The Bombay Stock Exchange (BSE) has revised the relisting norms for companies, which were recently challenged by a public interest litigation (PIL) at the Delhi High Court. According to the new norms, which the exchange’s board approved on April 27, suspended companies are not required to comply with requirements, such as minimum paid-up capital, minimum networth and profitability track record.
However, it has increased the lock-in on promoter group shareholding to one year after commencement of trading, up from the earlier six months. Further, promoters are also barred from selling their shares up to six months before the revocation of suspension.
Earlier, BSE had aligned the relisting norms in line with the conditions for fresh listing, which came into effect in July 2011. According to these rules, companies which have remained suspended for over a period of one year had to have a minimum paid-up capital of Rs 10 crore and a minimum networth of Rs 50 crore.
Further, it needed a profit-making track record. Accordingly, the company should have “distributable profits in terms of Section 205 of the Companies Act, 1956 for at least three out of five immediately preceding financial years based on audited financial results with the last financial year reporting profit. Provided that extraordinary income shall not be considered for calculating distributable profit. Provided further that latest three financial years should comprise a period of at least 12 months.”
According to several investor associations, these conditions made it practically impossible for suspended companies to relist and trade on the bourses again. According to the PIL, over Rs 1.8 lakh crore was stuck in such suspended firms. The petition alleged that by making relisting difficult with these conditions, BSE and Sebi were playing into the hands of the promoters. It further alleged that they did not make any efforts to protect the interests of the investors.
BSE, in its submission to the Delhi High Court, said it had reconsidered the norms “suo motu” in the interest of investors even before the petition was filed. The relaxed norms are likely to take effect after the minutes of the board meeting are approved by the board.
Other conditions that do not figure in the new norms submitted by BSE to the court include the minimum requirement of 500 public shareholders and at least 50 per cent of public shareholding to be in demat shares.
Ajay Veer Singh, advocate for Atul Agarwal, who filed the PIL, said: “The change in rules offers a ray of hope for investors. But this is a minor issue, if one looks at the larger issue of inaction on large number of suspended companies. Our goal is that there should not be a single dead share.”