The Securities and Exchange Board of India (Sebi) may have finally found the solution to deal with companies defaulting on payment of listing fees.
The market regulator is considering a proposal, whereby companies below a certain threshold of paid-up capital will be asked to make a one-time lumpsum payment to the stock exchanges, on which they are listed. The bourses will keep this money in bank fixed deposits, and the interest accruing on it would be used towards payment of listing fees.
In the past, many companies have been delisted by stock exchanges for not paying listing fees. In many cases, market watchers claim, promoters deliberately declined to make the payment so as to attract the compulsory delisting penalty.
A senior official at one of the stock exchanges confirmed the development to ET.
“Suspending or delisting a company hurts the minority shareholders more than the promoters. But so far, we were left with no choice but to take this drastic step if companies refused to pay the listing fee,” the official said.
NSE charges an annual listing fee of Rs 10,000 for a paid-up share capital of Rs 1 crore, and Rs 15,000 per annum for companies with a paid-up capital between Rs 1 crore and Rs 5 crore, Rs 20,000 for companies with a paid-up capital between Rs 5 crore and Rs 10 crore, and Rs 45,000 for companies with a paid-up capital between Rs 10 crore and Rs 20 crore.
BSE charges Rs 10,000 for companies with a paid-up capital up to Rs 5 crore, Rs 15,000 for companies with a paid-up capital between Rs 5 crore and Rs 10 crore, and Rs 30,000 for companies with a paid-up capital between Rs 10 crore and Rs 20 crore.
Compulsory delisting refers to permanent removal of securities of a listed company from a stock exchange as a penalty for not complying with the terms of the listing agreement, non-payment of fees being one of the offences.
“It was high time that the issue was resolved,” says AP Bakliwal of Bombay Shareholders Association.
“For paltry fees of Rs 20-30,000, retail investors would be stuck with holdings worth many times that amount. Often, companies deliberately default on paying listing fees in order to avoid bear hammering of their shares during a downturn in the market,” he added.
Prior to delisting or suspending trading in a stock, the stock exchange sends reminders and a show-cause notice to the concerned company. If the company makes the payment within the prescribed time frame, the suspension is revoked.
“In cases of compulsory delisting, there is no provision for an exit for shareholders, except that stock exchanges would allow trading in the securities under the permitted category for a period of one year after delisting. The number of complaints against such promoters has been rising over the years,” said BL Maheshwari of Indian Council of Investors.