Bombay Stock Exchange Initiates Compulsory Delisting of 428 Listed Companies

Bombay Stock Exchange Initiates Compulsory Delisting of 428 Listed Companies 

BSE’s Public Notice dated 23rd June 2016 offers another bombshell for promoters of Suspended Companies!!

During last few days, there is a lot of buzz about the companies that have been suspended on Nationwide Bourses for more than 7 years and the proposed action plan to compulsorily delist such companies. The most recent action being taken in such cases was BSE’s Public Notice dated 23rd June 2016 issued to 428 companies that have been suspended thereat for more than 7 years. The said Notice gave the Companies a time frame of 15 working days (which have already lapsed on 14th July 2016) to make a representation and initiate the process of Revocation of Suspension. Failing this, the Exchange would initiate the process of Compulsory Delisting.

To reiterate, Compulsory Delisting has severe repercussions not just for the Company, but also its Promoters/ Directors and other group companies. As per the Delisting Regulations:

The Company/ its Promoters/ its Whole Time Directors/ Companies promoted by any of them cannot directly or indirectly access the capital market i.e.

• ·        Such companies cannot relist/ list/ come out with the Public Issue, for a period of 10 years. 

• ·        The Exchange may file prosecution against Promoters/Directors of the Company for alleged Non-Compliances.

• ·        The Exchange may file a petition for winding up of the Company.

• ·        The Promoters need to pay the Price to the Shareholders as will be decided by the Exchange.

As a continuing measure and to create a negative environment for suspended companies, SEBI has now decided to harden the scenario for the promoters of such suspended companies. It is proposed to initiate the following actions against the Promoters of the errant companies: 

• ·        Freezing of Demat accounts-holding shares/ bonds/ mutual funds.

• ·        Imposition of ban on promoters to raise funds from the market- not just for the suspended company but also for any of their other ventures, even if they are not suspended.

• ·        The Promoters will also be barred from receiving any dividend from any of the companies in their portfolio.

• ·        The Promoters will also be restricted from acting as director in any other listed company.

The above mentioned restrictions/ bars would continue till the promoters move ahead with Revocation or give an exit opportunity to their public shareholders at price decided by valuer appointed by their respective stock exchanges.

It is evident that SEBI now is in no mood to carry on the burden of non-compliant and errant companies and is determined to take strict actions against the Promoters of such companies. These actions will not just compel the presently suspended companies to initiate corrective actions, but also act as deterrents for the Promoters of other listed companies and the companies that are suspended for less than 7 years.

It’s high time, for the Suspended companies and their Promoters to decide either to go ahead with Revocation of Suspension or give an exit to their public shareholders.