Following the open offer, SEBI will introduce a new framework for delisting

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(Commercial Representative) MUMBAI: The Securities and Exchange Board of India (Sebi) has suggested a new framework to facilitate delisting of listed companies after an open offer as part of efforts to facilitate mergers and acquisitions for listed companies.

The upfront disclosure of the target company's intention to delist the company at the time of open offer by the acquirer-acquirer is one of the major proposals, which aims to balance the interests of all investors in the process. In the discussion letter, SEBI said that the proposed framework should be available only in case of open offers under the takeover regulations with the intention of taking control of the target company in whole or in part by the new acquirer.

The recommendations made by the sub-group mainly deal with delisting upfront, delisting price and takeover price, approval of shareholders and stock markets and disclosure of intent to attempt delisting after open offer. If the acquirer has to make an open offer by purchasing more than 3% through a large existing shareholder or by issuance of new shares through a preferential allotment, the total shareholding of the acquirer can increase up to 5% and up to 30%.

In such a scenario, under the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, the shareholding of the acquirer-acquirer can go up to 5 per cent and up to 20 per cent. This situation could arise with holding between 3% and 5% under the agreement and getting 5% from public shareholders.

Under the provisions of Securities Contract (Regulation) Rules, 12, the acquiring company has to reduce its holding to less than 5 per cent in the next 12 months in this situation. However, the provision of SEBI (Delisting of Shares), 2006 does not allow the acquirer to attempt delisting to reach 50 per cent unless the holding is reduced to 5 per cent.

SEBI has asked the public to comment on the letter by July 15. SEBI's Primary Advisory Committee (PMAC) has made various recommendations regarding the delisting process following the acquirer's open offer on a number of issues related to the current standards.

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