The current situation caused by the COVID-19 pandemic is unprecedented and several listed companies have seen a reduction in their value due to the sharp fall in stock prices compared to the beginning of 2020. The recent weeks have also seen delisting announcements by certain widely held companies including those on the NIFTY-50 and subsidiaries of global corporations.
Voluntary delisting is essentially a strategic move where a promoter (controlling shareholder) of a listed company and the listed company seek to delist the shares from the stock exchanges in India and is primarily governed by the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009, as amended (the “Delisting Regulations”).
This note discusses the legal framework and process for voluntary delisting under the Delisting Regulations and certain key issues involved in delisting.
In connection with a proposed delisting of shares of AstraZeneca Pharma India Limited (AZPIL) in 2014, the SEBI recently issued an order dated June 5, 2020 under Sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992, holding that:
(i) AstraZeneca Pharmaceuticals AB Sweden (AZPAB), the promoter of AZPIL, and the Elliott Group (a group of related foreign institutional investors that collectively held a significant shareholding in AZPIL) colluded with each other to get the shares of AZPIL delisted and influence the delisting price of such shares without considering the interests of the retail shareholders of AZPIL; and
(ii) The conduct of AZPAB and the Elliott Group amounted to a manipulative and fraudulent trade practice under the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Practice Relating to Securities Market) Regulations, 2003.
The SEBI questioned the conduct of AZPAB and the Elliott Group and concluded that there existed a ‘meeting of minds’ between AZPAB and the Elliott Group prior to the delisting announcement. This note analyses the SEBI’s order.
On June 5, 2020, the Insolvency and Bankruptcy Code, 2016 was amended to inter-alia prohibit creditors and corporate debtors from initiating corporate insolvency resolution proceedings in respect of defaults arising during the six (6) month period from and including March 25, 2020 (the date of commencement of the national lockdown) – this period may be extended up to one (1) year.
Price adjustments in M&A transaction documentation enable parties to align the consideration originally negotiated at signing to the facts and circumstances existing at closing. Such adjustments become particularly important when there is a protracted time gap between signing and closing, usually due to statutory and regulatory approvals, and in case of listed entities, volatility in the financial markets. Certain transactions are implemented through tribunal-approved schemes of merger, de-merger, etc. (“Schemes”). While Schemes offer certain advantages such as an exemption from takeover regulations in case of listed entities, price adjustments in such transactions are subject to greater scrutiny and constraints, given requirements for tribunal approval and in the case of listed entities, pricing requirements and review by stock exchanges and the securities regulator. This note sets out certain price adjustment mechanisms that could be considered by parties to Schemes involving listed entities.
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