Delisted firms will have to give fair value to shareholders

Mumbai, Feb 1 | Updated: Feb 2 2006, 05:30am hrs
In a major relief to the shareholders of the company whose shares are infrequently traded on the bourses and are compulsorily delisted from the stock exchange (SEs) by the authorities, the Securities and Exchange Board of India (Sebi) has worked out a mechanism to give them at least the fair value of the stock.

For the first time, the shareholders of the delisted companies will get something in their hand, which was not the case till date. Sebi has amended the delisting guidelines and has added a clause of inventing a fair price to be paid by the promoters of the company to the shareholders of companies being compulsorily delisted.

Sebi has proposed to SEs to set up a panel of experts, which will decide the fair value of such stocks. The fair value will have to be discovered for shares infrequently traded on the bourses. The panel may take into account the book value and other financial parameters to arrive at fair price.

For frequently traded shares the expert panel will follow the formula suggested in Sebi's Takeover Regulations. The expert panel will be formed by the SEs and will be on the lines of standing takeover panel formed by Sebi for the matters related to takeover issues.

Sebi said adequate and wide publicity of delisting and disclosure of the fair value through newspapers and notice boards/trading systems of the SEs upon delisting of a security will have to be made public.