The capital markets regulator Securities and Exchange Board of India has barred suspended companies, their promoters and directors from raising capital via public issue of securities till their suspension is revoked or shares are delisted from the stock exchanges on which the securities of the company are delisted.
Besides, such companies and depositors are also required not to effect transfer of pledged shares held by promoters and directors till three months after the date of revocation of suspension by the stock exchange concerned or till their shares are delisted, the capital markets watchdog said.
However, the enforcement of aforesaid strict restrictions can be relaxed on recommendation from the stock exchanges, or would be in place till these securities get delisted, whichever is earlier.
“It has been noticed that several listed companies continuously fail to comply with listing conditions stipulated under the equity listing agreement and consequently trading in their shares is suspended by the stock exchange concerned,” Sebi said in a circular.
It may be noted that shares of listed companies are suspended from trading by stock exchanges for not complying with listing norms, and SEBI has imposed these restrictions so as to ensure effective enforcement of listing rules and improve compliance environment among the listed companies.
“While the non-promoter shareholders of such companies remain in a disadvantageous position on account of information asymmetry, their promoters/directors, who are responsible for such defaults, can use the undisclosed information about the company and dispose of their shareholding in the company leaving the gullible investors in lurch. Thus, such non-compliance jeopardise the interests of investors in such companies and adversely impact the market integrity,” it said.
At present, a stock exchange can start the process to compulsorily delist a company if it has remained suspended of more than six months and has not tried to get the suspension revoked. However, the stock exchange notifies the company concerned and its shareholders before it initiates the delisting process.