The corporatisation committee of the Bombay Stock Exchange (BSE) has decided to adopt the demutulisation procedure of Nasdaq.
The bourse will shortly forward a proposal in this regard to the Union ministry of finance through the Securities and Exchange Board of India (Sebi) after the approval of the governing board.
BSE will hold an extra-ordinary general meeting tomorrow to get the approval of its members.
The proposed model for BSE, similar to the system followed by Nasdaq, is also in consonance with the provisions of the Finance Bill, 2001, passed in the Lok Sabha on April 25, sources said.
The committee has proposed that BSE shall incorporate a "for-profit" public company "BSE Ltd" registered under and governed by the Companies Act, 1956, where there shall be a provision for the separation of the trading rights from the shareholding rights of the members.
The members of BSE shall be entitled to apply for and hold one or a fixed number of fully paid-up equity share/s of a pre-determined value to be issued for cash at par in lieu of their ownership right on BSE Ltd.
Additionally, each member shall be entitled to have one trading right per membership held by him in BSE. Accordingly, for each membership right that a member has will also be entitled to one trading right and one ownership right on the proposed BSE Ltd.
The BSE Ltd may decide in future to dilute the holding of the members by issuing further shares through private placement and/or through an initial public offering.
BSE Ltd. may, after due consultation with Sebi, impose such ceilings on acquisition of shares as also on voting rights as so deemed fit from time to time.
According to the committee recommendations, the members of the exchange shall be entitled to transfer their trading right on the bourse, subject to such conditions and restrictions as may be imposed by BSE Ltd from time to time.
The composition of the board of directors of the BSE Ltd as also their appointment shall be in accordance with the provisions of the Companies Act, 1956, and the Memorandum and Articles of Association of BSE Ltd.
And BSE Ltd shall incorporate a wholly owned subsidiary. This arm shall be responsible for looking after the functions of surveillance and inspection.
The governing board of the wholly owned subsidiary would consist of directors to be appointed by the government/Sebi. No member of BSE Ltd shall be entitled to be a member of the board of this subsidiary, the report said.
Alternatively, an independent firm or agency of repute, to be identified and appointed for the purpose, can execute the functions of surveillance and inspection.
The committee has also referred to the amendments to the Income Tax Act, as passed by the Finance Bill, 2001, on April 25, 2001.
The relevant and necessary amendments to The Bombay Stamp Act, 1958, and/or the Indian Stamp Act,1899, and The Securities and Exchange Board of India Act, 1992, as proposed by the exchange, are awaited, the report said.
