Panel suggests easing listing obligations, disclosure rules for firms facing insolvency
MUMBAI: A panel set up to ease listing, compliance and disclosure regulations for companies in the process of insolvency resolution has submitted its recommendations to market regulator Securities and Exchange Board of India (Sebi), two people with direct knowledge of the matter said.
The panel comprising members from Sebi and the Insolvency and Bankruptcy Board of India (IBBI) was formed considering that 11 of the 12 large stressed accounts currently under insolvency proceedings, including Bhushan Steel Ltd, Alok Industries Ltd, Amtek Auto Ltd, Lanco Infratech Ltd, Electrosteel Steels Ltd and Era Infra Engineering, are listed.
“The committee was formed to ease listing, compliance and processes for companies that are currently undergoing insolvency proceedings. Major recommendations include easing the listing obligation and disclosure requirements (LODR), and delisting and relisting if these are a part of the resolution plan,” said one of the two persons cited above, who declined to be named.
“Recommendations were submitted to the market regulator earlier this week for amending Sebi regulations. These recommendations could be considered in a meeting of Sebi’s board next month (December),” said the second person mentioned above, also on condition of anonymity.
This is the second time this year that Sebi is considering changes in regulations to ease the resolution of stressed assets in banks’ balance sheets.
On June 21, the Sebi board had exempted buyers of shares in dis- tressed firms from the requirement of making an open offer even if the purchase triggers such an event under the takeover code.
An email sent to Sebi on Thursday regarding the new proposals was not answered immediately.
“A pragmatic way of dealing with such companies will be to facilitate their revival and therefore various compliances that are otherwise required to be done by a listed company on a continuous basis under the listing regulations should be relaxed for companies referred to the insolvency board,” said Yogesh Chande, partner, Shardul Amarchand Mangaldas, a law firm.
Once a firm is admitted for insolvency by the National Company Law Tribunal, its board is no longer in control and the decisions to keep the firm as a going concern is taken by the Insolvency Resolution Professional (IRP).
“There was a proposal from the IRPS to suspend the compliance requirements for the insolvent companies. But the commit- tee felt that certain minimum LODR requirements would need to be met by the IRP. The IRP would be assisted by exchanges in generating alerts for the required disclosures,” said the second person cited above.
The panel has recommended that trading in a company’s shares should not be suspended, another demand from lawyers and IRPS, the person added.
The other key recommendation is to ease the delisting regulations. Under Sebi regulations if an acquisition is done with an intention to delist, the buyer has to first make an open offer.
If, after the open offer, its shareholding crosses 90% (the delisting threshold), it has to make another offer to acquire the majority of the remaining minority shareholding. If that doesn’t happen, then the buyer has to scale back its ownership to 75%.
The erstwhile Sick Industrial Companies Act, or SICA, which was repealed on December 1, 2016, had a specific provision for delisting sick companies.