SEBI proposes restrictions on Wilful Defaulters from accessing the capital market
SEBI issued a discussion paper on Proposed Amendments to Regulations framed under SEBI Act, 1992. The objective of the paper is to review the Regulations framed under the act with a view to impose restrictions on wilful defaulters from accessing the capital market. The paper has also highlighted that RBI has laid down sufficient safeguards to contain the financial activities of wilful defaulter, by restricting access to further bank finance to such entities; by providing for proactive approach by banks / financial institutions for change in management of the wilfully defaulting borrower unit; by requiring banks / financial institutions to take expeditious and effective steps for removal of person, from the Board of a borrower company, who is a promoter or director on the Board of a company which has been identified as a wilful defaulter.
The term 'wilful default' is defined in the Master Circular issued by the Reserve Bank of India dated July 12, 2012 which broadly covers the following
Assets financed either not been purchased or been sold and proceeds have been misutilized Misrepresentation / falsification of records Disposal / removal of securities without bank's knowledge Fraudulent transactions by the borrower
Keeping in view of the above, following recommendations are made to impose restrictions on wilful defaulters from accessing the capital market:
S.No.
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Recommendation
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1
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No issuer shall make a public issue of equity securities, if the issuer, its promoter, group company or director of the Issuer of such securities, is in the list of the Wilful defaulters, published by the Reserve Bank of India
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2
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No issuer shall make a public issue of the debt securities, if the issuer, its promoter, group company or director of the Issuer of such securities, is in the list of the Wilful defaulters, published by the Reserve Bank of India or it is in default of payment of interest or repayment of principal amount in respect of debt instruments issued by it to the public, if any
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3
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No issuer shall make a public issue of non-convertible redeemable preference shares , if the issuer, its promoter, group company or director of the Issuer of such securities, is in the list of the Wilful defaulters, published by the Reserve Bank of India or it is in default of payment of interest or repayment of principal amount in respect of debt instruments issued by it to the public, if any.
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4
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Existing listed companies / its promoter / group company / director of the Issuer categorized as 'wilful defaulter' may make a rights issue / private placement to qualified institutional buyers, with full disclosures in the offer document.
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5
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Existing listed companies / its promoter / group company / director of the Issuer categorized as 'wilful defaulter' should not be allowed to take control over other listed entity in accordance with SEBI (SAST) Regulations, 2011
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6
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Existing listed companies / its promoter / group company / director of the Issuer categorized as 'wilful defaulter' should be allowed to make counter offer in case of a hostile bid.
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Source: SEBI
In line with the above recommendations, public comments are solicited on the same . Therefore, we request you to kindly send your inputs (if any) latest by 12th January 2015 at surbhi@phdcci.in/ sunitag@phdcci.in
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