Stock exchanges – BSE and NSE – have unveiled guidelines to safeguard the rights of investors in a bid to bring transparency in trading of shares of companies undergoing Corporate Insolvency Resolution Process (CIRP). 

The bourses have said that they will identify and tag the security in a manner that will make it easy for members and market participants to know that the security is currently under IBC proceedings. Further, exchanges will direct all brokers to alert their clients at the time of placing orders that the scrip is undergoing CIRP. The move by the bourses comes after investors lost heavily in companies that were under insolvency proceedings. 

Resolution professionals (RPs) have been directed to disclose the resolution plan on oral pronouncement on an immediate basis and not later than 30 minutes. RPs will also have to inform through the exchange platform the impact on the existing holders. “Since this alert will be available from the day of admission into CIRP till the day of suspension of the company or exit from CIRP proceedings, pursuant to National Company Law Tribunal (NCLT) order, the market participants shall be clearly aware of the status of the company and shall exercise necessary due diligence will trading in the security,” the NSE has said in a press release. 

The NSE and the BSE will put in place a system to coordinate between each other and based on the intimation of the oral order from the company or RPs, suspend trading in the company on immediate basis. This will be done in instances where the value of the listed securities is considered zero or where the entire equity capital is reduced, cancelled or extinguished without any payment to the existing equity shareholders.