For non-compliance of listing conditions, exchanges have been suspending the trading of the shares of the listed companies, which affected the interest of non-promoters much more than the promoters as the exit route used to be closed for such investors after suspension of trading. Therefore, it is now decided that the exchange in case of non compliant companies would resort to several other measures such as imposition of fines, freezing of shares of the promoter and promoter group, transferring the trading in the shares of the company to separate category, etc., before suspending the shares of the company.
Accordingly, to maintain consistency and uniformity of approach by the stock exchanges for taking action against the listed entities for non-compliance with certain important listing conditions, such as Clause 35, Clause 41, Clause 49 of the listing agreement, SEBI vide Circular dated September 30, 2013 has prescribed Standard Operating Procedure (SOP) for suspension and revocation of suspension of trading in the shares. The salient features of the circular are as follows:
- Imposition of fines (on per day basis) on the company for non compliance and delay in compliance with continuous Listing condition such as submission of shareholding pattern, financial results, corporate governance report, etc.
- In case of non compliance for two consecutive quarters, moving the shares of non-compliant company to “Z” Category, where the trades would settled on Trade for Trade basis.
- In case non-compliance continues, freezing the shares of the promoter and promoter group. This would be carried out before suspension of the trading of shares of the company.
- In order to provide exit window for the non-promoters, after 15 days of suspension, trading in the shares of non-compliant entity will be available on the “Trade for Trade” basis, on the first trading day of every week for 6 months.