Chamber of Prakash K. Pandya

SEBI Circular to stock exchanges for action to be taken on non-compliance of conditions of listing agreement

[Circular no. CIR/MRD/ DSA / 31 /2013 dated September 30, 2013. Copy may be downloaded from here.]

SEBI has asked stock exchanges to streamline the processes and procedures with regard to actions for non compliance of certain conditions of listing agreement, which have so far been considered as grounds for suspension of trading by the stock exchanges.

Briefly, the said SEBI circular directs stock exchanges as under:

  1. While the relevant disclosures are not made, such promoters/promoter group should not exit from the listed entity.

2. During the process of the suspension of the trading / revocation of trading, stock exchanges shall intimate to the depositories (NSDL / DSL), the details of the non-compliant entity and its promoter /promoter group.

  1. On receipt of such intimation, the depositories shall freeze or unfreeze, as the case may be, the entire shareholdings of the promoter and promoter group in such entity.

  2. Every stock exchanges shall put in place the system to monitor and review the compliance of listing conditions by the listed entities.

  3. The stock exchanges shall disclose on its website the action/s taken against the listed entities for non-compliance/s of the listing conditions; including the details of respective requirement, amount of fine, period of suspension, freezing of shares, etc.

  4. The stock exchange shall impose fine on listed entities for noncompliance with certain clauses of the listing agreement due to non-submission /delay in submission of reports/documents to recognised stock exchange as under:

For non-compliance of – Fine payable for 1st
non-compliance		 Fine Payable each
subsequent and
consecutive noncompliance
Non-submission of the Annual
Report within period
prescribed under Listing agreement Clause 31.		 If non-compliance
continues for more than 5
days, Rs.1,000 per day till
the date of compliance		 Rs.2,000 per day till the
date of compliance.
Non submission of the
shareholding pattern within
period prescribed under Listing agreement Clause 35.		 Rs.1,000 per day till the
date of compliance
and
If non-compliance
continues for more than
15 days additional fine of
0.1 % of paid up capital*
of the entity or Rs.1 crore,
whichever is less.		 Rs.2,000 per day till the
date of compliance
and
If non-compliance
continues for more than
15 days additional fine of
0.1 % of paid up capital*
of the entity or Rs.1 crore,
whichever is less.
Non submission of the
financial results within period
prescribed under Listing agreement Clause 41		 Rs.5,000 per day till the
date of compliance
and
If non-compliance
continues for more than
15 days additional fine of
0.1 % of Paid Up capital*
of the entity or Rs.1crore,
whichever is less.		 Rs.10,000 per day till the
date of compliance
and
If non-compliance
continues for more than
15 days additional fine of
0.1 % of Paid Up capital*
of the entity or Rs.1 crore,
whichever is less.
Non submission of the
Corporate governance
compliance report within
period provided under Listing agreement Clause 49		 Rs.1,000 per day till the
date of compliance.		 Rs.2,000 per day till the
date of compliance.

*Paid up capital as on first day of the financial year in which the non compliance occurs.

Every stock exchange shall review the compliance status of the listed entities within 45 days from the end of the each quarter (for clauses at 35 and 49) and within 15 days from the due date of submissions under the clauses 31 and 41 and issue notices to the non-compliant listed entities to ensure compliance and pay fine as per this circular within 15 days from the date of the notice.

If any non-compliant listed entity fails to pay the fine despite receipt of the notice as stated above, the stock exchange may initiate appropriate enforcement action including prosecution.

Creation of a new category “Z” for trading
1. The stock exchange shall create a new category “Z” for trading of shares of such non-compliant listed entities wherein trades shall take place in ‘trade for trade’ basis.

  1. The stock exchange shall give 7 days prior public notice to investors before moving the share of non-compliant entity to “Z” category or vice versa.

  2. If a listed entity commits two or more consecutive defaults in compliance of the aforesaid clauses of the listing agreement within 15 days from date of the notice issued as aforesaid, the concerned stock exchange shall, in addition to imposing fine as specified above, move the scrip of the listed entities to “Z” category.

  3. The stock exchange shall move back the scrip of the listed entity to the normal trading category, if it complies with respective clauses of the listing agreement and completely pays fine prescribed as above.

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Chamber of Prakash K. Pandya

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