Markets regulator SEBI today decided to put in place a new mechanism to check non-compliance of listing conditions, wherein exchanges will have powers to freeze promoter shareholding.
The revised framework is expected to promote a better compliance culture apart from putting in place an appropriate system for effective enforcement of continuous compliance of requirements by listed firms, and their promoter or promoter group, SEBI said in a statement after its board meeting.
The new framework will be more comprehensive and cover a wide gamut of listing regulations such as the requirements pertaining to composition of a listed company’s board and its committees, submission of corporate governance compliance report, financial and voting results, among others.
Non-compliance of these regulations will lead to imposition of fines by stock exchanges. Further, if non-compliance persists, it will lead to suspension, SEBI said.
It also empowers the stock exchanges to freeze the shareholding of the promoter and promoter group in such non-compliant entity as well as their shareholding in other securities.SEBI Statement
Grounds for suspension from listing include failure to comply with the norms on board composition, including appointment of women directors, and failure to constitute audit committee for two consecutive quarters; failure to submit information on the reconciliation of shares and capital audit report for two consecutive quarters.
Under the proposal, SEBI may ask stock exchanges to impose penalties ranging Rs 1,000-5,000 per day on violation of certain clauses of the listing agreement like non-submission or delay in submission of documents related to the company’s financial and shareholding details and failure to appoint a woman director on the board.
Besides, the exchanges can levy a fine of Rs 10,000 per instance for delay in furnishing prior intimation about the company’s board meeting and delay in non-disclosure of record date or dividend declaration.