Exclusively listed companies of De-recognized/Non-operational/exited Stock Exchanges placed in the Dissemination Board (DB)
Summary
This circular clarifies the exit mechanisms for exclusively listed companies (ELCs) on the Dissemination Board, offering options to raise capital or provide investor exit. It mandates that ELCs submit a plan of action within three months and outlines specific procedures for preferential allotment and voluntary delisting. Non-compliance results in severe penalties including market bans, share freezing, and asset attachment for promoters and directors.
Text
The respective nationwide stock exchanges hosting the ELC on its DB would hereinafter be referred as ‘designated stock exchange’.
The ELCs on the DB would be required to exercise one of the two options as mentioned in Para 4.c or 4.d of the circular.
In order to facilitate listing on nationwide stock exchanges, the ELCs on the DB shall be allowed to raise capital for meeting the listing requirements through preferential allotment route in terms of the provisions under the Issue of Capital and Disclosure Requirements Regulations, 2009 (ICDR).
Towards this purpose, the designated stock exchange shall be according in principle approval and monitoring compliance with the same.
In the process of raising capital through preferential allotment, if the allotment is made to promoters/public such that it is in excess of the threshold limits (5% or 25%) of the SEBI (Substantial Acquisition of Shares and Takeovers Regulations), 2011 (SAST), the provisions of SAST Regulation shall not be applicable for the proposed acquisition subject to the overall holding of the promoter group not exceeding 75% of the paid up capital of the company.
The ELCs which fail to list on the nationwide stock exchanges under the aforesaid mechanism shall provide exit to its investors as per para 4.d of the circular.
In order to protect the interest of all shareholders of such ELCs, an exit mechanism to investors of such ELCs shall be as prescribed in Annexure-A to this circular. Accordingly, all ELCs shall be required to ensure compliance with the procedure for exit.
Designated stock exchanges shall further ensure that the promoters have made adequate efforts in terms of the above provisions for providing exit to their shareholders before removing ELCs from the DB.
The designated stock exchange shall display the list of companies willing to provide exit to their investors on their website on a monthly basis.
The ELCs on the DB which are yet to indicate their intention to comply with listing or to provide exit shall submit their plan of action to designated stock exchanges latest within three months from the date of this circular to the satisfaction of the designated stock exchanges, failing which the designated exchange shall recommend action as specified under Para 6 of this circular.
The designated stock exchanges shall review the plan of action and ensure completion of the process within 6 months.
Any promoter or director whose company is on the DB and has failed to demonstrate adequacy of efforts for providing exit to their shareholders in conformity with the exit mechanism as provided in this circular shall be liable for the following actions : The company, its directors, its promoters and the companies which are promoted by any of them shall not directly or indirectly associate with the securities market or seek listing for any equity shares for a period of ten years from the exit from the DB. Freezing of shares of the promoters/directors. List of the directors, promoters etc. of all non-compliant companies as available from the details of the company with nationwide stock exchanges shall be disseminated on SEBI website and shall also be shared with other respective agencies. Attachment of bank accounts/other assets of promoters/directors of the companies so as to compensate the investors.
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Source: SecMarx — Exclusively listed companies of De-recognized/Non-operational/exited Stock Exchanges placed in the Dissemination Board (DB). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.