A listed company can be delisted through an NCLT scheme of arrangement under Regulation 37 of the SEBI (Delisting of Equity Shares) Regulations, 2021. The route is available where the listed holding company and the listed subsidiary are in the same line of business, and it permits the subsidiary to be merged into the holding company or its shares to be acquired and cancelled, resulting in the delisting of the subsidiary.
The Regulation 37 Conditions
Regulation 37 requires the scheme to comply with the conditions prescribed by SEBI, including the approval of the public shareholders of the subsidiary. The NCLAT, in the ICICI Securities delisting, held that Regulation 37 provides an alternative delisting mechanism, and that the shareholders retain the right to exit and the valuation process adheres to recognised methods. The NCLAT also held that no separate meeting of the public shareholders was required, because the scheme uniformly affected all the equity shareholders, and Regulation 37(2)(d) prescribed the manner of voting.
The NCLAT examined whether the scheme ought to have been approved by seventy per cent of the public shareholders or by two-thirds, and it upheld the two-thirds threshold prescribed by Regulation 37. The Tribunal also found that SEBI’s relaxation from the reverse book building requirements was within its regulatory powers under Regulation 42, and that the valuation complied with Regulation 37(2)(j), meeting the minimum sixty-day VWAP requirement.
The Process
The scheme is filed with the stock exchanges under Regulation 37, and the exchanges grant the no-objection certificate. The scheme is then filed with the NCLT under Sections 230 to 232, and the Tribunal convenes the meetings and sanctions the scheme. The delisting is completed upon the filing of the certified copy of the NCLT order with the ROC.
The Limits
The Regulation 37 route is narrow. It is available only for a subsidiary delisting, not for the delisting of a parent company or an unrelated listed entity. A company that wishes to delist but does not satisfy Regulation 37 must use the reverse book building process, which requires a higher threshold of shareholder acceptance and a price discovered through the bidding process.
A technically sound delisting scheme complies with Regulation 37, the NCLT process, and the SEBI conditions, and it provides a fair exit to the public shareholders.
Call to Action
Anuj Desai & Associates advises listed companies and holding companies on delisting through an NCLT scheme—from the Regulation 37 eligibility and the public shareholder approval to the NCLT process and the post-delisting compliance. If you are considering a delisting, we can help you determine whether the route is available.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
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