SEBI’s Directive for migration of Companies exclusively listed on Non-operational Stock Exchanges
The Capital Market Regulator, SEBI with the intent to refurbish the regime of Indian Capital Market has decided to proceed with the compulsory de-recognition and exit of those Stock Exchanges that have not achieved the minimum turnover of Rs.1,000 crore (as directed by SEBI vide its Circular dated 30th May, 2012) at the end of the stipulated period, i.e. by 30th May,2014.
Accordingly, to redress the concerns of how to deal with the Companies exclusively listed on non-operational stock exchanges and with the primary intent to safeguard the interest of the public shareholders, SEBI vide its circular dated 22nd May, 2014 have given following options to such listed entities:
(a) To get itself listed on the stock exchange having nationwide trading terminal;or
(b) To opt for voluntary delisting before the de-recognition of the stock exchanges by following the existing delisting norms of SEBI in terms of SEBI (Delisting of Equity Shares) Regulations, 2009 even if the Company is non-complied with the ‘Minimum Public Shareholding’ requirement prescribed in Rules 19(2)(b) and 19A of the Securities Contracts (Regulation) Rules, 1957 and Clause 40A of the Listing Agreement.
In case such companies are not traceable or where the data available is of more than three years old then such company may be identified as ‘Vanishing’ by the respective stock exchanges and be included in the list of Vanishing Companies as maintained by Ministry of Corporate Affairs.
SEBI have further instructed the non-operational stock exchanges to place such companies on the dissemination board if they fail to obtain listing on any stock exchange having nationwide terminal or have not opted for voluntary delisting or which are not covered under the ambit of “Vanishing Companies” and such Companies will cease to be considered as listed entities.
Our Viewpoint:
In our view, its high time, that Companies listed on Regional Stock Exchanges apply to either BSE/ NSE for reaching that next level. Or else, if not keen on the same, to voluntarily apply for delisting before the De-recognition of the Regional exchanges. Companies which fail to do so, will be transferred to the Dissemination Board, whereat the Company’s status as to it being a listed company would be in limbo.
Another concern that we would like to share is if a Company is transferred to Dissemination Board, how will the trading take place, will that be off market (thus liable to Capital Gains) or will be subject to STT?
Furthermore, if such companies are deemed unlisted, how will their public shareholders get an exit, as per the mechanism prescribed under the SEBI Delisting Regulations?
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