Friday, September 9, 2016

SEBI tightens screw on promoters for enforcement of exit option in case of compulsory delisting

Under the existing delisting norms a Recognized Stock Exchange has power to delist the equity shares of listed company on certain grounds. The whole time directors and promoters of Company (which has been compulsory delisted) are debarred from accessing the securities markets for a period of 10 years from the date of compulsory delisting. 

The existing delisting Regulations provides that pursuant to compulsory delisting of a company, the promoter shall acquire delisted equity shares from the public shareholders, subject to their option of retaining their equity shares, by paying them the fair value. 

In addition to the existing delisting Regulations, SEBI has imposed new restrictions on promoters and whole time directors of company to ensure effective enforcement of exit option to the public shareholders in case of compulsory delisting of company. Accordingly, SEBI hereby directs that in case of such companies whose fair value is positive:

a) such a company and the depositories shall not effect transfer of any of the equity shares and corporate benefits (like dividend, rights, bonus shares, split, etc.) shall be frozen, for all the equity shares, held by the promoters/ promoter group till the promoters of such company provide an exit option to the public shareholders in compliance with delisting Regulations;

b) the promoters and whole-time directors of the compulsorily delisted company shall also not be eligible to become directors of any listed company till the exit option is provided.