To safeguard investors of firms listed on non-operational bourses, market regulator Sebi today allowed such companies to raise capital through preferential allotment route to meet listing requirements.
Besides, the regulator issued a new framework to provide an exit mechanism to investors of such companies. The Securities and Exchange Board of India (Sebi) in April asked exclusively listed companies (ELCs) to get listed on the nation-wide stock exchanges within 18 months.
The new directives come as exclusively listed companies of de-recognised, non-operational or exited stock exchanges have sought time clarifications on raising of further capital and the process of exit of such firms from the dissemination board (DB).
In a circular issued today, Sebi said ELCs on the DB will be required to exercise one of the two options -- either raise capital for listing on nation-wide stock exchanges or exit from the dissemination board. The nation-wide stock exchanges hosting the ELCs on its dissemination board will be referred as designated stock exchanges.
To facilitate listing on nation-wide stock exchanges, the ELCs on the dissemination board will be allowed to raise capital for meeting the listing requirements through preferential allotment route.
In case the allotment is made to promoters/public such that it is in excess of the threshold limits (5 per cent or 25 per cent) of the Sebi SAST (Substantial Acquisition of Shares and Takeovers) Regulations, then provisions of SAST Regulation will not be applicable for the proposed acquisition.
This is subject to condition that the overall holding of the promoter group should not exceed 75 per cent of the paid-up capital of the company. The ELCs which fail to list on the nation-wide stock exchanges under the mechanism would provide exit opportunity to its investors.
The regulator will take action against companies that will continue to be on the dissemination board. “The company, its directors, promoters and the companies which are promoted by any of them shall not directly or indirectly associate with the securities market or seek listing for any shares for 10 years from the exit from the DB,” Sebi said.
It will freeze shares of the promoters and directors and attach bank accounts and other assets of promoters to compensate investors. Spelling out details of the exit mechanism, Sebi said the promoter in consultation with the designated stock exchange will appoint an ‘independent valuer’. In case the fair value determined is positive, the promoter of the company will acquire shares of the firm from public shareholders by paying them value determined by the valuer. The promoter will have complete the entire process within 75 working days.
The public announcement will contain all material information of such exit opportunity to its shareholders disclosing the name and address of the company, including exit price offered by the promoter with justification, and not contain any false or misleading statement.
The announcement will contain a declaration about the liability of the promoter to acquire shares of shareholders who have not offered their shares under the exit offer up to one year from the completion of offer at the same price determined by the valuer.
The exit offer will remain open for a minimum five working days during which the public shareholders will tender their shares. The promoter will open an escrow account in favour of independent valuer/designated stock exchange and deposit therein the total estimated amount of consideration on the basis of exit price and the number of outstanding public shareholders.
The escrow account will consist of either cash deposited with a scheduled commercial bank or a bank guarantee, or a combination of both. The amount in the escrow account will not be released to the promoter unless all the payments made in respect of shares tendered for the aforesaid period of one year. The promoter shall make payment of consideration in 15 working days from the date of completion of offer.
“The promoter shall certify to the satisfaction of designated stock exchange that appropriate procedure has been followed for providing exit to shareholders of such companies. Subsequently, the designated stock exchanges upon satisfaction shall remove the company from the dissemination board,” Sebi said.
The exclusively listed companies that have 100 per cent promoter holding will be removed from the dissemination board on obtaining a compliance certification from any independent professional with regard to the holding of shares of these companies and submit to the designated stock exchanges.
The names of the companies providing exit opportunity to its shareholders and their promoters will be displayed in a separate section on the website of the designated stock exchange.