Advisory from stock exchanges to listed entities undergoing CIRP - MMJC

1. The Securities Contracts (Regulation) Act, 1956 (“SCRA”) and the Securities Contracts (Regulation) Rules, 1957 (“SCRR”) prescribes various conditions with regard to securities market. Rule 19 of SCRR deals with conditions with respect to listing of securities on recognised stock exchange, whereas Rule 19A of SCRR deals with minimum public shareholding related conditions to be fulfilled by listed entities at all times.
2. Rule 19A of SCRR deals with minimum public shareholding related conditions at the time when a listed company is in process of implementation of resolution plan approved under Section 31 of the Insolvency and Bankruptcy Code, 2016, i.e., under undergoing Corporate Insolvency Resolution Process (“CIRP”). It says:-
3. If public shareholding falls below 25%, then listed company shall bring it to 25% within 3 years from the date of such fall.
4. If public shareholding falls below 10%, then listed company shall bring it to 10% within twelve months from the date of such fall.
5. Ministry of Finance (MoF) vide its Notification dated June 18, 2021 has amended rule 19A (5) of the “SCRR”. Amended Rule 19A (5) of SCRR states that, “every listed company shall maintain public shareholding of at least five per cent as a result of implementation of the resolution plan approved under section 31 of the Insolvency and Bankruptcy Code, 2016”
6. In view of the same, Bombay Stock Exchange and National Stock Exchange has vide its circular dt: January 31, 2023 advised Resolution Professionals of listed entity/ies undergoing Corporate Insolvency Resolution Process (CIRP), to ensure that resolution plans approved by NCLT is compliant with the aforementioned provisions and other applicable provisions/regulations as amended from time to time.
7. BSE and NSE has further advised that Listed Company / RP shall take all requisite steps to modify the resolution plans to ensure compliance with aforesaid requirement; regardless of stage of CIRP process.

NSE Circular link:

https://www.nseindia.com/companies-listing/circular-for-listed-companies-equity-market

BSE Circular link:

https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20230131-7