Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021
The Securities and Exchange Board of India (SEBI) administers the Delisting of Equity Shares Regulations, 2021, the governing framework for companies seeking to remove their equity shares from trading on stock exchanges.
The regulations, notified in June 2021, replaced the earlier SEBI (Delisting of Equity Shares) Regulations, 2009, streamlining the process for both voluntary and compulsory delisting.
The framework has since been amended, most notably in 2024, to introduce a fixed-price delisting route as an alternative to the traditional reverse book-building mechanism and to ease the exit threshold for counter-offers.
Delisting remains a closely watched regulatory area because it directly affects the exit rights and pricing protections available to minority (public) shareholders.
Statutory Basis: Section 21A of the Securities Contracts (Regulation) Act, 1956
Delisting is governed at the primary legislation level by Section 21A of the Securities Contracts (Regulation) Act (SCRA), 1956, which empowers a recognised stock exchange to delist securities on prescribed grounds, subject to giving the company a reasonable opportunity of being heard. SEBI's 2021 Regulations operationalise this provision by prescribing the detailed procedure, pricing mechanism, and shareholder-protection safeguards for voluntary delisting initiated by a company's promoters.
Key Details
- SCRA, 1956 is the parent act for regulating stock exchanges and contracts in securities; Section 21 deals with listing conditions, Section 21A specifically with delisting.
- An aggrieved company or investor may appeal a stock exchange's delisting decision to the Securities Appellate Tribunal (SAT) within 15 days.
- Delisting is distinct from the Companies Act, 2013 mechanism for minority shareholder squeeze-out, which operates through share capital reduction/buyback provisions rather than the SEBI delisting route.
Every voluntary delisting — including the process the 2021 Regulations detail — ultimately traces its legal authority to this SCRA provision, making it a foundational reference point for questions on capital market regulation.
Reverse Book Building (RBB) and the 90% Threshold
Under the reverse book-building mechanism, public shareholders themselves discover the exit price by bidding at or above a SEBI-prescribed floor price, rather than the promoter unilaterally fixing the price. For voluntary delisting to succeed, the promoter's post-offer shareholding — combined with shares validly tendered by public shareholders — must reach at least 90% of the company's total issued shares (excluding shares underlying depository receipts and other specified categories).
Key Details
- The 90% threshold is designed to protect minority shareholders' collective bargaining power; if it is not met, the delisting offer fails and shares already tendered are returned.
- The floor price is determined per SEBI's pricing formula (based on frequently/infrequently traded status of the stock); the final "discovered price" from RBB bidding cannot be lower than this floor.
- A 2024 amendment introduced a fixed-price alternative to RBB: promoters can offer an exit price at a premium (reported to be at least 15% over the regulator-determined "fair price"), available only for frequently traded shares.
The 90% threshold and RBB mechanism are the central provisions tested on this topic, since they determine whether — and at what price — public shareholders can exit before a company leaves the exchange.
The 2024 Amendment: Counter-Offer and Reduced Threshold
SEBI's board approved amendments to the 2021 Regulations in mid-2024 that eased the exit route for promoters while retaining minority protections. A counter-offer mechanism now allows delisting to succeed at a lower combined shareholding threshold of 75% (down from 90%), provided at least 50% of the public shareholding tendered in response to the counter-offer.
Key Details
- The amendment also introduced special provisions for delisting of investment holding companies, requiring that at least 75% of the holding company's fair value comprise direct investments in equity shares of other listed companies.
- The changes followed a broader SEBI review of ease of doing business in capital markets, framed around providing companies a "fair exit" alongside "fair entry."
- These amendments apply on top of the base 2021 Regulations framework rather than replacing it, meaning the standard 90% RBB route and the newer 75%-with-counter-offer route now coexist.
The layered amendments illustrate how SEBI iteratively recalibrates delisting rules to balance ease of exit for promoters against continued price and threshold protection for public shareholders — a recurring theme in SEBI's regulatory evolution.
- SEBI (Delisting of Equity Shares) Regulations notified: June 2021, replacing the 2009 regulations.
- Statutory basis: Section 21A, Securities Contracts (Regulation) Act, 1956.
- Standard voluntary delisting success threshold: 90% of total issued shares (promoter + tendered public shares).
- 2024 amendment: counter-offer route threshold reduced to 75%, with at least 50% of public shareholding tendered.
- Fixed-price alternative to reverse book building (available since 2024 amendment): exit price at a premium over the regulator-determined fair price, for frequently traded shares only.
- Appeal against a stock exchange delisting decision: to the Securities Appellate Tribunal (SAT), within 15 days.