SEBI passed an order on November 06, 2015, in relation to the ongoing delisting of Essar Energy Holdings Limited. Essar is in the process of delisting and had obtained the necessary approvals of its board of directors and of its public shareholders by way of special resolution. However, there were some delays in obtaining the green light from the stock exchanges and SEBI. As a result, Essar required relaxation from the strict enforcement of certain provisions of the SEBI (Delisting of Equity Shares) Regulations, 2009, such as, the requirement to make final delisting application with the stock exchange within one year of the special resolution of the public shareholders, the requirement to make a public announcement within one day of receiving in-principle approval from the stock exchanges, etc. Essar made an application to SEBI seeking such relaxation.

In the meantime, SEBI received complaints from certain minority shareholders alleging that the promoters had entered into an agreement with an entity named OJSC Roseneft Oil Limited to sell 49% of their stake in Essar after the completion of the delisting. The concern was that the promoters may unfairly benefit from the stake sale at a high price without factoring the sale into the calculation of the delisting price, thereby affecting the interests of minority shareholders. SEBI sought Essar’s reply to these complaints before they considered the company’s application seeking relaxation.

While the promoters admitted to having entered into a non-binding agreement, they stated that the agreement was silent on financial details such as the price. Despite this, the promoters voluntarily undertook to pay any difference in price between the final delisting price, arrived at pursuant to the reverse book building process, and the price per share received by the promoters pursuant to the completion of the Roseneft transaction, to the tendering shareholders, provided the transaction takes place within one year of the delisting. SEBI, observing that the one year time limit is not in the interest of shareholders, granted the relaxation sought by Essar subject to the payment of the price difference as discussed above irrespective of when the transaction with Roseneft takes place.

This order may have successfully shielded minority shareholders from the ills of information asymmetry between them and the promoters. However, the requirement on the promoters to pay the difference in delisting price and sale price to the tendering shareholders, irrespective of when the Roseneft transaction takes place, seems onerous.