SEBI lays down SOP for Delisting of Listed Companies Merger with Listed Parent [Read Circular]

SEBI - SOP - Taxscan

The Security Exchange Board of India (SEBI) has laid down the Standard Operating Procedure for the delisting of listed Companies merger withit’s listed parent company. In March this year, the market watchdog proposed to exempt a listed company from delisting regulations in case of its merger with a listed holding firm, if the shareholder of the subsidiary entity gets shares of the parent company. Accordingly, the amendment was notified on June 10, 2021, to the SEBI (Delisting of Equity Shares) Regulations, 2021.

As per the amended norms, special provisions were incorporatedfor a listed subsidiary company getting delisted through a scheme of arrangement have been inter-alia inserted with respect to a listed holding company and the listed subsidiary company who are in the ‘same line of business’.

The SOP issued on Tuesday defined the term ‘same line of business’ as (i) the principal economic activities of both Holding company and Subsidiary Company are under the same Group (3-digit numeric code) under the National Industrial Classification (NIC) Code 2008. (ii)Not less than 50% of revenue from the operations of the listed holding and listed subsidiary company must come from the same line of business as perlast audited annual financial results submitted by both the companies in compliance with SEBI (LODR) Regulations, 2015. (iii) Not less than 50% of the net tangible assets of the listed holding and listed subsidiary must have been invested in the same line of business as per last audited annual financial results submitted by both the companies in compliance with SEBI (LODR) Regulations, 2015. (iv) In case of change of name of the listed entities, within the last one year, at least fifty percent of the revenue, calculated on a restated and consolidated basis, for the preceding one full year has to be earned by it from the activity indicated by its new name. (v) The listed holding company and the listed subsidiary have to provide a self-certification with respect to both the companies being in the same line of business.

The market regulated further directed all the recognized stock exchanges to bring the provisions of this circular to the notice of the listed companies and also to disseminate the same on their website.

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