WHAT IS DEMUTUALISATION

  • The process of converting an existing non-profit organization into a profit making company.
  • It’s an Intrinsic nature of effective governance.
  • The Association of a person (AOPs) that is mutually owned by members converts into an organisation or company which is owned by shareholders.
  • The Demutualisation is a type of Separation of members’ right into Various segments, i.e. ownership and trading rights.
  • The relationship between members and the stock exchange is changed.
  • Members who have trading rights acquire ownership rights (Have Market Value) in the stock exchange and also enjoys the right of limited liability.
  • The Diverse group of shareholders in a corporatized stock exchange as members have the right to decide to Sell or retain their shares.
  • Demutualisation, however, does not protect them from the competition.
  • A group is formed by SEBI (Securities Exchange Board of India) on Corporatisation and Demutualization of Stock Exchanges under the Chairmanship / Guidances of Justice M H Kania, (former Chief Justice of India),
  • The Group on Corporatisation and Demutualization of Stock Exchanges has submitted its Report to SEBI on August 28, 2002.
  • SEBI has taken up with the Central Government to amend the Securities Contracts (Regulation) Act (SCRA) to affect Corporatisation and Demutualization.

THE PROCESS OF DEMUTUALISATION TAKES PLACE IN THE FOLLOWING MANNER

  • The Stock Exchange values all its assets including the value of seats and arrives at total value.
  • This is divided into different shares and offered/provided to the general public.
  • After that, the shares are listed on the stock exchanges, and the funds collected by selling the shares will be distributed among the members of the exchange as payment for their seats.
  • If the company is not being listed, the shares may be offered to the members, not for transfer.

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