2,800 companies vanish from bourses in last ten years
Compulsory delisting claims some 800 BSE-listed firms
You may not be surprised by the fact that 786 companies have got
listed in the Bombay Stock Exchange in the last ten years. But do you
know that in the same period, 2,800 companies have disappeared from
the bourses?
You can neither buy nor sell shares of any of these. Stocks that were
investor favourites in the late 1990s — DSQ Software and Pentafour
Products — are no longer traded because trading has been suspended by
the exchanges. Pyramid Saimira Theatre — a company that saw its
initial public offer in 2006 getting oversubscribed 15 times— too
figures in that list.
If you can't find any of your yesteryear favourites on the bourses
today, there are two reasons for it.
How they vanished?
One, the stock exchanges have suspended trading in it. Two, the
company has been delisted, either voluntarily after offering an exit
to investors, or compulsorily, again by the stock exchanges.
Of the 1,600-odd companies that de-listed from the Bombay Stock
Exchange, 53 per cent was because of compulsory delisting. Femnor
Minerals, Lloyd Cements, Western Paques and CRB Capital Markets are
some of the well known names of the early 1990s have since been
delisted.
SEBI specifies a set of reasons why a stock may be compulsorily
delisted: Loss-making companies with negative net-worth, securities
suspended from trading for more than six months, infrequent trading in
the preceding three years, conviction of company/promoters/directors
for violation of the SEBI Act, addresses of company/promoter/directors
not known, and shareholding below minimum level according to listing
agreement.
Much of the compulsory delisting happened in 2004, when the BSE drew
up a list of companies that were already suspended for more than three
years and chose to delist them.
The number of suspended companies in the list was 1,200. Trading
suspension orders from exchanges generally follow non-compliance with
listing agreements and non-submission of the corporate governance
report. While DSQ Software, Pentafour Products and Pyramid Saimira
Theatre were suspended due to non-compliance with provisions of the
listing agreement, Pentagon Global Solutions was suspended for non
payment of listing fees.
In the case of compulsory delisting, promoters are bound to purchase
the outstanding securities from the holders if they wish to sell the
stock at a fair price determined in accordance with SEBI regulations.
What is the recourse?
Before a company gets compulsorily delisted, the exchange sends a show-
cause notice to the company. The company can defend its case. If the
company manages to revoke suspension, investors will have an exit
opportunity as trading resumes. If not, they have to wait until they
receive the delisting order from the exchange to exit the stock, when
the promoter has to make an offer to buy it.
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