The firms to be included in the list of 'vanishing' firms, and their directors and promoters to be debarred from accessing the capital market, says Sebi
Mumbai: The Securities and Exchange Board of India (Sebi) on Friday said it has initiated action against at least 1,088 firms on stock exchanges’ dissemination boards that have not been able to comply with listing norms within the given deadline.
Sebi said that since these firms were not traceable, they would be included in the list of “vanishing" firms, and the regulator will debar their directors and promoters from accessing the capital market.
Additionally, the registrar of companies and the ministry of corporate affairs will take action against these firms by initiating legal proceedings against their promoters and directors, Sebi said in a release.
Following the closure of 18 regional exchanges since 2014, around 3,000 companies were moved to the dissemination boards of nationwide stock exchanges such as BSE and the National Stock Exchange.
In January 2015, Sebi had said that firms listed exclusively on closed regional stock exchanges would be given 18 months to get listed on nationwide bourses and could, in the interim, be moved to their dissemination boards.
In October 2016, Sebi had allowed firms on the dissemination boards to raise capital to become eligible to list again.
Every firm on the dissemination boards was directed to submit a plan of action to indicate its intention to either comply with listing norms or provide an exit to shareholders within three months.
Sebi had warned that if the promoter or director of such a firm did not demonstrate sufficient effort to provide an exit to shareholders, the company, its directors and its promoters, as well as other companies promoted by any of them, would be debarred from the market for 10 years.
Further, the shares of the promoters/directors of such non-compliant firms were to be frozen and their bank accounts/other assets were to be attached so as to compensate investors.
The time to submit a plan of action was subsequently extended until 30 June 2017.
“Sebi has taken the right step... But while debarring the directors of these companies, Sebi should exercise some caution because as per the last information available with RoC (registrar of companies), there could be many who must have already resigned before the company went to the dissemination board," said Sudhir Bassi, partner at law firm Khaitan & Co.