SEBI Delisting Regulations 2021
The SEBI (Delisting of Equity Shares) Regulations 2021 govern the voluntary and compulsory delisting of equity shares from stock exchanges, introducing a revised reverse book building process, floor price methodology, and counter-offer mechanism to streamline delistings and enhance shareholder protection.
The SEBI (Delisting of Equity Shares) Regulations 2021 replaced the 2009 Delisting Regulations following recommendations from the Keki Mistry Committee. The revised framework addressed practical challenges that had made delistings protracted and often unsuccessful under the old rules, where a single large public shareholder could block a delisting by refusing to tender at the acquirer's offered price.
Voluntary delisting (where the promoter or acquirer seeks to take the company private) requires obtaining 90% of the total issued shares, including the shares already held by the promoter. The reverse book building (RBB) process is used to determine the exit price: public shareholders submit bids at prices they are willing to sell, and the discovered price is the price at which the cumulative shareholding of tendering shareholders reaches the required 90% threshold.
The floor price for the RBB is determined as the higher of the VWAP for the 60 trading days preceding the public announcement or the book value per share. The promoter may set a reference price as an indicative benchmark but is not bound to match it.
A key innovation in the 2021 regulations is the counter-offer mechanism. If the discovered price in the RBB is higher than the promoter is willing to pay, the promoter may make a counter-offer at any price above the floor price but below the discovered price. Public shareholders who had tendered at prices at or below the counter-offer price are deemed to have accepted. This prevents situations where an unrealistically high bid from a small minority shareholder could scuttle an otherwise broadly accepted delisting.
Compulsory delisting (imposed by stock exchanges for prolonged non-compliance) follows a different price discovery mechanism. The fair value is determined by an independent valuer, and the promoter is required to provide an exit opportunity at that price.
SEBI also introduced a fast-track delisting route for companies that met specific criteria (high promoter holding, low public float, small market cap), allowing a simplified process without the full RBB.