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JC - Legal Updates - SEBI proposes framework for delisting of NCDs

Legal Updates

24 May 2023

SEBI proposes framework for delisting of NCDs

Overview:
 
A framework for delisting of non-convertible debt securities from all or any of the stock exchanges has been proposed: 
 
Technical Details:
 
Following are the key proposals pursuant to the consultation paper:
 
1)  SEBI seeks views from the public with an aim to introduce a mechanism for voluntary delisting of all non-convertible debentures (“NCDs”).
 
2)   Accordingly, SEBI proposes to introduce the following mechanism for delisting of NCDs:

>   When delisting process will not be applicable: The proposed mechanism shall not be applicable to a listed entity which has more than 200 non-qualified institutional buyers holders in any ISIN relating to NCDs, or which has been delisted:

●   a consequence of any penalty/ action initiated against the entity;

●   due to redemption of NCDs; and

●   due to approval of a resolution plan under the Insolvency and Bankruptcy Code, 2016;
 
>   Process for delisting:
The listed entity shall be required to make an application to the stock exchange for seeking in-principle approval from the stock exchange;

●   The listed entity shall send a notice and seek approval of holders of NCDs for delisting from the stock exchange within 3 (three) days of grant of in-principle approval;

●   The listed entity shall make the disclosures to the stock exchange and on its website with respect to agenda for delisting, name of stock exchange with details of all NCDs sought to be delisted, date specified for determining the list of holders of NCDs, disclaimer and statement from board of directors certifying the compliance of all securities laws, etc.

●   The listed entity shall make a final application for delisting to the stock exchange.
 
3)  The consultation paper also proposes a timeline schedule for voluntary delisting of the NCDs as more particularly described in Annex-I therein.
 
JC Key Takeaways:

●   Till now there was a delisting mechanism only for equities and specified securities and there was no mechanism for delisting of NCDs. The proposed consultation paper will offer a clear structure for listed entities to follow when proposing to delist their NCDs.

●   It will make conducting business for listed entities that want to delist their NCDs easier and thereby reduce the corporate governance compliances for them.

●  With the tax implications on NCDs and market linked debentures being introduced, investors may prefer delisting their existing investments in listed NCDs.

For further details, please see:

https://www.sebi.gov.in/reports-and-statistics/reports/may-2023/consultation-paper-on-delisting-of-non-convertible-debt-securities_71151.html

For any queries/clarifications, please feel free to ping us and we will be happy to chat:

●   Ms. Apurva Kanvinde (apurva.kanvinde@jclex.com)
●   Mr. Smit Parekh (smit.parekh@jclex.com)
●   Mr. Mannan Gala (mannan.gala@jclex.com)