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Stock exchanges will impose a fine of up to Rs 10,000 on companies for each day of non- compliance with the minimum public shareholding requirements, according to a Sebi circular.
Names of the non-compliant entities would also be disclosed on the websites of the exchanges concerned.
Under the Sebi norms, listed entities are required to have a Minimum Public Shareholding (MPS) of 25 per cent.
Listing out the procedures to be followed by stock exchanges, Sebi in a circular today said that in case they find companies are not in compliance with MPS requirements, then notices should be issued to them within 15 days.
In cases where the listed entity has failed to meet the MPS norms for more than a year, the bourse would slap a fine of "Rs 10,000 per day of non-compliance" and the penalty would continue to be imposed till the date of compliance.
For other non-compliant entities, the fine would be Rs 5,000 per day.
"The amount of fine realised... Shall be credited to the 'Investor Protection Fund' of the concerned recognised stock exchange," the circular said.
Besides, the stock exchange would intimate depositories to freeze the entire shareholding of the promoter and promoter group in those non-compliant entities till the date of compliance.
"The promoters, promoter group and directors of the listed entity shall not hold any new position as director in any other listed entity till the date of compliance by such entity.
"An intimation to this effect shall be provided to the listed entity by the recognised stock exchange and the listed entity shall subsequently intimate the same to its promoters, promoter group and directors," the circular said.
Apart from penalty, the exchanges can also consider compulsory delisting of the non-compliant entity.
Periodically, the bourse would disclose on their website "names of non-compliant entities, amount of fine imposed, freezing of shares held by the promoters and promoter group and other actions taken against the entity".
Status of compliance, including details regarding fine paid by the entity, would also be disclosed, as per the circular.
Issuing the circular, Sebi said it is to maintain consistency and uniformity of approach in the enforcement of MPS norms and the procedures have to be followed by the recognised stock exchanges as well as depositories.
Advisory firm Corporate Professionals said issuance of standard operating procedures and mandating penalties for non compliance of MPS norms would surely act as a deterrent for the violators.
"For imposition of any penalties/restrictions, a distinction may be carved for routine defaulters and for lapses that may happen" because of certain corporate actions, Anjali Aggarwal, Partner and Head (Capital Market and Stock Exchange Services) at Corporate Professionals said in a statement.