Mumbai: In a major clean-up exercise, topexchange BSE has proposed delisting more than 1,000 companies from its platform as trading in their shares have remained suspended for more than seven years for various penal reasons.
A proposal in this regard has been set by Asia's oldest bourse, which completed its 140 years of operations, to the capital markets regulator Sebi wherein BSE has stated that the shares of these companies can be suspended after giving their shareholders sufficient opportunity to exit. Sources said the regulator is fundamentally in favour of delisting those companies who have not shown any interest in getting their suspension revoked by complying with the listing agreement requirements, but it wants to ensure that the interest of shareholders' are also safeguarded. Some investor associations are believed to have opposed the proposal on the grounds that such a large-scale delisting can send wrong signals, but the companies themselves have not come forward to take necessary steps for trading resumption.
There are also companies whose promoters might have vanished after duping the investors, while there are others who do not want to pay the penalties to revoke the suspension. As per Sebi regulations, a stock exchange can initiate the process for compulsory delisting of a company if it has remained suspended for over six months and it has not taken any step to get the suspension revoked. Before any such delisting, the exchange is required to give a final opportunity to the concerned company, while the shareholders need to be informed through public notices about any such step so that they get an exit opportunity.
There are more than 5,700 listed companies on BSE, making it the world's largest exchange on this front. However, it has suspended trading in 1,449 companies, as per the latest information available on its website. In its communication to Sebi, BSE has also given an 'aging analysis' of the companies suspended for penal reasons. Nearly 150 companies have been suspended for less than two years, 70 others have remained suspended for 3-6 years. However, more than 1,000 companies have remained suspended for a period of seven years or more.
To deal with this situation, BSE has proposed that a final notice be issued to the companies suspended for seven years or more to complete the formalities for revocation of their suspension within three months. A follow-up letter has also been suggested to provide a further period of one month for the compliance. In case of the companies failing to respond, BSE has said that the exchange might proceed with the compulsory delisting process from the main board by giving the necessary notices to the market and issuing public notices in newspapers for the benefit of investors and other market entities. Subsequently, the delisted companies can be transferred from the Main Board to the Dissemination Board to help the investors get an exit route.
In such cases, the existing shareholders would be given an opportunity to sell their shares back to the company. BSE has said that the proposed steps would encourage the companies to complete their compliance requirements and resume trading, while benefiting the shareholders. Also, transfer of non-compliant companies from Main Board would help the investors get an exit route.
