The Hindu Business Line : Ease delisting norms for smaller companies

A SECTION of corporate and legal experts have underscored the need to lessen the cost burden of small firmsthat are looking to delist their shares from stock exchanges .

The present exit norms prove heavy on the small companies' pocket due to high compliance cost, which includes other expenditures involved in following the process, experts said.

"The regulators need to reduce the cost of compliance so that the smaller companies proposing to delist can exit without any financial burden," Mr Pavan Kumar Vijay, Managing Director of Corporate Professionals (India) Pvt Ltd, a multi-disciplinary firm providing expertise in corporate law, finance and capital market, said.

The Securities & Exchange Board of India has issued the SEBI (Delisting of Securities) Guidelines, 2003, which provides that companies can delist from stock exchanges only by offering an exit route to remaining shareholders through a reverse book-building process. This mechanism would leave the option of pricing to the investors and would be totally transparent to the market. Further, as per the guidelines, the promoter shall offer a floor price on the basis of average of previous 26-weeks' high and low prices to investors. These guidelines sought to protect the interests of the small investors in the wake of any company delisting from the exchanges.

Of the 9,000-odd companies listed, almost 4,000 companies with a paid-up capital in the range of Rs 25 lakh to Rs 5 crore could make use of the exit route, Mr Vijay said . For the purpose of delisting, checklists have been set by the Bombay Stock Exchange and National Stock Exchange.

Giving an example of KPL Industries, which is in the process of being delisted from BSE, Mr Vijay said that the company needed to acquire a very small number shares.

The compliance cost in NSE was close to Rs 7 lakh for using the trading platform for delisting software. Besides, appointing 30 bidding centresmeant additional cost. The same in BSE would cost the company Rs 1 lakh.

Therefore, there is a need to reduce the cost of delisting and other expenditure involved in the process so that the smaller firms find the entire exit process hassle-free. In fact, companies with minimum number of shareholders an

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page