The Hindu Business Line : CSE plans major changes in capital structure

Winds of change
To amend key clause of memorandum of association
Wants elected shareholders to act as representatives
Some members seek participation of State Govt

Kolkata May 17 In what will be a crucial step towards demutualisation of the country's second-oldest bourse, the Calcutta Stock Exchange (CSE) has proposed to bring in major changes in its capital structure.

The exchange, which will hold an EGM of members later this month, has proposed that the equity shares, each with face value of Rs 250, be sub-divided so that each share will have face value of Re 1. The record date for the sub-division will be fixed later.

The CSE will amend a key clause of its memorandum of association pertaining to authorised capital. The latter will be Rs 10 lakh, divided into 10 lakh shares of Re 1 each.

The exchange has also proposed to issue new shares representing the sub-divided shares with new distinctive numbers.

Further, it has proposed that two shareholders be elected to act as representatives in an empowered committee for completion of the demutualisation process.

CSE's demutualisation scheme requires the exchange to divest a minimum of 51 per cent of its shares to the public (i.e., entities other than shareholders with trading rights).

Incidentally, the Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulations, 2006 has laid down the manner of increasing the public shareholding.

Currently, the CSE can only avail itself of the option of fresh issue of equity shares on private placement basis.

In order to broadbase the options of divestment as permitted by SEBI regulations, it is proposed to reduce the face value of the shares by sub-dividing it, the CSE stated in an explanatory note.

The CSE, which had earlier engaged PricewaterhouseCoopers as consultants, had also set up an empowered committee, which met in March this year.

It was noted that to enable the "shareholders' representatives" to have proper status and authority, they should be elected in a general meeting of shareholders and be given appropriate authorisation to act on their behalf.

Keeping in view the 25 per cent cap on the representation of trading members (as envisaged in the demutualisation scheme), shareholders' approval for appointment of two representatives will be sought.

Four members have filed nomination papers for inclusion in the empowered committee.

WBIDC participation

A section of the CSE members has underlined the importance of participation of the State Government in the demutualisation process.

The Government may render support to the exchange by directing an institution such as the West Bengal Industrial Development Corporation (WBIDC) to act as a nodal agency by subscribing to a small fraction of the shares and encourage others, including locally headquartered banks, to take similar stakes.

The idea is to bring in a set of financially strong investors who will be willing to bank on the proposed resurrection of the century-old exchange, members said.