Insider has been made wider by including persons connected on the basis of being in any contractual, fiduciary or employment relationship that allows such person access to unpublished price sensitive information (UPSI). Directors, employees and all other persons in the deeming category covered under 1992 regulations immediate relatives will be presumed to be connected persons, with a right to rebut the presumption.

Connected Person

Under the Regulations, the definition of a “Connected Person” has been broadened and also the onus of establishing not in possession of UPSI, shall be on such connected persons.

Unpublished Price Sensitive Information (UPSI) and Generally Available Information

UPSI has been defined as information not generally available and which may impact the price. The definition of UPSI has been strengthened by providing a test to identify price sensitive information, aligning it with listing agreement and providing platform of disclosure. Price sensitive information has now been included with respect to securities as well which was earlier with respect to company only Generally Available Information will be the information that is accessible to the public on a non-discriminatory platform which would ordinarily be stock exchange platform.

Communication of information

Clear prohibition on communication of unpublished price sensitive information (UPSI) has been provided except legitimate purposes, performance of duties or discharge of legal obligation. Considering every investor's interest in securities market, advance disclosure of UPSI at least 2 days prior to trading has been made mandatory in case of permitted communication of UPSI. Companies by law would be entitled to require third-party connected persons to disclose their trading and holdings in securities of the company. The mere disclosure or communication of UPSI in itself constitutes an offence under the new Regulations whether or not the recipient has utilized the UPSI to gain an undue Advantage Trading can be done after two days of Disclosure of Price Sensitive information.

Third party connected persons like merchant Bankers, lawyers, Auditors needs to disclose their trading and holding in securities of the Company

Directors and KMPs are prohibited from trading in derivatives of Company's securities. This aligns with position in the Companies Act, 2013.

Valid Defense

In given cases, certain circumstances which can be demonstrated by an insider to prove his innocence have been provided. The introduction of the provisions regarding valid defenses is a step forward in developing sound insider trading norms in India. The text of the valid defenses set out that the charge of insider trading not only has to be clear, precise and reasonable but it also involves the element of mens rea. It must be noted that SAT has, previously, held that in light of the objective of the Insider Trading Regulations, the intention/motive of the insider has to be taken cognizance of.

Trading Plan

Insiders who are liable to possess UPSI all-round the year would have the option to formulate prescheduled trading plans. Trading plans would, however, to be disclosed on the stock exchanges and have to be strictly adhered to. Trading plans shall be available for bona fide transactions. The United States had introduced the concept of “prearranged trading plans” in 2000 in the form of Rule 10b5-1 of the Exchange Act, 1934. This facilitates compliant trading towards acquisitions by insiders and to provide them a safe harbor under the new Regulations. However, it is contemplated that once a trading plan has been in put in place; it shall necessarily have to be followed.

Disclosures of Change in Shareholding

Disclosure of any change of 2% for persons holding more than 5% shares or voting rights has been removed.

Amendment to SEBI (Delisting of Equity Shares) Regulations, 2009 Conditions for Delisting to be Successful

A delisting shall be considered successful only when the shareholding of the promoter, together with shares tendered by public shareholders, reaches 90 % of the total share capital. At least 25% of the public shareholders need to be part of a reverse book-building process.

Determination of Offer Price

The offer price determined through Reverse Book Building shall be the price at which the shareholding of the promoter, after including the shareholding of the public shareholders who have tendered their shares, reaches the threshold limit of 90%.

Prohibition on Promoter &Promoter Group

The promoter/ promoter group shall be prohibited from making delisting offer if any entity belonging to the said group has sold shares of the company during a period of six months prior to the date of the Board meeting which approves the delisting proposal.

Stock Exchange Mechanism

Use of Stock Exchange platform for offers made under Delisting, Buy Back and Takeover Regulations.

Timelines for the Process

Timelines for completing the delisting process has been reduced from 137 calendar days (approx. 117 working days) to 76 working days.

Responsibility of compliance lies on the Board of Directors

The Board of the company shall approve the proposal for delisting only after satisfying itself that delisting is in the interest of shareholders and that the company is in compliance with applicable securities laws. The Board of the company shall appoint a Merchant Banker on behalf of the company and the promoter for the said purpose and for compliance with the Delisting Regulations.

Exemption from following Reverse Book Building Process

Companies whose paid up capital does not exceed Rs.10 crores and net worth does not exceed Rs.25 crores as on the last day of the previous financial year are exempted from following the Reverse Book Building process.

The exemption would be available only if

• There was no trading in the shares of the company in the last one year from the date of the board resolution authorizing the company to go for delisting and
• Trading of shares of the company has not been suspended for any non-compliance during the same period.
• Option to the acquirer to delist the shares of the company directly through Delisting Regulations pursuant to triggering Takeover Regulations has been provided. However, if the delisting attempt fails, the acquirer would be required to complete the mandatory open offer process under the Takeover Regulations and pay interest @ 10%p.a. for the delayed open offer

- C.S. Suresh ThakurDesai