DE-LISTING OF COMPANIES MAY RESULT IN ESCAPE FROM THE SYSTEM OF STOCK EXCHANGES
What is The Meaning of Delisting of Companies?
Delisting means permanent removal of securities of listed companies from the stock exchange and no more trading can be done in such securities by the traders.
procedure for Delisting of companies
Delisting of securities can be only be done by the stock exchange such as BSE or NSE.
1- A panel constituted by the Recognised stock exchange shall take the decision regarding the delisting of the company by the exchange.
2- A public notice regarding the delisting is published in Two newspapers one in English and the other one in the regional language where the stock exchange is being situated.
3- A 15 Days time is given to all concerned people if any shareholder is not satisfied then they can represent their concerning matter with the exchange
4- After the given time orders are passed by the recognized stock exchange to delist the companies from the exchange.
5-After Delisting the company. public notice is published in newspapers and also the same is being circulated through the website of the stock exchange.
6- Independent valuers are appointed for the valuation of the delisted shares.
7- once the fair value of the shares is determined by the independent valuers, The promoters acquire the shares at the determined prices decided by the valuers.
8- The promoters or the directors of the company are barred from listing the shares for a period of 10 years from the date of delisting of the company.
A Lot of companies listed with the Bombay stock exchange were found of neglecting compliance under the companies act 2013 and stock exchanges. due to such negligence by companies, they have to suffer suspension from their operations.
In view of such a situation, The stock exchange has to send show causes notices to such companies to their last known addresses regarding the compliance of various rules and regulations but when the exchange receives no response then ultimately The exchange delists the companies from the stock exchange.
This comes as an undesirable situation as the whole process takes a lot of time and by the time delisting happens Investors are unaware of the situation and get cheated and their investment in the companies remains blocked.
The securities exchange board of India(SEBI) is responsible for regulating trading activities in the stock exchange but it’s not been able to solve investors’ grievances regarding manipulation of their shares by the defaulting companies.
There are situations where blessing and disguised happens. In a case where a company got delisted by the Bombay stock exchange due to lack of compliance again got listed on the exchange after complying with all rules and regulations and after adjustment of dues. suddenly the price of the stock rigged up and the investors who were hunged up with the company got benefited drastically.
In India, only the middle class and lower middle class suffers, and why I am saying this is because when this class takes the loan for establishing or expanding their business or for education or home other personal types of loans then there is a lot of policies governing such loans regarding repayment of the Interest and the principal amount and they are always burdened with the EMI S . and if they are not able to pay EMI s then they are being harassed by the lender for even small amount of money and under such few of them commit suicide.
Now let’s take another example where a lot of companies list their entities in the stock exchange and after raising funds from the public vanish from the market as a horn from donkeys head. this results in a lot of loss for the investors who invested their money in trusting the companies prospectus. These kinds of fraudulent activities by the companies resulted in a sense of lack of confidence in the minds of the new investor to risk their hard-earned money by investing in these kinds of companies.
This issue was taken by Virendra Jain of Midas Touch in 1990.who filed a PIL against such companies in ALLABADH HIGH COURT. The court ordered the central govt to constitute a committee named coordination monitoring committee (CMC) to look into the matters of such vanishing companies and tracing them and attaching their properties and compelling them to clear their dues by paying the reluctant Investor their money.
later JPC was constituted and under JPC a committee along CMC was constituted .consisting of chairman of SEBI, Members of RBI, members of cms were the core members in this operation to traces these vanished companies them accountable for their defaults.
After so many efforts around 238 companies were Identified between 1992 and 1999 who were involved In such loots but the sad part was that nothing was recovered from those companies.
conclusion
There is a need that our regulators like SEBI need to keep a strict check over this kind of company to ensure transparency in the trading of securities in the stock exchange. and also need to figure out a path to penalize such companies before they ran away from the system.