SEBI bans wilful defaulters from tapping capital market

Move follows RBI regulations onbank safeguards In an attempt to tighten the regulatory framework, the Securities and Exchange Board of India (SEBI) has barred ‘wilful defaulters’ from accessing the capital market or acquiring another listed entity. The capital and commodity market regulator has decided that if a listed entity or its promoter has been declared a wilful defaulter, it will not be allowed to make a public issue of equity shares, debt or any other convertible securities. The decision was taken by the SEBI board in New Delhi on Saturday, based on Reserve Bank of India (RBI) regulations which lay down safeguards to be exercised by banks to contain the financial activities of a wilful defaulter. The RBI defines a wilful defaulter as an entity that defaults on its payment obligations even if it has the capacity to pay back debts. The SEBI’s move has come at a time when banks have moved the Supreme Court against industrialist Vijay Mallya, who has been declared a wilful defaulter. Meanwhile, the SEBI has decided that a wilful defaulter will not be allowed to acquire any other listed company, and the guidelines for determining ‘fit and proper person’ will also be amended to keep such wilful defaulters out of its ambit. “Any company or its promoter or director categorised as wilful defaulter may not be allowed to take control of other listed entity. However, if a listed company or its promoter or its director is categorised as wilful defaulter, and there is a take-over offer in respect of the listed company, they may be allowed to make a competing offer,” said a SEBI statement.