Promoters of a company compulsorily delisted from the stock exchanges will soon find their own shareholdings frozen, according to the diktats of a new circular from securities markets regulator SEBI. From last year, SEBI has been tightening the screws on errant promoters in whose companies, for different reasons, trading in their shares on recognised stock exchanges has been suspended.
For instance, BSE has over 400 companies in whose shares trading has been suspended. Earlier, SEBI had empowered stock exchanges to compulsorily delist companies that violate the terms of their listing agreements or in which trading has been suspended for long periods. Promoters of such companies are barred from accessing the capital markets, directly or indirectly, for 10 years from the date of the company’s compulsory delisting. They are also not allowed to sell or pledge their shares until they provide a viable exit option to public shareholders, including buying them from the shareholders at a fair value.
In the latest circular, SEBI has ruled that if a non-compliant listed entity fails to pay the fine levied by the stock exchange, the exchange can, upon expiry of the period indicated in the notice issued by it, freeze holdings in other securities in the demat accounts of the promoter and promoter group to the extent of liability which shall be calculated on a quarterly basis. If the promoter does not pay the penalty for two consecutive periods, then the depository can freeze holdings in the demat accounts of the promoter and the promoter group.