The K R Chandratre Committee on delisting of securities, appointed by the Securities and Exchange Board of India (Sebi), has recommended the granting of powers to stock exchanges to initiate prosecution against listed corporates, its officers and directors for breach of listing norms.
The committee has also recommended the scrapping of the concept of listing agreement and recommended that its contents be prescribed as part of the Securities Contracts (Regulation) Rules.
In its latest report, a copy of which is available with Business Standard, the panel has also recommended stiffer penalties for violation of listing provisions and the strengthening of the stock exchange machinery to tackle offending corporates.
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The panel has also recommended an amendment to the Companies Act, wherever required, to bring its provisions in conformity with the provisions of the listing agreement where the provisions of the agreement override those of the Act.
It has also recommended that the reinstatement of delisted securities be permitted by the bourse without requiring the company to make an application if such relisting is sought within one year of delisting. If the period is more than a year, it should be treated as a case of fresh listing.
Recommending that the listing agreement be scrapped and its contents merged in the SCR rules under the heading Conditions for Listing and Continued Listing, the panel says the conditions should be of two parts, one common for all bourses and the other of varying nature which may differ from bourse to bourse. Stock exchanges should be given the freedom to modify the second part to suit their requirements, subject to prior Sebi approval.
The panel has recommended that section 23(2) of the SCR Act be amended to hike the fine from Rs 1,000 to Rs 10,000 and to provide for a further fine of Rs 1,000 for every day in the case of a continuing default. Section 29(A) of the SCR Act should also be amended to give prosecution powers under the Act to the bourses, the report says. The panel also calls for a separate provision to be made in the SCR rules for the procedure for amendment of the Listing Agreement once the agreement is merged with the Act. Sebi, it says, should have the power to amend this agreements after consulting the stock exchanges.
The panel has also called for the exchanges to be given the power to fix the quantum of listing fees and there need not be any uniformity in this regard. SE s, the report says, should be free to determine the manner and the periodicity of payment of the fees.
Delisting: On delisting, the panel says the SCR Act should have a specific provision empowering Sebi to prescribe rules and regulations relating to delisting of securities on recognised bourses. The committee says specific provisions should be made on compulsory delisting and the precise procedure should be laid down to be followed by each exchange. Bourses should not resort to delisting on the ground of non-payment of listing fees unless all efforts for recovery by persuasion or force have failed, the report says. Besides, adequate intimation should be given to the holders of the securities proposed to be delisted, and they should also have the right to be heard.
The panel has also recommended that there be a mechanism akin to dealing in permitted securities to provide liquidity to delisted stocks. A public notice before and after delisting by the stock exchanges has also been recommended.
The panel has also suggested that the SCR rules be amended to insert rules and procedures for voluntary delisting of securities and the existing finance ministry rules be withdrawn. Corporates wishing to delist their securities should secure approval from the holders of those securities by way of a special resolution at a general meeting. They must also have an exit opportunity, the panel says.
The directors report of the companies should also disclose the fact of delisting together with reasons and justification in the case of voluntary delisting. Every listed company would also need to disclose every stock exchange where its securities are listed and whether it has paid the listing fees.