|
6.1 ‘Delisting’ denotes removal of the listing of the securities of a listed company from the Stock Exchange. Delisting differs from suspension or withdrawal of admission to dealings of listed securities which is for a limited period. Broadly, delisting of securities may be of two types, namely, voluntary delisting and compulsory delisting. In the case of voluntary delisting, a listed company seeks of its own motion delisting of its securities; while in the case of compulsory delisting, a listed company is compelled by the Stock Exchange to delist its securities. 6.2 Whereas listing of securities is governed by statutory provisions, rules, regulations, guidelines, etc., curiously, law is conspicuously silent on the delisting of securities. The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, vide Regulation 21(3)(a) refers to delisting in circumstances mentioned therein. As noted earlier (see para 2.3), the Companies Act in its section 73, provides for listing of shares and debentures on recognised Stock Exchanges. However, it does not contain any provision on delisting of securities. Unlike suspension or withdrawal of admission to dealings in the listed securities, neither the SCR Act nor the SCR Rules provide for anything in regard to delisting of securities. 6.3 As noted earlier (see para 3.2), Listing Agreement is an agreement between two parties to it; hence, it may be terminated by mutual consent of the two parties. It cannot be terminated unilaterally by one of the parties to it, unless there is a breach of any of the provisions of the agreement on the part of the other party and the first-mentioned party terminates it by the process of law. It is to be noted that, the Listing Agreement form contains in this behalf the following clause : "........... the company hereby agrees and declares that any of its securities listed on the Exchange shall remain on the list entirely at the pleasure of the Exchange and that nothing herein contained shall restrict or be deemed to restrict the right of the Exchange to suspend or remove from the list the said securities at any time and for any reason the Exchange considers it proper in its absolute discretion." It also provides : ".......... unless the Exchange agrees otherwise the company will not without the previous permission in writing of the Central Government withdraw its adherence to this agreement for listing of its securities." 6.4 It is worth noting that subscribers to the securities in a public issue subscribe on the faith of the prospectus which inter alia promises to the world that the securities of the company would be listed on the Stock Exchange/s named therein. This is the tenor of section 73 of the Companies Act, which enjoins upon a company intending to offer its securities to the public by prospectus, to state the name of the Stock Exchange or as the case may be, each such Stock Exchange, on which it is proposed to list the securities so offered. As such, delisting of the securities is a breach of that promise. 6.5 Nonetheless, under the law as it stands at present, the holders of securities of a listed company have no locus standi in the matter of delisting of securities of a company, although those holders of securities who subscribed to the securities in a public or rights issue on the faith of the prospectus (or the letter of offer) which, inter alia, contained a statement as to the listing of the company’s securities, may sue the company for damages on the ground of breach of the promise given by the company therein. Section 62 of the Companies Act provides for the civil liability for mis-statements in prospectus and enables a subscriber of shares or debentures issued by a company by prospectus to claim damages sustained by reason of any untrue statement included in the prospectus (including, for instance, an untrue statement regarding listing of the shares or debentures issued thereunder). It is, however, doubtful whether such an action can lie in other cases, in the absence of any statutory provision giving such right. A holder of securities may also resort to the writ jurisdiction of the High Court. This is however, both, expensive and time consuming and virtually beyond the reach of the common investor. 6.6 In a recent English case, the Court of Appeal of the UK, on an application by the shareholders of a listed company for judicial review of a decision of the International Stock Exchange to delist the shares of the company, has held that the shareholders or investors do not have the right of appeal or to apply to the Court against the decision of the competent authority as to the suspension of dealings or delisting of securities. [R v International Stock Exchange of the UK and the Republic of Ireland Ltd (1993) BCC 11 (CA)]. The Committee, therefore, recommends that A specific provision be made in the SCR Act, empowering SEBI to prescribe rules / guidelines in regard to delisting of securities on recognised Stock Exchanges. |