Bombay: On Friday, the exchanges decided to avoid losses for investors in companies facing insolvency resolution with a series of instructions on timely disclosure and compliance, following the recent fiasco. of Dewan Housing Finance Corp. Ltd (DHFL) where small investors lost all of their investments.
In a joint statement, the National Stock Exchange and the BSE said that if an approved resolution plan wipes out share capital, they will suspend trading in the shares as soon as the bankruptcy court issues its oral order. The company in question must communicate the development to the exchange within 30 minutes, which will confirm it with the resolution professional (RP) and suspend the stock.
“In cases where the resolution plan provides that the value of listed securities is considered zero and that the company must be delisted or when the entire share capital is reduced, canceled or extinguished without any payment to existing shareholders, the exchanges in coordination with each other, based on the intimation of the company’s oral order and PR confirming the aforementioned provision in the resolution plan, will immediately suspend the activities of the company, ”the statement said.
The rules follow the delisting of DHFL, whose shares had skyrocketed by the end of the resolution process. During the March quarter, retail investors held 42.19% in DHFL, up sharply from 21.55% in March 2019 and 38.67% in March 2020. Mint announced on June 18 that some retail investors DHFL planned to take the national company law to the Supreme Court. Tribunal (NCLT) for authorizing the expungement under the resolution. Investors plan to accuse NCLT and the Securities and Exchange Board of India (Sebi) of failing to properly notify them of the impending delisting, which is part of the Piramal Group’s approved resolution plan.
Without specifying any cases, the exchanges have stated in the recent past that they have encountered cases where the approved resolution plan allowed for delisting or delisting, cancellation or extinction of shares without payment / remuneration to existing shareholders. . “However, it is observed that there is a considerable delay between the issuance of the oral order by NCLT and the final written order by NCLT. Companies generally retain information and do not make any timely disclosure to exchanges until they receive a written copy of the order. At this point, the information may be available to a small group and may create asymmetry and confusion of information, “the statement said.
As soon as a company is admitted to the Corporate Insolvency Resolution (CIRP) process, exchanges will identify and label its title in such a way that members and market participants will easily know that the title is in the process of being issued. insolvency. A list of these titles will also be available on the stock exchange websites.
The exchanges will also issue a detailed guidance note to CIRP companies and the RP on compliance and disclosure requirements under the Sebi LODR (Listing Obligations and Disclosure Requirements) Regulation, 2015, which will be uploaded to the website of the scholarship, and an email will be sent. to all companies that are under CIRP, informing them of the guidance note.
The PR must comply with Sebi LODR regulations and disclose the approval of the resolution plan whether or not the order is spoken on an immediate basis and no later than 30 minutes.
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