 "U K Sinha")
The Securities and Exchange Board of India (Sebi) is inclined to tweaking the delisting regulations for companies whose shares have remained suspended for many years.
The changes are expected in a few months as the delisting of such companies is one of the focus areas for the regulator. "We are going to reduce the number of listed companies where no or little trading is taking place," said Sebi Chairman UK Sinha in an interaction with the media on Thursday.
On BSE and NSE, 1,200 companies have been suspended for more than seven years. Sebi plans to enable exit for shareholders of these.
"This can be done by setting a fair value for the shares. The fair value will be determined by an independent valuer. If promoters don't pay investors the determined price, they will risk being barred from the capital market for up to 10 years. They will also not be allowed to be directors in companies," said a source with knowledge of the developments.
"If promoters do not give exit, the regulator can act against the company, promoter, even directors," he added.
Exchanges now send a final notice to companies suspended for seven years or more to complete formalities for revocation of their suspension within three months. In case the companies fail to respond, the exchanges can proceed with the compulsory delisting process by issuing the necessary notices to the market and public notices in newspapers.
Under compulsory delisting, a stock exchange can initiate the process for delisting of a company if it has remained suspended for over 6 months and it has not taken any step to have the suspension revoked. Before any such delisting the exchange is required to offer a final opportunity to the company and shareholders need to be informed through public notices about any such step.
One set of 3,000 such companies were listed on regional exchanges but the exchanges shut down. In another set, the promoters might have vanished after duping investors. A third set of companies do not want to pay the penalties to revoke their suspension.
"Sebi can relax the rules for companies listed on regional exchanges," said the person cited above.
Over the past two years, most of the regional stock exchanges have stopped trading due to their inability to comply with Sebi norms on the minimum net worth of exchanges and meet the level of trading activity prescribed by the regulator. Sebi norms require stock exchanges to have a minimum net worth of Rs 100 crore and annual trading of Rs 1,000 crore.
Further, Sebi also allowed firms listed on regional stock exchanges to be listed on nationwide exchanges. However, many companies were unable to list on the BSE and NSE because they were unable to meet the minimum Rs 10 crore net worth required by the exchanges.
For companies listed on regional stock exchanges, delisting through reserve book-building is a cumbersome process. In reverse book building a company that wants to get off an exchange decides on the price that needs to be paid to shareholders to buy back stocks. Shareholders then bid at various prices above or equal to the floor price set by the company. The final buyback price is determined after aggregating all shareholder bids.
"Many companies listed on regional exchanges are unable to meet the migration criteria for national exchanges. Such companies should be provided an easy delisting platform," said Sandeep Parekh, founder, finsec law advisors.
