India’s capital markets regulator on Wednesday toughened penalties for delisted companies that do not provide exit options to shareholders, responding to complaints that executives were often not honouring listing agreements.
Under Indian rules, companies that are delisted from exchanges must return money to their shareholders, but investor associations have complained that many executives had simply walked away from these commitments and were often untraceable.
To prevent recurrences, the Securities and Exchange Board of India (SEBI) said on Wednesday that companies that have been delisted will not be allowed to sell, pledge or tranfer any equity shares until they have given an exit option to shareholders.
Corporate benefits such as dividend, rights and bonus shares held by promoters will also be frozen until investors are given an opportunity to be paid back, SEBI said.
The regulator also said promoters and whole-time directors of such companies will not be eligible to become directors of any listed company until an exit option is provided.