Regulatory updates

A listed entity may choose to voluntarily delist¹ Delisting means the permanent removal of securities of an entity from the trading platform of a recognised stock exchange, either voluntarily or compulsorily. Once such securities are delisted, no trading is permitted in such securities on the trading platform of stock exchanges. Delisting assumes significance as it is considered as a permanent loss of investment or divestment opportunity for the investors in such securities. its Non-Convertible Securities² Non-convertible securities for the purpose of this amendment would include non-convertible debt securities and non-convertible redeemable preference shares (NCS) for various reasons, such as for restructuring the NCS due to financial distress, less number of holders of such instruments, in case of a merger – especially, where the acquiring entity is not listed, etc.

Currently, the Securities and Exchange Board of India (SEBI) (Delisting of Equity Shares) Regulations, 2021 provide for voluntary as well as compulsory delisting of specified securities³ Specified securities includes equity shares and convertible securities. in certain cases. However, neither the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (NCS Regulations), nor the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) provide a framework for delisting of NCS.

On 23 August 2023, SEBI issued amendments to the LODR Regulations, thereby inserting a new chapter – Chapter VIA: Framework for voluntary delisting of non-convertible debt securities or non-convertible redeemable preference shares and obligations of the listed entity on such delisting (the amendments).

Applicability

The amendments would be applicable to voluntary delisting of all listed NCS from all or any stock exchanges where such NCS are listed. However, there are certain exceptions, which include:

• NCS that are issued by way of public issue
• Where more than 200 persons (excluding qualified institutional buyers) have invested in that security (ISIN)
• Where NCS have been delisted due to any penalty, redemption or due to any resolution plan under the Insolvency and Bankruptcy Code.

Procedure for obtaining approval The amendments have prescribed detailed procedures when making an application for delisting of NCS from all or some of the stock exchanges⁴ It is to be noted, that the process for delisting the NCS completely from all stock exchanges is different as compared to the process adopted for delisting of the NCS from some of the stock exchanges. .

The issuers of the NCS would need to obtain the following approvals within the timelines prescribed in the amendments:

• Approval of the board of directorsApproval of the board of directors
• Approval of ALL holders of the NCS
• Approval of the debenture trustee (only in case of non-convertible debt securities)
• Approval from the stock exchange (including the in-principle approval and final approval).

Disclosure of material events Regulation 51 of the LODR Regulations, requires issuers of NCS to promptly inform the stock exchange and disclose on the website all information having bearing on the performance/operation of the listed entity or which is price sensitive.

The amendments have prescribed that all the events in respect of the proposal of delisting of the NCS, beginning with placing of the agenda for delisting before the board of directors till the delisting is complete would be disclosed as material information under Regulation 51 of the LODR Regulations. The amendments have also prescribed certain information that needs to be disclosed on the website of the issuer of NCS such as:

• The objects and reasons for delisting
• The name of the stock exchange from which the NCS are sought to be delistedThe name of the stock exchange from which the NCS are sought to be delisted
• The cut-off date specified for determining the name of the holders of the NCS to whom notice of delisting has to be sent (and approval of delisting needs to be taken)
• NCS held by related parties or on behalf of the issuer or the related parties and who would not be eligible to vote on the proposal
• Details of compliance officer
• Statements/undertakings by the following:Statements/undertakings by the following:

1. Board of directors confirming that complete disclosures have been made to the stock exchange, that the entity is compliant with applicable provisions of the security laws and that delisting is in the interest of the holders of NCS
2. Debenture trustee on adequacy of security cover in case of secured non-convertible debt security
3. Issuer that they have not paid any incentive to investors or entered into any side agreements with investors with regard to the delistingIssuer that they have not paid any incentive to investors or entered into any side agreements with investors with regard to the delisting

Effective date: The amendment came into force from the date of its publication in the Official Gazette, i.e., 23 August 2023.

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To access the text of the amendment, please click here

Recently, SEBI, vide a circular dated 9 August 2023 reduced the timelines for listing of specified securities in a public issue. As per the circular, the specified securities should be listed after the closure of public issue within three working days (T+3 days) (earlier it was within six working days (T+6 days)) . Accordingly, the timelines for various activities involved in the public issue process have also been revised.

The timelines for submission of application, allotment of securities, unblocking of application money and listing should be prominent in the pre-issue, issue opening and issue closing advertisements issued by the issuer for public issues in terms of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations).

Effective Date: The provisions of the circular would be applicable as follows:

• On a voluntary basis for public issues opening on or after 1 September 2023, and
• Mandatory for public issues opening on or after 1 December 2023.

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To access the text of the circular, please click here