Capital market regulator, SEBI has notified amended norms barring willful defaulters from making a public issue of shares, debt securities, or non-convertible redeemable preference shares.
However, willful defaulters can be allowed to tap existing shareholders by way of rights issue, private placement, or preferential allotment.
Capital Market Regulator has also restrained willful defaulters from setting up market intermediaries like mutual funds and brokerage firms.
In a significant move, SEBI also barred a willful defaulter company or individual from taking control of any other listed company.
The new rules will apply to entities declared willful defaulter as per RBI norms.
An individual or a company is declared a ‘willful defaulter’ for deliberate non-payment of dues despite adequate cash flow and good net worth, and for siphoning off funds to the detriment of the defaulting unit.