Securities and Exchange Board of India, SEBI has directed stock market to initiate action against 331 suspected shell companies listed in the share markets.
These scripts will not be available for trading from this month. The regulator’s directive came after the corporate affairs ministry shared a list of 331 listed companies that are suspected to be shell entities and could even face “compulsory delisting”.
In a communication sent to the BSE, the NSE and the Metropolitan Stock Exchange, the markets regulator has asked them to keep the 331 shares in stage four of the Graded Surveillance Mechanism (GSM) with immediate effect. Securities coming in stage four are permitted to trade only once a month under trade to trade category.
As part of efforts to curb the black money menace, the corporate affairs ministry has already cancelled the registration of more than 1.62 lakh companies that have not been carrying out business activities for long.
According to a communication by the Bombay Stock Exchange, under the stage VI of GSM framework, trading in these identified securities shall be permitted only once a month under trade-to-trade category.
“Further, any upward price movement in these securities shall not be permitted beyond the last traded price and additional surveillance deposit of 200 % of trade value shall be collected form the Buyers which shall be retained with Exchanges for a period for five months,” the communication said.
Apart from this, the shares held by the promoters and directors in such listed companies shall be allowed to be transferred by depositories only after verification by concerned exchanges. “…They shall not be allowed to transact in the security except to buy securities in the said listed company until verification of credential / fundamental by Exchanges is completed,” it said.
The bourses shall initiate a process of verifying the credentials / fundamentals of such companies and appoint an independent auditor to conduct audit of them. The may even conduct a forensic audit of these companies to verify its credentials/fundamentals.
The exchanges will go for compulsory delisting of companies that could not be verified. “…The said company shall not be permitted to deal in any security on exchange platform and its holding in any depository account shall be frozen till such delisting process is completed,” the BSE said.