Dissemination board: Liquidity at all costs!

The Securities and Exchange Board of India (SEBI) in 2008 issued guidelines for regional stock exchanges (RSEs) whose recognition it withdraws or refuses, and RSEs that seek to surrender their recognition. In all such cases, SEBI passes an appropriate order containing conditions, one of them being that companies which are exclusively listed on de-recognized exchanges have to either seek listing on other stock exchanges or provide an exit option to shareholders as per SEBI’s delisting guidelines and regulations after obtaining shareholder approval for the option, within a time frame specified by SEBI, failing which the companies stand delisted through operation of law.

By a circular dated 30 May 2012, SEBI modified the process for stock exchanges seeking voluntary surrender of recognition. Under the revised guidelines, if the stock exchange was not able to maintain the prescribed turnover or did not apply for voluntary surrender of recognition and exit within two years from the date of the circular, SEBI would proceed with compulsory de-recognition and exit of the exchange. SEBI further directed that companies which were exclusively listed on de-recognized exchanges and which failed to obtain listing on another stock exchange would cease to be listed companies and would be moved to the dissemination board (DB) by the exiting stock exchange.

Therefore, in the interest of investors of exclusively listed companies, stock exchanges with nationwide trading terminals (NTTs), such as the BSE, National Stock Exchange and MCX-SX, have set up a DB mechanism.

Suhail Nathani is a partner and Yogesh Chande is an associate partner at Economic Laws Practice. This article is intended for informational purposes and does not constitute a legal opinion or advice.