In light of the ongoing practices by shell companies of getting entry into the stock market and becoming a helping hand for money laundering and frauds, The Securities and Exchange Board of India is planning to tighten the current listing criteria for companies.

At present, the minimum post issue capital requirement of an applicant company or a new company seeking listing of its securities on BSE is Rs. 10 crore for IPOs and Rs. 3 crore for FPOs whereas minimum issue size and minimum market capitalization is Rs. 10 crore and Rs. 25 crore respectively.  In NSE, the minimum post issue equity paid up capital is Rs. 10 crore and the market capitalization is Rs. 25 crore in the case of an IPO.

Apart from the above threshold limits there are many other obligations which are required to be fulfilled by the companies intending to list their securities on stock exchange.

Now SEBI is intending to raise the above threshold limits to avoid the listing of shell companies, where a shell company is a non-trading entity used as a vehicle for various financial manoeuvres or kept dormant for future use in some other capacity.

The new limit surely will be an effective hurdle for the market players intend to issue and invest for the purpose of tax evasion and money laundering. Strict norms and higher monetary limits will enhance transparency and fair market sharing.

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ACS Divya Verma

An Associate Member of Institute of Company Secretary of India (ICSI), having an experience of more than an year in managing Corporate Law Compliances with focus on SEBI, Industrial Laws & FSSAI Compliances. Presently engaged with LexComply.com, playing foremost role in the Content Enhancement besides managing the regulatory compliances of various clients through LexComply.