These 331 shell company stocks have stopped trading from today; do you own any?

By

Rahul Oberoi

, ETMarkets.com|

Updated: Aug 08, 2017, 10.41 AM IST

Markets regulator Securities and Exchange Board of India (Sebi) on Monday directed stock exchanges to take action against 331 suspected shell companies that are listed on the bourses. 

As part of efforts to curb black money menace, Sebi has said these scrips would not be available for trading this month. These stocks stopped trading on the bourses from Tuesday. 

Shell companies are dubious entities that are generally used for laundering illegal funds. However, the term ‘shell company’ is not defined under the Companies Act. 

According to BSE, trading in all such listed securities shall be placed in Stage VI of the graded surveillance measure (GSM) with immediate effect. If any listed company out of the said list is already identified under any stage of GSM, it shall also be moved to GSM Stage VI directly. 

Here is a list of all 331 companies: 

All you need to know about shell companies: 

1) Under the Stage VI of GSM framework, trading in these identified securities shall be permitted only once a month under the trade-to-trade category. Further, any upward price movement in these securities shall not be permitted beyond the last traded price and additional surveillance deposit of 200 per cent of trade value shall be collected from the buyers and the same shall be retained with the exchanges for five months.

2) Companies that were moved to GSM framework under Stage VI with effect from August 8 include ATN International, Alka India, Birla Cotsyn, Birla Capital, Blue Chip India, ARSS Infra, J Kumar Infraprojects, Jai Mata Glass, Pincon Spirit, REI Agro and Zenith Birla. (Table: Companies that moved to GSM Stage) 

3) As per the provisions of the GSM framework, the securities shall not be available for trading from Tuesday. Trading in these securities shall be permitted only once a month (first Monday of the month). 

4) Shares held by the promoters and directors in such listed companies shall be allowed to be transferred by depositories only upon verification by the exchange concerned and they shall not be allowed to transact in the security except to buy securities in the said listed company until verification of credentials or fundamentals by the exchanges is completed. 

5) Exchanges shall initiate a process of verifying the credentials/fundamentals of such companies. Exchanges shall appoint an independent auditor to conduct audit of such listed companies and, if necessary, even conduct forensic audit of these companies to verify credentials/fundamentals. 

6) On verification, if exchanges do not find appropriate credentials/fundamentals about existence of the company, they shall initiate proceedings for compulsory delisting against the company, and the said company will not be permitted to deal in any security on the exchange platform and its holding in any depository account shall be frozen till such delisting process is completed. 

7) Out of the list of shell companies, if securities of any of the listed companies are under suspension, the trading in such securities shall be placed under GSM Stage VI directly on revocation of suspension by exchange. 

8) Of late, at least 26 chartered accountants have come underscanner of the ICAI for allegedly helping shell companies, a senior official said. 

This whole thing has come as a surprise, Amit Tandon MD, Institutional Investor Advisory Services (IIAS) in said a chat with ETNow. “I was told a committee has been formed, which looked at some of the large deposits in the companies around the time of the demonetisation exercise and these companies have been identified ever since. But there is a broader question.” 

“Even if there has been a disproportionate amount of deposits in these companies, I would have expected that a show-cause notice would be issued. These companies would have a chance to respond to it and some of this would at least be in the public domain and it would not have come as a complete shock and surprise to a large number of investors. For some of these companies, they do have certain marquee investors who have been investing there,” he said. 

The corporate affairs ministry has already cancelled the registration of more than 1.62 lakh companies that have not been carrying out business activities for long. 

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