Sebi may ease takeover rules for stressed companies
, ET Bureau|
Updated: Nov 24, 2017, 09.43 AM IST
MUMBAI: The Securities and Exchange Board of India (Sebi) plans to ease takeover rules to speed up the resolution of insolvency proceedings for stressed companies as local lenders seek to recover about ?9 lakh crore from entities rendered unviable by the mounting debt pile.
The capital markets regulator will likely allow the demerged units of listed companies in insolvency resolution to list on stock exchanges without an initial public offer (IPO), two people with knowledge of the matter told ET. Pricing norms for delisting of companies under insolvency resolution will also be eased.
“A company can be demerged from its listed group as part of any resolution plan. If the demerged entity again wants to be listed as a separate company, the regulator could waive certain compliance requirements as the companies in question are already stressed,” said one of the persons cited above.
Although the current rules allow demerged entities to list directly on stock exchanges without an IPO, insolvency professionals have asked the regulator to spell this out explicitly for companies undergoing insolvency proceedings in its regulations.
Sebi didn’t respond to an emailed query on the matter.
Furthermore, if the resolution is for delisting the company, then all the existing delisting rules would apply.
But pricing norms will be different for such companies. If the shares of the company are infrequently traded, the fair value formula will be applied, said another person.
These suggestions were given by members of the special committee constituted by the Insolvency Bankruptcy Board of India (IBBI) and Sebi. The exercise is aimed at finding ways of complying with capital market regulations while speeding up insolvency proceedings. The changes will follow once a final decision is taken.
The committee comprises insolvency professionals, representatives of stock exchanges, Sebi, IBBI and other stakeholders.
TRADING SUSPENSION
One of the other proposals considered by the committee was suspension of trading in the shares of companies undergoing insolvency proceedings. The proposal, however, is unlikely to be accepted.
“Shares of listed companies undergoing insolvency proceedings will not be suspended from trading,” said an executive familiar with the matter.
Stock exchanges may also be required to facilitate compliance for such companies.
“If such rules are incorporated, it will help fast-pace the insolvency processes within the stipulated period,” said Sandeep Parekh, founder of Finsec Law Advisors. “The IPO relaxation for demerged entity would be an important move as a company already in trouble cannot afford to go through an IPO process. Besides, few would be interested in subscribing to such a company’s shares.”
In August, the market regulator relaxed norms for stake purchases in distressed listed companies by lenders, largely exempting them from making open offers to shareholders.
The capital markets regulator will likely allow the demerged units of listed companies in insolvency resolution to list on stock exchanges without an initial public offer (IPO), two people with knowledge of the matter told ET. Pricing norms for delisting of companies under insolvency resolution will also be eased.
“A company can be demerged from its listed group as part of any resolution plan. If the demerged entity again wants to be listed as a separate company, the regulator could waive certain compliance requirements as the companies in question are already stressed,” said one of the persons cited above.
Although the current rules allow demerged entities to list directly on stock exchanges without an IPO, insolvency professionals have asked the regulator to spell this out explicitly for companies undergoing insolvency proceedings in its regulations.
Sebi didn’t respond to an emailed query on the matter.
Furthermore, if the resolution is for delisting the company, then all the existing delisting rules would apply.
But pricing norms will be different for such companies. If the shares of the company are infrequently traded, the fair value formula will be applied, said another person.
These suggestions were given by members of the special committee constituted by the Insolvency Bankruptcy Board of India (IBBI) and Sebi. The exercise is aimed at finding ways of complying with capital market regulations while speeding up insolvency proceedings. The changes will follow once a final decision is taken.
The committee comprises insolvency professionals, representatives of stock exchanges, Sebi, IBBI and other stakeholders.
TRADING SUSPENSION
One of the other proposals considered by the committee was suspension of trading in the shares of companies undergoing insolvency proceedings. The proposal, however, is unlikely to be accepted.
“Shares of listed companies undergoing insolvency proceedings will not be suspended from trading,” said an executive familiar with the matter.
Stock exchanges may also be required to facilitate compliance for such companies.
“If such rules are incorporated, it will help fast-pace the insolvency processes within the stipulated period,” said Sandeep Parekh, founder of Finsec Law Advisors. “The IPO relaxation for demerged entity would be an important move as a company already in trouble cannot afford to go through an IPO process. Besides, few would be interested in subscribing to such a company’s shares.”
In August, the market regulator relaxed norms for stake purchases in distressed listed companies by lenders, largely exempting them from making open offers to shareholders.
