Clause 41 of Listing Agreement and its Penal Provisions

Introduction:

As per Clause 41 of the Listing Agreement, every company shall submit quarterly, year to date and annual financial results to the stock exchange (SE) in the manner as prescribed under the clause.

Further, the company has an option to submit either audited financial results with audit report or un-audited financial results subject to limited review by statutory auditors quarterly and year to date financial results to the SE within 45 days of end of each quarter (Other than last quarter).

For the last quarter alone the company has an option to submit its audited financial results (both standalone and consolidated) for the entire financial year within 60 days from the end of the financial year.

Further in case of non compliance with the requirement of clause 41 it will be an offence and violation of the provisions of Listing Agreement.

What are the implications in case of Non-compliance with the provisions of Listing Agreement:

In case of non compliance of certain provisions of listing agreement, Securities and Exchange Board of India (SEBI) vide its circular no. CIR/MRD/DSA/ 31/2013 dated September 30, 2013 have implemented the following:

(i) “Uniform fine structure” for non-compliance of certain clauses of the listing agreement

(ii) “Standard Operating Procedure” (SOP) for suspension and revocation of suspension of trading in the shares of such listed entities.

• The circular inter-alia stipulates imposition of fines as action of first resort (Refer Annexure I)
• Transfer to Z group, (Refer Annexure II)
• Freezing of promoter holding and invocation of suspension of trading in cases of subsequent and consecutive defaults. (Refer Annexure III)and procedure for revocation (Refer Annexure IV).

Penal Provision in case of non – compliance of Clause 41 of Listing Agreement:

Clause of listing agreement	Due date of Submission as per Listing Agreement	Commencement of Levy of Penalty	Fine payable for 1st non-compliance	Fine Payable each subsequent and consecutive non-compliance
Clause 41Non submission of the financial results within period prescribed under this clause	60  days **from the end of quarter (where it is the final quarter)	61st day from the end of quarter	Rs. 5000/- per day till the date of compliance and If non-compliance continues for more than 15 days additional fine of 0.1 % of Paid Up capital* of the entity or Rs. 1 Crore, whichever is less.	Rs. 10000/- per day till the date of compliance and If non-compliance continues for more than 15 days additional fine of 0.1 % of Paid Up capital* of the entity or Rs.1 crore, whichever is less.
	45 days from end of quarter for other quarters	46th day from end of quarter.

*paid up capital as on first day of the financial year in which the non compliance occurs.  (This would refer to the listed capital as per Exchange records).

** would be on the basis of company’s financial year end.

Notes:

• While analyzing the case for non submission, companies which have submitted incorrect, incomplete or undecipherable report whereby the said report could not be disseminated or taken on record, the same would be treated as non submission and dealt with accordingly.
  

• Computation of fines would commence one day after the due date specified for submission mandated in the Listing Agreement and would continue till the date of submission (including the day of submission). For example, where the last day for submission falls on Saturday, then due date would be the next working day of the exchange (Monday) and the fine in case of non submission, would commence from Tuesday. However, in case the due date falls on a Friday then the computation of fine would commence from Saturday.
  

• The fine amount (including service tax – presently at 12.36%)may be remitted thru electronic transfer or through cheque favouring BSE Ltd. It may be noted that as per SEBI circular all fines collected would be ultimately credited to the BSE Investors Protection Fund.

Creation of a new category “Z” for trading/Conclusion:

If a listed entity commits two or more consecutive defaults in compliance of clause 41 of the listing agreement within 15 days from date of the notice issued, the concerned recognised stock exchange shall, in addition to imposing fine as specified above, move the scrip of the listed entities to “Z” category.

“Z” Category where trading of shares of non- compliant listed entities shall take place in ‘trade for trade’ basis.

Suspension of Trading will be done if the company fails to comply with clause 41 of listing agreement with respect to submission of financial results for two consecutive quarters.