Shares in a Company Listed Only on a Regional Stock Exchange: The Dissemination Board Explained

If your family’s share certificates are in a company you cannot find on the NSE or the BSE, there is a good chance it was listed on one of India’s regional stock exchanges — Ludhiana, Madras, Bangalore, Ahmedabad, Kanpur, Patna and a dozen more. Those exchanges no longer operate. The shares listed on them still exist.

This is what happened to them, and how to find out where yours stand.

What happened to the regional exchanges

For decades a company with a local character could raise money and list close to home rather than in Mumbai. By the 2000s almost all trading had moved to the national exchanges, and the regional ones had little or none. In May 2012 SEBI issued an exit policy for de-recognised and non-operational stock exchanges, and over the following years they wound up one after another:

• Saurashtra Kutch Stock Exchange: (Rajkot) — April 2013
• Bangalore Stock Exchange: — December 2014
• Ludhiana Stock Exchange: — December 2014
• Bhubaneswar Stock Exchange: — February 2015
• Madras Stock Exchange: — May 2015
• Ahmedabad Stock Exchange: — April 2018
• Magadh Stock Exchange: (Patna) — May 2019

Coimbatore, Hyderabad, Indore, Kanpur, Pune, Delhi and others went the same way.

The exchange closed. Your shares did not

An exchange is a marketplace. Closing it removes the place where shares were bought and sold; it does not cancel the company or your ownership of part of it. What it does remove is liquidity — and for a company listed nowhere else, that left shareholders holding paper with no market.

SEBI’s answer was the Dissemination Board. Companies that had been listed only on an exiting exchange were placed on a board hosted by the national exchanges, so that shareholders had somewhere to find them and their promoters could be held to what came next.

What the promoters were required to do

In October 2016 SEBI set out two routes for every company on the Dissemination Board:

• List on a nationwide exchange.: SEBI relaxed some of the conditions for raising capital to make this achievable.
• Or give public shareholders an exit.: The promoters buy out the public at a fair value determined by an independent valuer from the panel of the designated stock exchange — not at a price the promoter chooses.

The exit route came with protections. The promoter had to place the full consideration in escrow before the offer opened, the offer had to stay open for at least five working days, and payment had to follow within fifteen working days of it closing.

A further circular in August 2017 dealt with companies that did neither: their promoters’ shareholdings were to be frozen, and their promoters and directors barred from being directors of any listed company until an exit was provided.

So what is your certificate now?

It will be one of four things, and which one decides everything.

• The company listed nationally.: Then it is an ordinary listed share, possibly under a new name, and you deal with its registrar like any other. This is the best outcome and it is more common than people expect.
• The company merged or was renamed.: The holding carried forward into the successor, usually at an exchange ratio. Shares of merged or renamed companies.
• The promoters made an exit offer.: If your family tendered, the shares were paid for. If the offer closed without you — common, since notices went to old addresses — you generally remain a shareholder of what is now an unlisted company. What applies to unlisted company shares.
• The company did nothing, or has stopped operating.: It may be on the list of non-compliant companies, dormant, or struck off the register. The shareholding survives a dormant company; a struck-off one needs restoring through the tribunal before anything can be claimed, and that is only worth doing if the company still holds something.

How to find out which

• Start with MCA master data.: Search the company name or the CIN printed on the certificate. It shows the current name, the registered office and whether the company is active, under liquidation or struck off.
• Check the national exchanges.: Search the company, and any later name, on the NSE and BSE. Both exchanges also publish their Dissemination Board lists and the exit offers made through them. (NSE: exit option for shareholders)
• Write to the company secretary: at the registered office, quoting the folio and certificate numbers, and ask what the folio holds today and whether an exit offer was made.
• Check the IEPF records.: Unpaid dividends and the shares behind them can reach the IEPF from these companies exactly as from any other. How to check.

An honest word on value

Some of these certificates are worth a great deal: the company listed nationally, grew, and issued bonuses along the way. Many are worth little or nothing, because the business behind them failed. You cannot tell which from the certificate, and it is not worth paying anyone until you know. Establishing which of the four cases applies is the first step, and it costs nothing but a search.

Where we see these most

The cities that had their own exchange are where these certificates turn up: Ludhiana, Rajkot, Patna, Bhubaneswar, Indore, Kanpur and Chennai.

If you would like us to trace the company on a certificate, send us the details. We will tell you which of the four cases it is before you decide whether a claim is worth making.

This is general information on SEBI’s exit framework for regional exchanges. Exit dates are those of SEBI’s orders; the position of any individual company has to be checked against MCA and exchange records.