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Dos & doníts on delisting

Mumbai, Feb. 17: The Securities and Exchange Board of India (Sebi) has issued detailed guidelines on delisting of shares from stock exchanges stating that investors should be given an exit option for which the price has to be determined through the book building process.

A company may delist from the stock exchange where its securities are listed provided they have been listed for a minimum period of three years on any exchange, Sebi said.

These guidelines come at a time when many multinational companies and a few Indian companies have made open offers to delist their scrips from exchanges.

Sebi said an exit opportunity need not be given in cases where shares continue to be listed on a stock exchange having nation-wide trading terminals such as the Bombay and National Stock Exchanges.

Recently Sun Pharma had proposed an open offer for shareholders residing in far-flung cities when the pharma company decided to delist from a few regional stock exchanges.

When a company, which is listed on any stock exchange other than those having nation-wide terminals seeks delisting, an exit offer should be made according to Sebi's Delisting of Securities Guidelines 2003, which comes into immediate effect.

There would be no compulsions on the part of existing companies to remain listed on any stock exchange merely because it is a regional stock exchange.

Sebi also notified the establishment of a central listing authority to bring about uniformity in the due diligence process for scrutinising listing applications.

Stock exchanges may delist companies, which have been suspended for a minimum period of six months for non-compliance with the Sebi's listing agreement.

Relisting would be allowed only after two years, the market regulator said.

Sebi further said any promoter, desirous of delisting securities of the company, should obtain the prior approval of shareholders of the company by a special resolution passed at its general meeting.

In the event of securities being delisted, the acquirer shall allow a further period of six months for any of the remaining shareholders to tender securities at the same price.

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