Copy of all show cause notice(s)/order(s) issued by any regulatory authority (e.g. SEBI, ROC, RBI, CLB, Stock Exchange etc.) & Correspondence there to.

7. PAN & TAN of the Company.

8. DIN & PAN of Promoters and Directors.

9. Printed Balance Sheets, Profit & Loss Accounts and Cash Flow Statements for the preceding 5 years (or for such applicable periods)

10. Copies of major orders/contracts/ received/ executed/ in-hand should be kept ready and be available for inspection. A statement of material contracts duly certified by a practicing Chartered Accountant/ practicing Company Secretary should be submitted. The Company should also state the place, time and date where these documents can be inspected

11. A statement containing particulars of the dates of, and parties to all the material contracts, agreements (including agreement for technical advice and collaboration), concessions and similar other documents (except those entered into in the ordinary course of business carried on or intended to be carried on by the company) together with a brief description of the terms, subject matter and general nature of the documents.

12. Details if the present or any previous application of the Company/Group Company for listing of any securities has been rejected earlier by SEBI or by any stock exchange and reasons thereof.

13. Name of the exchange which is proposed to be designated Exchange for the issue, if decided.

14. Copies of agreements and memoranda of understanding between the Company and its promoters/ directors.

15. Articles & Memorandum of Association of the Company.

16. A certificate from the statutory auditor/practicing chartered accountant certifying compliance of conditions of Corporate Governance as stipulated in clause 52 of the listing agreement and circular no.SEBI/CFD/DIL/CG/1/2004/12/10 dated October 29, 2004 issued by the Securities and Exchange Board of India (SEBI). The company should also give the composition of various committees as required under the said clause.

17. Association, if any, of the directors/ promoters of the Company with any public or rights issue made during the preceding 10 years.

18. One Time Listing Fees of Rs. 50,000/- plus applicable Service Tax.(Details of all applicable fees for SME Listing is attached)

19. Date of opening of public issue to be intimated as soon as it is finalized.

SEBI ICDR not to govern listing of SME

SEBI (Issue of Capital and Disclosure Requirement) Regulations, 2009 (SEBI ICDR Regulations)

SEBI ICDR Regulations deal with issue of specified securities through initial public offering by a new issuer or through a further offering by a listed issuer. SEBI ICDR Regulations contain various chapters dealing inter alia with the following :-

a. Public Issue

b. Rights Issue

c. Preferential Issue

d. Qualified Institution Placement (QIP)

e. Bonus Issue

f. Issues by SMEs

g. IDR Issues

h. General Obligation of Issuer and Merchant Banker in Public Issue/ Right Issue

However, the following issues have been left out of the purview of ICDR, which are regulated by other regulations as mentioned : -

a. Public Issue of Debt Securities (Regulated by SEBI (Issue and Listing of Debt Securities) Regulations 2008)

b. Issue of ADR/ GDR (Regulated by Government's Issue of FCCBs and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993)

c. Issue of FCCBs (Regulated by Government's Issue of FCCBs and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993)

d. Issue of Shares pursuant to ESOPs (Regulated by SEBI (Employees Stock Option Plan and Employees Stock Purchase Scheme) Guidelines, 1999)

SEBI ICDR Regulations as Applicable to SMEs

With a view to facilitate the necessary provisions needed for SME Exchange, amendments have been made to the SEBI ICDR Regulations and a separate Chapter X-A has also been inserted therein. The regulations emphasized on the following:

Salient features:

Reduced paid up Capital threshold: An issuer company whose post-issue paid-up capital is not more than INR 10 Crore shall be eligible to list its securities on the SME exchange. Those issuer companies, whose post-issue paid-up capital lies between INR 10 Crore and up to INR 25 Crore, have the option to list their securities either under the provisions of this Chapter XB, i.e. on SME Exchange or on Main Board by complying with the relevant terms and conditions prescribed under the SEBI ICDR Regulations. As per the provisions of the SEBI ICDR Regulations, a minimum paid up capital of INR 10 Crore is required for listing of securities on any Main Board of BSE / NSE.

Filing of the offer document : The offer document is required to be submitted to the merchant banker who, in turn, will file it with SEBI along with the new Form H. A prospectus in relation to the issue shall also be filed with the SME Exchange and the jurisdictional Registrar of Companies. It has been specifically mentioned that SEBI will not scrutinize the offer document of an SME IPO.

Underwriting : Underwriters to the issue under Chapter XA shall ensure that the issue is 100% underwritten and that a disclosure to that effect is made to SEBI, a day prior to the opening of the issue. A minimum of 15% of the issue size is mandated to be underwritten by the merchant bankers. Certain Nominated Investors may be permitted to enter into contractual arrangements with the merchant bankers to share the burden of devolvement of underwriting obligations; however such contractual arrangements shall be subject to the prior approval of the SME Exchange. In case the underwriters or the Nominated Investors fail to achieve the minimum subscription, the merchant banker shall be required to fulfill its underwriting obligations.

Minimum Application Size and Number of Investors : Minimum application size in an SME IPO is fixed at INR 100,000 per application as opposed to the minimum application value ranging from INR 10,000 to INR 15,000 per application under Main Board IPO. Further, the minimum number of allotees in an SME IPO should be at least 50.

Migration to SME Exchange : A listed issuer whose post-issue paid-up capital is less than INR 25 Crore has an option to migrate to the SME Exchange, subject to the approval of its shareholders and compliance with the eligibility criteria laid down by the SME Exchange.

Migration from SME Exchange : Companies listed on the SME Exchange shall compulsorily migrate to the Main Board of the Stock Exchanges if their post-issue share capital is in excess of INR 25 Crore. Upon the performance of any rights issue/ preferential issue/ bonus issue which results in triggering of the above limit, then such company would have to compulsorily migrate to the Main Board. Such companies shall, therefore, be required to comply with the provisions of the Listing Agreement of the Main Board and all regulatory requirements including compliance with SEBI ICDR Regulations for the purposes of the same.

Market-making : The merchant banker to the issue shall bear the responsibility of compulsory market making for a minimum period of 3 years. The securities being bought and sold as part of the market making shall ultimately get transferred to the Nominated Investor. During the compulsory market-making period, the market makers are restricted from buying any securities from the promoters/ promoter group of the issuer or any other acquirer. The promoters may, therefore, be allowed to dilute their shareholding either through offer for sale or to an acquirer. However, the promoters' shareholding which is not locked-in may be traded with the prior permission of the SME Exchange. In case, the value of the shareholding of the Nominated Investors falls below INR 1 lakh, for any reason whatsoever, the market maker is obligated to buy the entire shareholding of such investor in a single lot. Acquisitions of shares by the merchant bankers / market makers are exempted from the SEBI Takeover Code, provided that such merchant bankers/ market makers do not have the intention of taking over the management and there is no resultant change in control (direct or indirect) of the issuer company.

Market Makers Obligation

SEBI has compulsorily mandated market making for all scripts listed and traded on the SME exchange. The obligations of market makers are as follows:
1. The merchant bankers to the issue will undertake market making through a stock broker who is registered as market maker with the SME exchange.

2. The merchant bankers shall be responsible for market making for a minimum period of 3 years.

3. The market makers are required to provide two way quotes for 75% of the time in a day. The same shall be monitored by the exchange.

4. There will not be more than 5 market makers for scrip.

5. Market makers will compete with other market makers for better price discovery.

6. The exchange shall prescribe the minimum spread between the bid and ask price.

7. Market Maker shall be allowed to deregister by giving one month notice to the exchange.

8. Trading system may be either quote driven or hybrid.

SME Listing Agreement
SEBI in order to encourage promotion of dedicated exchanges and/or dedicated platforms of the exchange for listing and trading of securities issued by Small and Medium Enterprises ("SME"), and in order to facilitate listing of specified securities in the SME Exchange, has facilitated a separate Model Listing Agreement" to be executed between the issuer and the stock exchange.

SME listing agreement is similar to the Main Board equity listing agreement. However, certain relaxations are provided to the issuers whose securities are listed on SME Exchange in comparison to the listing requirements in Main Board, which inter-alia include the following:

1. Companies listed on the SME Exchange may send their shareholders, a statement containing the salient features of all the documents (in abridged form), as prescribed in proviso to section 136 of the Companies Act, 2013 instead of sending a full annual report.

2. Periodical financial results may be submitted on "half yearly basis", instead of "quarterly basis" under Clause 41 and


3. SMEs need not publish their financial results in newspapers, as required in the Main Board equity listing agreement.
Delisting of Securities



SEBI Regulations gives an option to the listed company to either get itself delisted from all the recognised stock exchanges where it is listed or only from some of the few stock exchanges and continue to be listed on the exchange(s) having nationwide terminals. The difference between two options is that of giving ‘exit opportunity’ to the shareholders. This is described as under:

Option I – No ‘exit opportunity’ required to be given: In this option, if after the proposed delisting from any one or more recognised stock exchanges, the equity shares still remain listed on any recognised stock exchange which has nation-wide trading terminals, no exit opportunity needs to be given to the public shareholders. The procedure for such delisting of shares can be through a board resolution, public notice and application to the concerned exchange.

(1) It shall be approved by a resolution of the board of directors of the company in its meeting;

(2) The company shall give a public notice of the proposed delisting in at least one English national daily with wide circulation, one Hindi national daily with wide circulation and one regional language newspaper of the region where the concerned recognised stock exchanges are located;

(3) The company shall make an application to the concerned recognised stock exchange regarding this;

(4) The public notice shall mention the names of the recognised stock exchanges from which the equity shares of the company are intended to be delisted, the reasons for such delisting and the fact of continuation of listing of equity shares on recognised stock exchange having nationwide trading terminals;

(5) An application shall be disposed off by the recognised stock exchange within a period not exceeding thirty working days from the date of receipt of such application complete in all respects.

(6) The fact of delisting shall be disclosed in the first annual report of the company prepared after the delisting.

Securities and Exchange Board of India (Delisting Of Equity Shares) Regulations, 2009
Regulation No. 6

A company may delist its equity shares from one or more recognised stock exchanges where they are listed and continue their listing on one or more other recognised stock exchanges, subject to the provisions of these regulations and subject to the following –

(a) if after the proposed delisting from any one or more recognised stock exchanges, the equity shares would remain listed on any recognised stock exchange which has nationwide trading terminals, no exit opportunity needs to be given to the public shareholders; and,

(b) if after the proposed delisting, the equity shares would not remain listed on any recognised stock exchange having nationwide trading terminals, exit opportunity shall be given to all the public shareholders holding the equity shares sought to be delisted.

Option II – ‘Exit opportunity’ must be given: This option requires that if after the proposed delisting, the equity shares do not remain listed on any recognized stock exchange having nation-wide trading terminals, exit opportunity shall be given to all the public shareholders holding the equity shares sought to be delisted, through reverse book building.

Step wise procedure for delisting:

Step 1: Conduct Board Meeting

Step 2: Passing of special resolution (If votes cast by public shareholder in favour of the proposal amount to at least two times the number of votes cast by public shareholders against it)

Step 3: Application for in-principal approval to Stock Exchanges

Step 4: Opening of Escrow account (Appoint a merchant banker)

Step 5: Public Announcement

Step 6: Dispatch of letter of offer

Step 7: Bidding/Reverse Book Building

Step 8: Determination of offer price

Step 9: Public announcement for closure of offer

Step 10: If offer is successful
            Payment of consideration to shareholder and final application to stock exchange
            If offer is unsuccessful
            Refund of shares

Procedure for delisting where no exit opportunity is required:
Regulation No. 8

(1) Any company desirous of delisting its equity shares under the provisions of Chapter III shall, except in a case falling under clause (a) of regulation 6, -

(a) obtain the prior approval of the board of directors of the company in its meeting;

(b) obtain the prior approval of shareholders of the company by special resolution passed through postal ballot, after disclosure of all material facts in the explanatory statement sent to the shareholders in relation to such resolution:
Provided that the special resolution shall be acted upon if and only if the votes cast by public shareholders in favour of the proposal amount to at least two times the number of votes cast by public shareholders against it.

(c) make an application to the concerned recognised stock exchange for in-principle approval of the proposed delisting in the form specified by the recognised stock exchange; and

(d) within one year of passing the special resolution, make the final application to the concerned recognised stock exchange in the form specified by the recognised stock exchange:

(1A) Prior to granting approval under clause (a) of sub-regulation (1), the board of directors of the company shall,-

(i) make a disclosure to the recognized stock exchanges on which the equity shares of the company are listed that the promoters have proposed to delist the company;

(ii) appoint a merchant banker to carry out due-diligence and make a disclosure to this effect to the recognized stock exchanges on which the equity shares of the company are listed;

(iii) obtain details of trading in shares of the company for a period of two years prior to the date of board meeting by top twenty five shareholders as on the date of the board meeting convened to consider the proposal for delisting, from the stock exchanges and details of off-market transactions of such shareholders for a period of two years and furnish the information to the merchant banker for carrying out due-diligence;

(iv) obtain further details in terms of sub-regulation (1D) of regulation 8 and furnish the information to the merchant banker.

(1B) The board of directors of the company while approving the proposal for delisting shall certify that:

(i) the company is in compliance with the applicable provisions of securities laws;

(ii) the promoter or promoter group or their related entities, are in compliance with sub-regulation (5) of regulation 4;

(iii) the delisting is in the interest of the shareholders.

(1C) For certification in respect of matters referred to in sub regulation (1B), the board of directors of the company shall take into account the report of the merchant banker as specified in sub regulation (1E) of regulation 8.

(1D) The merchant banker appointed by the board of directors of the company under clause (ii) of sub-regulation (1A) shall carry out due diligence upon obtaining details from the board of directors of the company in terms of clause (iii) of sub-regulation (1A) of regulation 8

Provided that if the merchant banker is of the opinion that details referred to in clause (iii) of sub-regulation (1A) of regulation 8 are not sufficient for certification in terms of sub-regulation (1E) of regulation 8, he shall obtain additional details from the board of directors of the company for such longer period as he may deem fit.

(1E) Upon carrying out due-diligence as specified in terms of sub regulation (1D) of regulation 8, the merchant banker shall submit a report to the board of directors of the company certifying the following:

(a) the trading carried out by the entities belonging to acquirer or promoter or promoter group or their related entities was in compliance or not, with the applicable provisions of the securities laws; and

(b) entities belonging to acquirer or promoter or promoter group or their related entities have carried out or not, any transaction to facilitate the success of the delisting offer which is not in compliance with the provisions of sub-regulation (5) of regulation 4.

(2) An application seeking in-principle approval for delisting under clause (c) of sub-regulation (1) shall be accompanied by an audit report as required under regulation 55A of the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 in respect of the equity shares sought to be delisted, covering a period of six months prior to the date of the application.

(3) An application seeking in-principle approval for delisting shall be disposed of by the recognised stock exchange within a period not exceeding  five working days from the date of receipt of such application complete in all respects.

(4) While considering an application seeking in-principle approval for delisting, the recognised stock exchange shall not unfairly withhold such application, but may require the company to satisfy it as to –

(a) compliance with clause (b) of sub-regulation (1);

(b) the resolution of investor grievances by the company;

(c) payment of listing fees to that recognised stock exchange;

(d) the compliance with any condition of the listing agreement with that recognised stock exchange having a material bearing on the interests of its equity shareholders;

(e) any litigation or action pending against the company pertaining to its activities in the securities market or any other matter having a material bearing on the interests of its equity shareholders;

(f) any other relevant matter as the recognised stock exchange may deem fit to verify.

(5) A final application for delisting made under clause (d) of sub regulation(1) shall be accompanied with such proof of having given the exit opportunity in accordance with the provisions of Chapter IV, as the recognised stock exchange may require.

Recognised stock exchange having nation wide trading terminals’ means the Bombay Stock Exchange Limited, the National Stock Exchange of India Limited or any other recognised stock exchange which may be specified by SEBI in this regard.

Exit Opportunity
Regulation 10

(1) The promoters of the company shall within one working day from the date of receipt of in principle approval for delisting from the recognised stock exchange, make a public announcement in at least one English national daily with wide circulation, one Hindi national daily with wide circulation and one regional language newspaper of the region where the concerned recognised stock exchange is located.

(2) The public announcement shall contain all material information including the information specified in Schedule I and shall not contain any false or misleading statement.

(3) The public announcement shall also specify a date, being a day not later than thirty working days from the date of the public announcement, which shall be the ‘specified date’ for determining the names of shareholders to whom the letter of offer shall be sent. 

(4) Before making the public announcement, the promoter shall appoint a merchant banker registered with the Board and such other intermediaries as are considered necessary.

(5) It shall be the responsibility of the promoter and the merchant banker to ensure compliance with the provisions of this Chapter.

(6) No promoter shall appoint any person as a merchant banker under sub-regulation (4) if such a person is an associate of the promoter.

(7)No entity belonging to the promoter and promoter group of the company shall sell shares of the company during the period from the date of the board meeting in which the delisting proposal was approved till the completion of the delisting process.

Escrow Account
Regulation 11

(1) Before making the public announcement under regulation 10, the promoter shall open an escrow account and deposit therein the total estimated amount of consideration calculated on the basis of floor price and number of equity shares outstanding with public shareholders.

(2) On determination of final price and making of public announcement under regulation 18 accepting the final price, the promoter shall forthwith deposit in the escrow account such additional sum as may be sufficient to make up the entire sum due and payable as consideration in respect of equity shares outstanding with public shareholders.

(3) The escrow account shall consist of either cash deposited with a scheduled commercial bank, or a bank guarantee in favour of the merchant banker, or a combination of both.

Letter of offer  
Regulation 12

(1) The promoter shall dispatch the letter of offer to the public shareholders of equity shares, not later than two working days from the date of the public announcement.

(2) The letter of offer shall be sent to all public shareholders holding equity shares of the class sought to be delisted whose names appear on the register of the company or depository as on the date specified in the public announcement under sub-regulation (3) of regulation 10.

(3) The letter of offer shall contain all the disclosures made in the public announcement and such other disclosures as maybe necessary for the shareholders to take an informed decision.

(4) The letter of offer shall be accompanied with a bidding form for use of public shareholders and a form to be used by them for tendering shares under sub-regulation (1) of regulation 21.

Bidding Period
Regulation 13

(1) The date of opening of the offer shall not be later than seven working days from the date of the public announcement.

(1A) The promoter shall facilitate tendering of shares by the shareholders and settlement of the same, through the stock exchange mechanism as specified by the Board.

(2) The offer shall remain open for a period of five working days, during which the public shareholders may tender their bids.

Book Building
Regulation 14

14. (1) All public shareholders of the equity shares which are sought to be delisted shall be entitled to participate in the book building process in the manner specified in Schedule II.

(2) An promoter or a person acting in concert with any of the promoters shall not make a bid in the offer and the merchant banker shall take necessary steps to ensure compliance with this sub-regulation.

(3) Any holder of depository receipts issued on the basis of underlying shares held by a custodian and any such custodian shall not be entitled to participate in the offer.

(4) Nothing contained in sub-regulation (3) shall affect the right of any holder of depository receipts to participate in the book building process under sub-regulation (1) if the holder of depository receipts exchanges such depository receipts with shares of the class that are proposed to be delisted.

Offer Price
Regulation 15 

(1) The offer price shall be determined through book building in the manner specified in Schedule II, after fixation of floor price under sub-regulation (2) and disclosure of the same in the public announcement and the letter of offer.

(2) The floor price shall be determined in terms of regulation8 of Securities and Exchange Board of India(Substantial Acquisition of Shares and Takeovers) Regulations, 2011,asmay be applicable.]

Minimum No. of equity shares to be acquired
Regulation 17

An offer made under chapter III shall be deemed to be successful only if,-

(a) the post offer promoter shareholding (along with the persons acting in concert with the promoter) taken together with the shares accepted through eligible bids at the final price determined as per Schedule II, reaches ninety per cent. of the total issued shares of that class excluding the shares which are held by a custodian and against which depository receipts have been issued overseas; and

(b) at least twenty five per cent of the public shareholders holding shares in the demat mode as on date of the board meeting referred to in sub-regulation (1B) of regulation 8 had participated in the Book Building Process:

Provided that this requirement shall not be applicable to cases where the acquirer and the merchant banker demonstrate to the stock exchanges that they have delivered the letter of offer to all the public shareholders either through registered post or speed post or courier or hand delivery with proof of delivery or through email as a text or as an attachment to email or as a notification providing electronic link or Uniform Resource Locator including a read receipt.

Explanation.- In case the delisting offer has been made in terms of regulation 5A of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, the threshold limit of ninety per cent. for successful delisting offer shall be calculated taking into account the post offer shareholding of the acquirer taken together with the existing shareholding, shares to be acquired which attracted the obligation to make an open offer and shares accepted through eligible bids at the final price determined as per Schedule II.]

Public announcement after closure of offer
Regulation 18

Within five working days of closure of the offer, the promoter and the merchant banker shall make a public announcement in the same newspapers in which the public announcement under sub-regulation (1) of regulation 10 was made regarding:- (i) the success of the offer in terms of regulation 17 Along with the final price accepted by the acquirer; or (ii) the failure of the offer in terms of regulation 19; or (iii) rejection under regulation 16 of the final price discovered under Schedule II, by the promoters.

Payment of consideration and return of equity
Regulation 20

(1) The promoter shall immediately on ascertaining success of the offer, open a special account with a banker to an issue registered with the Board and transfer thereto, the entire amount due and payable as consideration in respect of equity shares tendered in the offer, from the escrow account.

(2) All the shareholders whose equity shares are verified to be genuine shall be paid the final price stated in the public announcement within ten working days from the closure of the offer.

Right of remaining shareholders to tender equity shares
Regulation 21

(1) Where, pursuant to acceptance of equity shares tendered in terms of these regulations, the equity shares are delisted, any remaining public shareholder holding such equity shares may tender his shares to the promoter up to a period of at least one year from the date of delisting and, in such a case, the promoter shall accept the shares tendered at the same final price at which the earlier acceptance of shares was made.

(2) The payment of consideration for shares accepted under sub regulation (1) shall be made out of the balance amount lying in the escrow account.

(3) The amount in the escrow account or the bank guarantee shall not be released to the promoter unless all payments are made in respect of shares tendered under sub-regulation (1).

Delisting not permissible in certain circumstances and conditions for delisting
Regulation 4

4. (1) No company shall apply for and no recognised stock exchange shall permit delisting of equity shares of a company,-
(a) pursuant to a buyback of equity shares by the company ;or
(b) pursuant to a preferential allotment made by the company ;or
(c) unless a period of three years has elapsed since the listing of that class of equity shares on any recognised stock exchange; or
(d) if any instruments issued by the company, which are convertible into the same class of equity shares that are sought to be delisted, are outstanding.

(1A) No promoter or promoter group shall propose delisting of equity shares of a company, if any entity belonging to the promoter or promoter group has sold equity shares of the company during a period of six months prior to the date of the board meeting in which the delisting proposal was approved in terms of sub-regulation (1B) of regulation 8.]

(2) For the removal of doubts, it is clarified that no company shall apply for and no recognised stock exchange shall permit delisting of convertible securities.

(3) Nothing contained in clauses (c) and (d) of sub-regulation (1) shall apply to a delisting of equity shares falling under clause (a) of regulation 6.

(4) No promoter shall directly or indirectly employ the funds of the company to finance an exit opportunity provided under Chapter IV or an acquisition of shares made pursuant to sub regulation(3) of regulation 23.

(5) No promoter or promoter group or their related entities shall – (a) employ any device, scheme or artifice to defraud any shareholder or other person; or (b) engage in any transaction or practice that operates as a fraud or deceit upon any shareholder or other person; or (c) engage in any act or practice that is fraudulent, deceptive or manipulative – in connection with any delisting sought or permitted or exit opportunity given or other acquisition of shares made under these regulations

This blog is Created by CA Anil Kumar Jain.