Can minority shareholders stop delisting?

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: There was a time, not very long ago, when there was no agency like Sebi. And the capital market was not what it is today. In 1956, the Government of India enacted a law called Securities Contracts (Regulations), 1956, (the securities regulations) which came into force with effect from February 1957. Among other things, this law regulated operations of stock exchanges and listing of public issues. The Controller of Capital Issues fixed the price of shares issued by any company. Normally, the Controller used to permit a small premium that could be charged by a company while issuing shares to the public.

Every company that issues shares to the public is under an obligation to have its shares listed on a recognised stock exchange. Till recently, listing was a one-way street: there was no question of delisting. Even the securities regulations had no provision that could enable a company to voluntarily delist its shares from any or all the stock exchanges where the shares were listed.

With the changing economic scenario and with the opening up of the Indian economy, the country witnessed huge influx of foreign capital. This resulted in demand from several India-based MNCs that they should be permitted to delist their shares. To consider the prevailing position in respect of delisting, Sebi appointed a committee to study the whole issue and, as a result, issued guidelines for delisting of securities in 2003.

The present position is that the promoters of every listed company have a right to get the securities delisted, subject to compliance with the delisting guidelines.

With the promoters being permitted to delist the securities, the question of protecting the interest of minority shareholders came to the fore. Consequently, the delisting guidelines stipulate that an exit opportunity be given to such shareholders. However, no exit opportunity is to be given if the securities continue to be listed in a stock exchange having nationwide trading terminals.