SME Exchange is already under consideration.{Chapter XA under Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2010}]
AN OPEN LETTER TO SEBI CHAIRMAN FOR LISTED ENTITIES
There are more than 900000 companies active in MCA portal across country. Daily 100-200 companies are incorporated by professionals. Whereas the total listed entities are only 6000 out of which shares of 3000 companies are regularly traded in the stock exchange. To have better corproate governance and Small and Medium companies to access global markets, it is necessary to formulate SME stock exchange reforms.
Introduction:
During 1988, the Government has announced tax concession of 15% for widely held companies i.e. listed entities. Lot of companies voluntarily availed this concession and listed in major stock exchanges. The concession was subsequently withdrawn due to single rate for corporate sector.and one single rate for domestic and another rate for foreign companies.
The budget speech of then Honble Finance Minister is as follows. (Budget speech 1988)
I now propose to introduce a provision whereby every company will have to pay a minimum corporate tax on the profits declared by it in its own accounts. Under this new provision, a company will pay tax on at least 30% of its book profit. In other words, a domestic widely held company will pay tax of at least 15% of its book profit. This measure will yield a revenue gain of approximately Rs.75 crores.
Stock Exchanges: Prior to 1994 Bombay Stock Exchange and regional stock exchanges used to function. Among them Bombay Stock Exchange considered to be premier one. After 1994, National stock exchange was started and initiated paper less trading. Subsequently, Bombay stock exchange also adopted the same. The Regional stock exchange was functioning before 2000 after that the mandatory clause was removed from listing agreement due to the fact that NSE making inroads in rural and semi urban areas, urban areas by screen based trading. The NSE which was replaced the regional stock exchanges and they are surviving with minimum turnover
Regional Stock Exchange: The same can be renamed as SME exchange to provide liquidity to the Small and Medium enterprises. SME segment which wants to global to sell their products but raising of funds from Venture capital or Private Equities are very difficult. The Funding authoritys procedure is much complex one. The Government can initiate stock exchange reforms in line with Telecommunication reforms, as the affordability of mobile phones to the common man. The same principle should be applied to Stock exchange reforms.
Shareholding pattern at SME Exchanges: The SEBI should relax the minimum and maximum shareholding pattern. The company shares are to be widely held in these companies. They should fix at least 100 members in these companies. There should be provision to be contained in the SME listing agreement.
The government should come forward to make stock exchange reform and add more companies by introducing SME exchanges with lesser compliance and companies should come forward for listing as well as follow good corporate governance.
Conclusion: The present limit of 6000 to 15000 companies will be listed provided government should initiate SME stock exchange reforms with the following concessions.
1) Reduce joining fees and annual listing fees
2) Limited paper work
3) Simpler delisting formalities
4) Minimal documentations.
5) Tax concession for Listed companies.
CS A Rengarajan
Alok Rudra
CS Richa sharma
CAclubindia
