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Listed Insolvent/bankrupt companies with Negative Net Asset Value (NAV) coupled with serious loss of capital yet trading with the courtesy of Sri Lankan securities law. Reminder: Vanik, Touchwood.. Stay Away!
Listing Regulations
(ii) Enforcement Procedure for Emphasis of Matter on Going Concern
(A) In respect of Securities Listed in the Main Market Segment
1. This Rule 7.5 (d)(ii)(A) shall not be applicable to Entities which have listed only Debt Securities on the Exchange provided a fresh rating certificate obtained for the relevant financial year is disclosed to the market.
2. In the event the emphasis of matter ongoing concern, it shall be the duty of such Entity to resolve such matters within the time period provided for in these Rules.
3. Until the matters giving rise to emphasis of matter on going concern are resolved and such resolution is independently verified by an auditor within the time periods provided herein, the Listed Entity shall be subjected to the Public enforcement procedures as specified in this Rule.
4. In the event an emphasis of matter on going concern, the Securities of such Listed Entity shall be transferred to the Watch List on or before the expiry of five (05) Market Days from the date of submission of such Audited Financial Statements to the Exchange.
5. On submission of such Audited Financial Statements to the Exchange, the Entity shall make an announcement to the Market via the Exchange regarding emphasis of matter on going concern (as applicable) and such announcement shall contain the following;
a) A Statement that the Securities of the Entity will be or has been (as applicable) transferred to the Watch List by the Exchange within five (5) Market Days from the date of receipt of an emphasis of matter on going concern (as applicable);
b) The remedial action taken or proposed to be taken by the Entity to resolve the matters giving rise to the emphasis of matter on going concern (as applicable);
c) The time period within which such remedial action will betaken by the Entity; and
d) The following additional statements;
i. In the event of any deviation from the proposed remedial action, the extent of the deviation shall be communicated to the investors by way of a subsequent announcement to the Market via the Exchange within one (01) Market Day from the date of obtaining the approval of the Board of Directors of the Entity for such deviation;
ii. In the event the matters giving rise to the emphasis of matter on going concern (as applicable) are not resolved within a period of fifteen (15) months from the date of transferring the Securities of the Entity to the Watch List, the trading of Securities of the Listed Entity shall be suspended. In the event the trading suspension continues for a period in excess of twelve (12) months, the securities of the Entity shall be delisted by theBoard of Directors of the CSE in terms of Rule 11.3 (a) ofthe Listing Rules.
iii. In the event the matters giving rise the going concern (as applicable) are resolved and such fact is independently verified by an auditor during the period the Securities of the Entity are on the Watch List, it shall be announced to the Market via the CSE forthwith.
6. The announcement specified in Rule 7.5(d)(ii)(A)(5) above shall be
repeated on the first (1st) Market Day of each calendar month thereafter until such time the Entity resolves the matters giving rise to the emphasis of matter on going concern as aforesaid, during the time period the Securities of the Entity are on the Watch List.
7. Unless the matters giving rise to the emphasis of matter on going concern are resolved earlier in the manner specified in these Rules, the Entity shall notify its shareholders of the following facts at the first General Meeting to be held subsequent to submitting the Audited Financial Statements to the Exchange. The notice to the shareholders shall include the following;
i. A statement that the independent auditor’s report on the Audited Financial Statements of the Listed Entity contains an emphasis of matter on going concern (as applicable);
ii. The remedial action taken or proposed to be taken by the Entity to resolve the matters giving rise to the emphasis of matter on going concern (as applicable); and
iii. A statement that a failure on the part of the Listed Entity to resolve the matters giving rise to the emphasis of matter on going concern (as applicable) in the manner specified in the Listing Rules within a period of fifteen (15) months from the date of transferring its Securities to the Watch List shall result in the trading suspension of the Securities of the Entity and the continued failure to resolve such matters shall result in the subsequent delisting of the securities of the listed Entity in terms of Rule 11.3(a) of the Listing Rules.
8. The Listed Entity shall make an announcement to the Market via the Exchange regarding the outcome of the above matter taken up at the General Meeting of the Entity within the Market Day immediately following the date of such General Meeting. The announcement shall include any decisions made pertaining to such matter.
9. The Directors and the Chief Executive Officer of the entity, their close family members, the parent entity of the Listed Entity and any entity in which such Director, Chief Executive Officer, their close family members or the parent entity directly or indirectly hold fifty per centum (50%) or more of the voting rights shall refrain from exercising their right to transact directly or indirectly in the Securities of the Entity whilst such Securities are on the Watch List unless, prior approval is obtained from the SEC.
In the event any of the persons mentioned above resign from the position held in the Listed Entity, the restriction imposed above shall continue for a period of three (03) months from the date of resignation or until the Listed Entity resolves the matters giving rise tothe qualified audit opinion and/or the emphasis of matter on going concern, whichever occurs earlier.
10. a) Unless the listed entity obtains a deferment from the SEC in terms of Rule 7.5 (d)(ii)(A)(12) of these Rules or resolves the matters giving rise to the emphasis of matter on going concern and such fact is independently verified by an auditor within a period not exceeding fifteen (15) months from the date its Securities are transferred to the Watch List, the trading in Securities of the Listed Entity shall be suspended at the expiry of fifteen (15) months from the date of transferring the Securities to the Watch List.
b) In the event the matters giving rise to the emphasis of matter on going concern are resolved and such fact is independently verified by an auditor prior to the expiry of fifteen (15) months from the date of transferring its Securities to the Watch List, the Securities of the Listed Entity shall be transferred out of the Watch List.
11. Unless the listed entity obtains a deferment from the SEC in terms of Rule 7.5 (d)(ii)(A)(12) of these Rules or resolves the matters giving rise to the emphasis of matter on going concern in the manner specified in these Rules, a Listed Entity
in which trading in Securities has been suspended for failure to resolve the matters giving rise to the qualified audit opinion and/or the emphasis of matter on going concern as aforesaid shall on the expiry of twelve (12) months from the date of suspension of trading be delisted by the Board of Directors of the Exchange in terms of Rule 11.3(a) of the Listing Rules .
The decision of the Board of Directors of the Exchange to delist the Securities of the Entity shall be communicated to the SEC together with the reasons for same.
In the event the matters giving rise to the emphasis of matter on going concern are resolved and such resolution is independently verified by an auditor after the suspension has been imposed on the trading of Securities of the Listed Entity, but before the expiry of twelve (12) months from the date of suspension of Securities, the Securities of the Listed Entity shall be transferred out of the Watch List.
12. The SEC may grant a deferment from suspension of trading of Securities of the Listed Entity on an application made by the Listed Entity within twelve (12) months from the date of transferring its Securities to the Watch List for a deferment from suspension of trading of the Securities and seek further time to resolve the matters giving rise to the emphasis of matter on going concern.
The SEC may grant a deferment from the matter being referred to the Board of Directors of the Exchange to delist the Securities of the Entity, on an application made by the Listed Entity within nine (09) months from the date of suspension of trading of Securities, seeking further time to resolve the matters giving rise to the emphasis of matter on going concern.
13. In the event the SEC grants a deferment to the Listed Entity from its Securities being suspended and/or from being delisted as the case maybe, the Listed Entity shall resolve the matters giving rise to the emphasis of matter on going concern within theextended time period granted by the SEC.
14. Upon the matters giving rise to the emphasis of matter on going concern being resolved and such resolution has been independently verified by an auditor within the time periods provided for in these Rules or within the extended time period provided by the SEC as the case may be, the Securities of the Listed Entity shall be transferred out of the Watch List.
15. Additional Requirement to be satisfied by Listed Entities, in the event the Independent Auditor’s Report in the Audited Financial Statements of the Listed Entity contains a qualified audit opinion:
In the event Audit Opinion set out in the Independent Auditor’s Report in the Audited Financial Statements of the Listed Entity, contains a qualified audit opinion and such audit qualification/s is/are quantifiable, the Listed Entity shall forward to the Exchange an ‘Impact Report’ for public release at the time of submitting the Audited Financial Statements to the Exchange.
The Impact Report shall contain a detailed description of the impact of the said audit qualification/s to the Audited Financial Statements had the matter in question been recognized and disclosed as per the views of the Independent Auditor, including cumulative impact on profit or loss, net assets, total assets, turnover/total income, earnings per share and any other financial item/s, which may be impacted due to the qualified audit opinion.
Listing Regulation Applicable to Bankrupt Companies:
https://cdn.cse.lk/pdf/listing-rules/Section-7-Continuing-Listing-Requirements.pdf
No Comment.