SEBI Delisting Regulations 2021: Key Changes in 2024

Why SEBI rewrote the delisting rulebook

SEBI notified the SEBI (Delisting of Equity Shares) Regulations, 2021 on June 10, 2021, replacing the 2009 framework. The stated intent was to streamline the voluntary delisting process while strengthening safeguards for minority shareholders. Delisting matters because it removes a company’s equity shares from a recognised stock exchange, changing liquidity, disclosure, and exit outcomes for public investors. SEBI’s work followed extensive consultation with market participants. In 2020, SEBI formed a review committee chaired by Pradip Shah, and its recommendations were later combined with public feedback to shape the 2021 regulations.

Voluntary delisting starts with board and shareholder approvals

Chapter III lays out the process for voluntary delisting. A delisting proposal first needs board approval. It then requires shareholder approval through a special resolution. A key condition is that public shareholder votes in favour must be at least twice the votes cast against the proposal, a test explicitly stated in Regulation 8(1)(c). This “two-times” requirement is aimed at ensuring that a delisting cannot pass without meaningful support from non-promoter shareholders. The structure reflects SEBI’s focus on making the decision-making process more defensible when public float is being bought out.

Reverse book building remains central to price discovery

Regulation 11 keeps reverse book building (RBB) as the core price discovery mechanism for voluntary delisting. The “final offer price” is determined at the price where shares accepted through eligible bids take promoter or acquirer shareholding (including persons acting in concert) to at least 90% of the total issued shares of that class, excluding shares held by a custodian against which depository receipts have been issued overseas. The framework is designed to allow public shareholders, collectively, to influence the exit price. The floor price is calculated using parameters that include volume-weighted average price (VWAP) over specified periods. SEBI’s 2021 design tries to balance market-based discovery with rule-based minimum pricing.

Indicative price: a 2021 addition meant to reduce uncertainty

One visible change in the 2021 regulations is the “indicative price” concept. Promoters may announce an indicative price, but it must be higher than the floor price. The intent is to provide a reference point before bidding begins and reduce the chance of extreme outcomes in RBB. The article’s cited research comparing pre-2021 and post-2021 outcomes reports that the average premium to floor price decreased from about 57% to 43%. It also notes sector variation in delisting premiums, with technology and healthcare averaging about 72% above floor price versus manufacturing and commodities at about 31%.

Special route for small companies avoids reverse book building

Chapter IV provides an easier delisting pathway for small companies, with the rationale that their shareholder base and trading characteristics can make standard RBB impractical. Regulation 27 defines eligible small companies using four conditions: paid-up capital not exceeding ₹10 crore, net worth not exceeding ₹25 crore, fewer than 200 public shareholders prior to the proposal, and equity shares not traded in the preceding twelve months. For such companies, the regulations waive the RBB requirement. Instead, promoters and public shareholders can directly negotiate the exit price. This exception is narrow and tied to objective eligibility criteria.

Escrow protection for shareholders who do not tender

Regulation 23 strengthens the position of remaining public shareholders after delisting. Regulation 23(2) requires the promoter or promoter group, on the date of payment to accepted public shareholders, to create an escrow account for at least one year for the remaining public shareholders. The escrow amount is calculated as the number of remaining equity shares held by public shareholders multiplied by the exit price. The practical effect is that shareholders who did not tender during the delisting offer retain a time-bound exit opportunity at the discovered price. This is a direct investor protection feature built into the post-delisting period.

What changed versus the 2009 framework

The article highlights four major shifts in the 2021 framework relative to the 2009 regulations. First, the end-to-end timeline was reduced from roughly 117 working days to about 76 working days. Second, the success threshold moved from acquiring 90% of total shares to 90% of total issued shares excluding certain categories such as depository receipts. Third, the indicative price concept was introduced to improve price certainty and potentially reduce delisting failure rates. Fourth, the 2021 rules better align with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, particularly for transactions where delisting follows a change in control.

Consultation and committee work fed into later reforms

SEBI released a consultation paper dated August 14, 2023 on reviewing voluntary delisting norms under the 2021 regulations. The paper proposed changes to the RBB process and the introduction of a fixed price mechanism as an alternative pricing method. The stated policy concern was that delisting announcements can lead to volatility and speculative activity because the eventual delisting price is uncertain under RBB. A sub-group chaired by Shri Keki Mistry, formed under the Primary Market Advisory Committee (PMAC), submitted recommendations covering alternatives to RBB, counter-offer frameworks, and floor price determination. The paper also notes operational features such as a five working day bidding period and the intent to announce VWAP within two hours of the close of bidding to support informed decisions.

2024 amendment reintroduces fixed-price delisting

SEBI revised the delisting process again on September 25, 2024, following board approval of amendments discussed in its June 27, 2024 meeting. The SEBI (Delisting of Equity Shares) (Amendment) Regulations, 2024 reintroduced the fixed price process for voluntary delisting alongside RBB, creating two alternatives. The amendment also introduced revisions to the floor price calculation under the fixed price method. For frequently traded shares, the floor price determination was changed to align with the process used for infrequently traded shares under RBB. The amendment added an ‘adjusted book value’ parameter under Regulation 19A.

Counter-offer guardrails and the role of VWAP

Under the amended regime, counter-offer pricing is framed using VWAP and any indicative price. The article states that the counter-offer price must be higher than (i) the VWAP of shares tendered in RBB during the tendering period, and (ii) the indicative price, if any. It also notes that depending on the cumulative shareholding of the acquirer after the tendering period, VWAP for the counter-offer will be computed as per the Explanation to Regulation 22(5) of the amendment. Separately, the consultation material describes that all public shareholders, not only those who participated in the initial RBB, may be given the opportunity to tender at the counter-offer price, with that window also remaining open for five working days.

A live reference point: filings on RBB outcomes

The article references an “Outcome of Reverse Book Building Process” filing under Regulation 17(3) in the context of a proposed voluntary delisting offer involving East India Securities Limited. While no outcome numbers are included in the text, the mention underscores that RBB processes culminate in formal disclosures under the 2021 regulations. For investors, these filings are part of the information chain around discovered price, acceptance, and next steps.

Key facts at a glance

Why the shift to fixed price matters

The consultation paper and the 2024 amendment point to a consistent regulatory theme: reduce uncertainty without removing shareholder safeguards. RBB can produce prices that promoters consider unpredictable, and the article notes concerns about volatility and speculative activity around delisting announcements. Fixed price delisting aims to let shareholders decide upfront whether to tender at a stated price and helps acquirers plan funding with more visibility. At the same time, the continued emphasis on thresholds like 90% of total issued shares and disclosure-linked metrics such as VWAP indicates SEBI is trying to keep price-setting anchored to market participation.

Conclusion

SEBI’s delisting framework has evolved from the 2021 regulations to the 2024 amendment, with the core goal of improving process efficiency while protecting public shareholders. The 2021 rules tightened voting requirements, preserved RBB-based discovery, created a small-company route, and added escrow-based exit protection for remaining shareholders. The 2023 consultation paper and PMAC-led work built the case for alternatives to RBB, and the 2024 amendment reintroduced fixed-price voluntary delisting alongside RBB and revised floor-price parameters. The next set of practical learnings will come from how issuers and shareholders use the two-track structure in future delisting proposals and the disclosures that accompany them.