Oct 19, 2023

Introduction of Provisions for Delisting of Non-Convertible Securities

The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, were amended, by way of the Notification dated August 23, 2023, introducing Chapter VIA, which introduced additional provisions relating to voluntary delisting of non-convertible debt securities and non-convertible redeemable preference shares (collectively referred to as ‘Non-Convertible Securities’) by a listed entity. The amended provisions apply to the voluntary delisting of Non-Convertible Securities, unless the listed entity: (i) has outstanding Non-Convertible Securities from a public issue; (ii) has more than 200 Non-Convertible Securities holders, other than qualified institutional buyers; or (iii) is delisting due to penalties, redemption of such Non-Convertible Securities, or a resolution plan under the Insolvency and Bankruptcy Code, 2016 (‘IBC’). The key steps involved in the process include:

i.    Approval of the board of directors of the listed entity followed by in-principle approval from the SEs. The listed entity is required file the application with SEs within 15 working days from the date of the board resolution and the SEs are required to dispose off the application within 15 working days from the date of the receipt of such application.

ii.   Approval from the Non-Convertible Securities holders within 15 working days of notice of delisting. This process needs to commence within three working days of grant of in-principle approval by the SEs within which period the listed entity needs to deliver the notice of delisting to the Non-Convertible Securities holders. A no-objection from the debenture trustee, also has to be obtained. Further all the events are required to be disclosed by the listed entity as material information to the SEs along with certain disclosures on its website which will inter-alia include: (a) name of SEs from which the Non-Convertible Securities are sought to be delisted; (b) cut-off date specified in the list of holders of Non-Convertible Securities for approving the delisting proposal; (c) the object and reason for delisting; (d) statement from the debenture trustee on the adequacy of security cover; and (e) undertaking that the issuer has not paid and will not pay any incentive to any investor.

Once the abovementioned approvals have been obtained, the listed entities must submit a final application to SEs within five working days, and SEs must process it within 15 working days, resulting in the delisting of the Non-Convertible Securities. Further, listed entities with Non-Convertible Securities listed on multiple SEs can choose to delist from all but one SE with nationwide trading terminals.




These are the views and opinions of the author(s) and do not necessarily reflect the views of the Firm. This article is intended for general information only and does not constitute legal or other advice and you acknowledge that there is no relationship (implied, legal or fiduciary) between you and the author/AZB. AZB does not claim that the article's content or information is accurate, correct or complete, and disclaims all liability for any loss or damage caused through error or omission.