Listed cos Face Penalty for Withholding Facts

VIGILANCE Firms must submit annual reports, shareholding pattern data and financial results within a certain deadline

Stock exchanges on Friday announced strict penal actions, ranging from monetary fines to trading suspension, for listed companies failing to ensure timely and proper disclosure of details like financial results, annual reports, shareholding data and corporate governance reports.

Acting on a Securities and Exchange Board of India (Sebi) directive, leading bourses, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), have put in place a “Standard Operating Procedure (SOP)” for dealing with listed companies for their non-compliance to various clauses of the Listing Agreement.

Under this agreement, companies are required to submit documents like annual reports, shareholding pattern data, quarterly and full-year financial results, as also corporate governance compliance reports within stipulated time periods.

However, Sebi found that hundreds of companies are not adhering to various provisions of this agreement, pursuant to which the regulator has asked the stock exchanges to put a stronger mechanism in place to ensure compliance.

Under the new mechanism, the initial penal action would be a minimum fine of ` 1,000-5,000 per day depending on the violation, while repeated offences would lead to actions like transfer to restricted-trade category, freezing of promoter shares and overall suspension on trading in company shares.

The exchanges would also now make public the details of action taken against non-compliant companies.

Companies need to submit their annual reports at least 21 days in advance of their annual shareholding meeting, which needs to be held within six months from the end of company’s financial year.

Besides, the quarter-end shareholding pattern needs to be submitted in a prescribed format within 21 days from the end of a quarter. The financial results needs to be submitted within 60 days from the end of the quarter (where it is the final quarter) and within 45 days for other quarters.

The companies need to submit their corporate governance compliance reports within 15 days from the end of every quarter.

“While analysing the case for non submission, companies that have submitted incorrect, incomplete or undecipherable report whereby the said report could not be disseminated or taken on record, the same would be treated as non submission and dealt with accordingly,” the exchanges said.

Sebi chairman U K Sinha recently told PTI in an interview that a large number of companies were not complying with the Listing Agreement provisions.

The new norms would, however, ensure that the small investors remain insulated when any action is taken against noncompliant companies, Sinha had said, while adding that the new guidelines also seek to improve quality of compliance.

Hindustan Times, New Delhi, 18-01-2014

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