Stock exchanges have initiated audits of suspected shell firms. According to sources, the National Stock Exchange (NSE) and the BSE will first audit 100 suspended companies of the 331 listed by the government.
The move follows the Securities and Exchange Board of India’s (Sebi’s) directives to stock exchanges to verify the credentials and fundamentals of the “331 suspected shell companies", which have been barred from trading. The market regulator, in a letter dated August 9, asked the exchanges to seek the auditor’s certificate from the companies, with a list of other disclosures. These include annual income tax returns for three years and description of pending tax disputes, if any. Companies were also asked to provide status reports on compliance with the Companies Act and Sebi’s listing regulations.
Sources said the exchanges were in the process of appointing an audit panel to examine the selected firms, including their trading data. Sebi, in a meeting last week, learnt to have briefed stock exchange about the action plan against the suspected shell firms. Sources said promoter's share could be freezed until investigation concludes.
The regulator had last week directed the exchanges to suspend the suspected firms. The 331 suspected shell companies were identified by the corporate affairs ministry.
However, the Securities Appellate Tribunal temporarily stayed the trading ban on some of them imposed by the regulator.