The Bombay Stock Exchange (BSE) will submit the proposal of demutualisation and corporatisation of the exchange to the Securities and Exchange Board of India (SEBI) for approval shortly, official sources said. The exchange has called for an extra-ordinary general meeting on Tuesday to obtain approval of the members for the draft proposal.
Post-corporatisation, the exchange which will be called BSE Ltd has also decided to adopt a model similar to system followed by Nasdaq subject to certain modifications and in consultation with the solicitors and tax consultants of the bourse. In the corporatised set-up, surveillance, risk management as well as clearing and settlement functions would be performed by a separate entity, on whose board there would be no broker-members, and which would be a wholly owned subsidiary of the exchange.
BSE will also appoint merchant bankers to explore the possibilities of placement of Type 'A' shares in BSE Ltd so as to provide an exit route to the members of the exchange who want to surrender / dispose of their type A shares, as soon as possible.
In the draft scheme, the composition of the board of the proposed BSE Ltd has been revised to 18 members. The board will include Sebi-nominated non-executive Chairman and one managing director, three Sebi nominee directors, one Reserve Bank of India nominee director, seven industry representative directors, and five independent professional directors to be appointed by the shareholders in general meeting.
The appointment of the industry representative directors will not be linked to the shareholding of the broker-members. Even if the holding of the broker-members happens to be less than 40 per cent of the share capital of the proposed BSE Ltd. At any time, their quota on the board of BSE Ltd shall continue to be seven.
In view of the provisions of Sections 255 and 256 of the Companies Act 1956, excepting the chairman, managing director, Sebi nominee directors and RBI nominee director (totaling to 6), all other 12 directors will be subject to retirement by rotation.
It has also been provided that, immediately after the appointed date, to ensure an exit route to the members who so wish, a public offer will be made with the help of reputed merchant bankers.
As regards the board of the proposed subsidiary company, which will be entrusted with all the activities relating to surveillance, risk management and clearing and settlement. It is also suggested that there will be no industry representative director. However, the board of the proposed subsidiary will be constituted by the proposed BSE Ltd keeping in mind the principles of corporate governance.
It has also been provided that the proposed subsidiary company will be run on the basis of 'cost plus' basis so that the entire expenditure of the proposed subsidiary company and some incremental amount will be met by the proposed BSE Ltd.
Only one type of shares will be issued representing the ownership of members. To represent the clearing and trading rights of the members of the exchange, instead of Type B shares, a clearing and trading membership certificate will be issued by the proposed BSE Ltd and, therefore, there will be no need to issue Type B shares.
