Crackdown on errant promoters

Sebi may bar over 1,000 companies, suspended for more than 7 years, from accessing the market

The Securities and Exchange Board of India (Sebi) is to enact stringent norms against promoters of companies which have been suspended from trading.

Promoters of entities suspended from trading for more than seven years due to non-compliance with the listing regulations are likely to be barred from accessing the market, said sources. An early announcement seems likely. There are 1,021 companies listed on the BSE and 200 on the National Stock Exchange which have been suspended for more than seven years in this regard. Sebi wants to reduce the number of listed companies where no trading is taking place. And, to provide an exit opportunity to shareholders in these.

The new norms might also restrain subsidiaries or related entities of suspended companies from accessing the market, the sources added. Also, said one, if the promoters do not give an exit option to minority shareholders, the regulator would act against the company, promoters and even directors.

The latter might also not be allowed to set up market-related intermediaries such as mutual funds or brokerage firms or take control of any other listed company.

“It is a good move. There are players in the market who should be blacklisted,” said Sandeep Parekh, founder, Finsec Law Advisors.

Meanwhile, the exchanges have also begun sending notices to companies suspended for seven years or more, to complete the formalities for revocation of their suspension within three months. BSE is said to have sent letters to 500-plus delisted firms but most of them are said to have bounced back.

“Companies not responding means they have vanished. In that case, the regulator might seek ministry of corporate affairs (MCA) intervention,” said a source.

Besides, if companies fail to respond, the exchanges can proceed with compulsory delisting, by issuing the necessary notices to the market and public notices in the media. A stock exchange can initiate the process for delisting of a company if it has remained suspended for over six months and it has not taken any step to have the suspension revoked.

Before any such delisting, the exchange is required to offer a final opportunity to the company and shareholders need to be informed through public notices about any such step.

“Sebi efforts to make companies management more responsible for compliance with the listing regulations would go a long way in making the markets more safe and robust, improving public trust,” a BSE spokesperson told this newspaper.

TIGHTER NORMS

• New rule for errant promoters
   
• Suspended firms’ promoters may be barred from raising public money
   
• Rules may restrain promoters/ directors  from tapping the markets even through their subsidiary entities
   
• Prevent them from setting up market intermediaries such as mutual funds and brokerage firms
   
• They may not be allowed to take control of any other listed company
   
• Norms enable exit for shareholders of such firms