It seems the Securities and Exchange Board of India (SEBI) does have some plans up its sleeves. As per an article in Livemint, the market regulator is aiming to tighten its grip around wilful defaulters. As you would already know, a wilful defaulter is one who does not repay his dues even if he is in a position to do so. One of the big names that got the notorious wilful defaulter tag has been business tycoon Vijay Mallya.
As per existing norms, a wilful defaulter is barred access to further loans from the banking system. However, there is no law that bars wilful defaulters from accessing funds from the capital markets. This is where the market regulator believes lies a loophole that could be exploited by dubious promoters and firms.
At its board meeting today, SEBI will discuss stricter rules that will probably ban wilful defaulters from raising money via initial public offerings. Wilful defaulters may also be debarred from acquiring stakes in other listed companies.
We believe these are indeed positive initiatives that if well implemented will go a long way in protecting the interests of minority shareholders.