Another Jolt for Suspended Companies
To safeguard the interest of public shareholders at large and to deter the Promoters/Directors of the Suspended Companies who are generally having access to undisclosed information and can use it directly or indirectly to their advantage, the Capital Market Regulator, SEBI vide its order dated 20th July 2015 has prohibited the suspended companies from raising funds from public.
- A gist and summary of the aforesaid order is outlined as follows:
- SEBI vide its said order has debarred suspended companies as well as its holding/subsidiary, its promoters and directors from issuing prospectus, any offer document or advertisement soliciting money from public for issuance of securities, directly or indirectly till the suspension of the Company gets revoked by concerned stock exchange or securities of such company are delisted, whichever is earlier.
- SEBI further ordered that such suspended companies and depositories shall not effect transfer of shares held by promoters and directors, by way of sale, pledge, etc. till three months after the date of revocation of suspension by stock exchange or till their shares are delisted, whichever is earlier.
CP’s Viewpoint:
SEBI’s order would surely prove to be fatal not only for Promoters/Directors of that Suspended Company but for the entire Promoter Group Entities as suspension of one listed entity in a group will result in debarment of the entire promoter group from accessing the capital market for raising funds from the public.
To avoid severe repercussions of the SEBI’s Order, it is advisable for the Companies to regularly comply with the requirements of Listing Agreement and for the suspended Companies to approach the Bourse and have their suspensions revoked.
For revocation of suspension, the Stock Exchanges generally ask for completion of pending Listing Agreement Compliances, including payment of Reinstatement Fee/Penalties. Longer the non-compliance period, more would be the amount of penalty & fee and furthermore higher the restrictions.