CSE gears to weed out bad eggs on its boards
At least 20 per cent of Sri Lanka’s listed companies at the Colombo bourse have run afoul of regulations pertaining to the prescribed minimum percentage of shares held by the public.
Figures as at September 2017 show that 59 listed companies are non-compliant with the minimum public float rule of the Colombo Stock Exchange (CSE). Since then in the past few months, more companies have said that they are not compliant with these rules.
Of the figures as at September, between 30 to 40 firms are likely to exit the exchange through this mechanism which is meant to weed out bad eggs, officials say.
“There’re 44 main board companies and 15 on the Diri Savi Board (pertaining to violating this rule). They issued announcements with regard to their non compliance as it’s now a requirement to issue them till June this year when the enforcement rules kick in,” an official told the Business Times.
The CSE has 295 companies representing 20 business sectors as at September 30, 2017 with a market capitalization of Rs. 2,919 billion.
Earlier when a company listed on the CSE, there was a minimum stake (10 per cent) that it has to part with, but it wasn’t mandatory to maintain this amount. To maintain a certain percentage which corresponds to a certain number of minimum shareholders was introduced in 2016.
By end June, the non-compliant firms will be transferred to a ‘watch list’ according to Section 7 of the CSE’s listing rules and remain there for a further six months. In the instance they are unable to rectify the situation, they will be delisted, one official said. “This enforcement policy has been introduced following the grant of a period of over three years since the initial introduction of minimum public holding as a continuous listing requirement in 2013 and a further grace period of six months,” he said.
Some listed firms such as TAL Lanka Hotels Plc have said in their announcement that they were compelled to engage in a financial restructure due to adverse market conditions in the hospitality industry till the financial year 2001/02.