NSE, BSE initiates audit against 100 shell firms

The stock exchanges have initiated the process of audit on shell firms. According to the sources, the National Stock Exchange (NSE) and BSE will first audit 100 suspended companies of 331, listed by the government.

The move follows Securities and Exchange Board of India (Sebi) directives to stock exchanges to verify the credentials and fundamentals of the "331 suspected shell companies", which have been barred from trading.

In a letter dated August 9, the markets regulator has asked 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 that exchanges are in the process of appointing audit panel to examine the selected firms including their trading data.

Sebi learnt to have briefed stock exchange about the action plan against the suspected shell firms in a meeting held last week. Sources said that promoter's share could be frozen until investigation concludes.

Regulator had last week directed stock exchanges to suspend the suspected firms. All 331 suspected shell companies were identified by the Ministry of Corporate Affairs.

However, Securities Appellate Tribunal (SAT) temporarily stayed the trading ban on some of them imposed by regulator for being "suspected shell companies".


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