SEBI preparing guidelines for wilful defaulters, information memorandum for cos

By PTI
17 September, 2014

To ensure greater transparency and easier regulatory oversight, Sebi plans to make it mandatory for listed companies to publish annual information memorandum on all the details about their businesses and statutory disclosures.

The Securities and Exchange Board of India (Sebi) has started work with regard to annual information memorandum for listed companies and it is going to be mandatory, Chairman U K Sinha today said.

Noting that such an exercise would help in a variety of ways, Sinha said, “one is that you will not be visited by undue litigations from the regulators”.

“Secondly, if you are going to raise some funds, either debt or equity, you don’t have to update this information again and again. That is another idea why we are doing this,” he said.

The idea is that let this information rest in the system and if there are minor changes or adjustments to be made to the specific issue then that can be done, the Sebi chief said.

He was speaking at a conference organised by industry body CII.

On whether this memorandum requirement is going to be introduced through guidelines or by amending the corporate governance norms, Sinha said it would be both.

“It (memorandum) will be a far reaching thing because today a corporation which has filed everything as per Sebi requirement can still be hauled up, that is a lacunae in our system,” he said.

According to him, if an entity has filed some information under the takeover regulations as well as part of disclosure requirements, both are taken separately.

“So for an analyst, a shareholder, a stakeholder it becomes a problem and it also becomes a problem for corporations that are willing to comply,” he added.

The capital market watchdog already has stringent corporate governance norms for listed entities, as part of efforts to ensure more transparency.

Sebi is working on guidelines to deal with wilful defaulters but there is no restriction at present on such entities from raising funds from the capital market, according to the regulator’s chief U K Sinha.

“We are working on the guidelines for wilful defaulters.

It will take some time,” Sebi Chairman Sinha said here today.

He also said that at present, there is no restriction on wilful defaulters from raising funds.

Earlier this month, United Bank of India had declared Kingfisher Airlines, its promoter Vijay Mallya and three other directors as wilful defaulter citing alleged diversion of funds.

Kingfisher Airlines and directors declared as wilful defaulters would not be able to borrow from banks in the future. They would also lose director-level positions in companies and criminal proceeding could be initiated against them, if warranted, to recover the money.

Meanwhile, the government is planning to come out with a separate Bill in Parliament to deal with instances of wilful defaults in payment of bank loans.

Stringent action against the wilful defaulters in terms of attachment of properties under Sarfaesi Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act), change in management and other legal action against the promoters, among others, are under consideration.

For preparing the Bill, the Department of Financial Services has set up a panel for suggesting changes in the existing laws to make debt recovery more effective and frame a statute with harsh penal provisions for wilful defaulters.

Sebi to float discussion paper on reducing FPO time line

To elicit views from diverse stakeholders, capital market regulator Sebi will come out with a discussion paper on reducing the time line for follow-on public offers.

The proposal for a discussion paper also comes at a time when many public sector companies are gearing up for stake sale as part of government’s ambitious disinvestment programme.

“We have received representations that FPO time line should be reduced. We are still examining (the issue) and we will come out with a discussion paper for public at large. It will take some time,” Sebi Chairman U K Sinha said today.

He was speaking at an event organised by industry body CII here.

FPO and Offer for Sale (OFS) are seen as preferred routes for selling stakes in public sector companies.

In the current fiscal, the government aims to garner more than Rs 43,425 crore through disinvestment.

However, Sinha said that there is no proposal to change Sebi (Securities and Exchange Board of India) norms for FPOs with respect to retail investors quota.

“If you are asking whether Sebi rules are going to be changed for FPOs, there is nothing on the plate as of now but if an issuer wants to allocate more to retail investors, it is possible,” he noted.

In an FPO, at least 35 per cent should be allocated to retail investors.

“As an issuer, if you decide to have 100 per cent (quota) for retail (investors) there is nothing in Sebi laws prevents you,” Sinha said.

On changes made in corporate governance norms, Sinha said the regulator has extended the deadline for induction of at least one woman director on a listed company’s board to April 1, 2015.

The norm was to come into force from October 1 this year.

“We have done it because the Ministry of Corporate Affairs guidelines towards this end has also been extended. We felt that it is better in at least this matter to synchronise with what the Ministry of Corporate Affairs has done,” he noted.

Regarding a query on implementation of IFRS norms, Sinha said the government and regulators are working to ensure that they are implemented within the proposed time frame.

Finance Minister Arun Jaitley, in his Budget speech on July 10, had said there was an urgent need to converge the current Indian accounting standards with IFRS.

“I propose for adoption of the new Indian Accounting Standards (Ind AS) by the Indian companies from the financial year 2015-16 voluntarily and from the financial year 2016-17 on a mandatory basis,” he had said.

Meanwhile, responding to a query on whether trading time for currency derivatives would be extended, Sinha said Sebi, RBI and the government are discussing the matter.


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SEBI preparing guidelines for wilful defaulters, information memorandum for cos

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