SEBI issues directions for action against Exclusively Listed Companies and its Promoters/Directors pending Exit Offer to the Shareholders

SEBI issues directions for action against Exclusively Listed Companies and its Promoters/Directors pending Exit Offer to the Shareholders

August 8, 2017 Corporate 0

The Securities and Exchange Board of India (“SEBI”), by way of a Notification dated 1st August, 2017 (“Present Circular”), have prescribed action againstExclusively Listed Companies (“ELCs”) and its Promoters/Directors pending Exit Offer to the Shareholders.

As per the Present Circular “Exclusively Listed Companies” refer to those companies whose equity shares were exclusively listed at a recognized stock exchange at the time of exit from such exchange and were subsequently moved to the Dissemination Board (“DB”) of NSE and BSE and whose shares are available for buying and selling on Dissemination Board.

Background

SEBI, by way of a circular dated October 10, 2016, (“Previous Circular”) had provided options to the ELCs on DB to raise capital for meeting the capital requirement for getting listed on the nationwide stock exchanges or to provide exit options to investor.

An exit mechanism for investors in such ELCs was also specified in the aforesaid circular. Moreover, ELCs were required to furnish the plan of action by January 09, 2017 to the Designated Stock Exchanges (“DSEs”), which was subsequently extended till June 30, 2017.

Key Highlights of the Present Circular

With a view to protect the interest of investors in ELCs on DB, SEBI has directed the following to the ELCs who have not submitted their plan of action to the DSEs:

  1. The defaulting ELCs and theDepositoriesmust not transfer, by way of sale, pledge, etc., of any of the equity shares. Other corporate benefits like dividend, rights, bonus shares, split, etc. will be frozen, for all the equity shares, held by the promoters or directors of non-compliant ELCs till the promoters of such non-compliant ELCs provide an exit option to the public shareholders in compliance with Previous Circular as certified by the concerned Designated Stock Exchanges.
  1. The non-compliant ELCs, its directors, its promoters and the companies which are promoted by any of them will not be eligible to access the securities market for the purposes of raising capital till the promoters of such non-compliant ELCs provide an exit option to the public shareholders in compliance with the Previous Circular as certified by the concerned Designated Stock Exchanges.
  1. The promoters or directors of non-compliant ELCs will not be eligible to remain or become director of any listed company till the promoters of such non-compliant ELCs provide an exit option to the public shareholders in compliance with the Previous Circular as certified by the concerned Designated Stock Exchanges.
  1. The concerned DSEs and Depositories must co-ordinate with each other and ensure compliance of these requirements.
  1. SEBI can also take any other appropriate action(s) against the promoters/directors of the ELCs for non-compliance with the Previous Circular.

Source: Securities and Exchange Board of India

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