The doors of Indian economy were opened to overseas Investors, due to global acquisitions, mergers, demergers, etc. among the conglomerates, the impact is on change in control of Indian Listed entities resulting direct or indirect acquisition of shares or voting rights or control over Indian Listed Companies. In such a case most of the MNC’s, listed on the Indian Stock Exchanges need to comply with Regulation 3, 4, or 5 of SEBI (SAST) Regulations, 2011 which includes Appointment of Merchant Banker, Making Public Announcement, arriving at offer price, etc. But Promoters want to have full control over the affairs of the company then delist is the only option. It takes around 3 months to complete all the compliances under the open offer.
As per regulation 7 (4) of SAST Regulations, if the following completion of open offer result in acquirer’s shareholding exceeding the maximum permissible non-public shareholding then Acquirer need to bring down non-public shareholding below 75% within maximum period of twelve months from the completion of open offer.
As per Regulation 38 of SEBI (LODR) Regulations, 2015 listed entity to comply with minimum public Shareholding as specified in Rule 19(2) and 19A of the Securities Contract (Regulations) Rules, 1957. So even though the Acquirer enjoys more than 75% of the shareholding, the happiness doesn’t last forever, because within one year Acquirer need to bring down its shareholding to 75% otherwise penalties in terms of fines, freezing of promoters shares and even barring promoters from being promoters in other listed companies will be imposed.
Due to mandatory provisions earlier, Multinational Companies need to get themselves listed on the Indian Stock Exchanges but considering ongoing arrangements at the global level the control over such entities is changing and in most of the cases triggering the Open Offer. Now along with open offer an option is available to said entities to get out of the listing zone by delisting their securities from Stock Exchanges. Regulation 5A of the SEBI (SAST) Regulations, 2011 provides an option of Delisting along with the open offer.
We have covered a recent delisting offer which failed by INEOS STYROLUTION in our August 2020 issue and to further the knowledge of our readers we have listed the overlaps and differences in open offer and delisting way for listed companies.
Following are the options available to the companies for delisting of securities at time of open offer:
A. Combined open offer with Delisting offer
Regulation 5A of SEBI (SAST) Regulation gives an option that, if the acquirer makes a public announcement of an open offer in terms of regulation 3, 4 or 5, he may delist the Company following provisions of SEBI (Delisting of Equity Shares) Regulations, 2009.
Compliances under Regulations 5A:
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