Companies whose shares are suspended for trading on stock exchanges have been forbidden to raise further capital till they are de-listed or their suspension revoked, whichever is earlier.
The SEBI prohibitory order is also applicable to the suspended company’s holding company, subsidiary, promoters, and directors.
Stock exchanges suspend trading in a company’s shares when a company does not comply with listing requirements.
The order seeks to prevent the use of undisclosed information during the suspension period by promoters or directors to dispose of their shareholding in the company, leaving gullible investors in the lurch.
SEBI observed that non-promoter shareholders of such companies remain at a disadvantage on account of information asymmetry.
However, the strict enforcement of this restriction may be relaxed in the interest of trade and securities in cases of companies other than those suspended on recommendation from the concerned stock exchange wherein such promoters are also promoters/directors, SEBI said.
SEBI also prohibited the suspended company and the depositories from transferring shares by way of sale, pledge and the like by the company’s promoters/promoter group and directors till the earlier of de-listing or three months from the date of revocation of suspension.
Exchanges and depositories have been directed to co-ordinate with each other to ensure compliance. Promoters/directors have the option to file an objection with the exchanges which, in turn, is empowered to remove this restriction on receipt of satisfactory reasons.
This order comes into effect immediately.