Home

Back

Annexure 4

CORPORATISATION & DEMUTUALISATION - A COMPARATIVE STUDY OF NSE AND THE INTERNATIONAL EXCHANGES

PRIOR TO DEMUTUALISATION

*S.NO.*	*details*	*nse*	*australia*	*singapore*	*london*	*toronto*	*hongkong*
1.	Legal Status	Company limited by shares.	Mutual Company limited by Guarantee, incorporated under the Australian Corporate laws, owned and controlled by its Brokers.	An independent Exchange (SES) which existed along with the Singapore International Monetary Exchange (SIMEX), owned by its members, which were companies carrying brokerage business on such exchange.	Set up as an Association of Stock Brokers, became a limited company in 1986.	An independent Stock Exchange, incorporated by special statute, owned and controlled by member firms.	Three separate entities, viz. The Stock Exchange of Hong Kong Ltd., Hong Kong Futures Exchange Ltd., & Hong Kong Securities Clearing Corporation Ltd.
2.	Whether "for profit " or "not for profit"	For profit.	Not for Profit.	Not for Profit.	Not for Profit	Not for Profit.	Not for Profit.
3.	Ownership structure	Owned by shareholders.	Mutual ownership structure, with one vote per member in the general meeting. All directors appointed by Members.	Owned by member companies carrying on brokerage business on the exchange. 34 shares each held by a member company of the SES and 40 each of corporate clearing members of SIMEX.	100% owned by member firms. A shareholder had, compulsorily to be a member firm.	100% owned by member firms.	Details not available.
4.	% of ownership with the Brokers	Nil.	100%	100%	100%	100%	Details not available.
5.	Exemptions or Benefits	Nil.	Exemption from payment of Income Tax.	Exemption from payment of Income Tax.	Details not available.	Details not available.	Details not available.
6.	Assets how held	As a company.	Not held in trust, but were owned by the exchange, which was in turn owned by brokers.	Details not available but, SIMEX Compensation Fund and Fidelity Fund were held in trust.	Not held in trust.	Details not available.	Details not available.
7.	Major beneficiaries of these assets	Shareholders.	N.A.	The Investors (for the two funds)	N.A.	Details not available.	Details not available.

PROCESS OF DEMUTUALISATION

*S.NO*	*details*	*nse*	*australia*	*singapore*	*london*	*toronto*	*hongkong*
1.	Any special legislation enacted to facilitate demutualisation	No. Demutualised since inception.	Yes. A special Act of Parliament was required.	Yes. Demutualisation and Merger of SES & SIMEX was affected by The Exchanges (Demutualisation and Merger) Act, 1999.	No.	Yes, by a legislation amending The Toronto Stock Exchange Act.	Yes. By enactment of the implementing legislation, The Exchanges and Clearing Houses (Merger) Ordinance.
2.	Whether assets of the old entity transferred to the new one, in totality	N.A.	No. The same entity (although reconstituted) held the assets.	The old share capital was deemed to have been cancelled and replaced by new shares which were held by the new entity.	No new entity was formed.	No. The same entity (although reconstituted from TSE to TSE Inc.) held the assets.	Details not available.
3.	Any shares/securities issued to the brokers in lieu of their earlier ownership	N.A.	Yes, each earlier member received 1,66,000 shares in the demutualised entity.	Yes, the shares in the new entity were issued to the brokers in lieu of their ownership in the old entity.	Bonus issue of 99,999 shares for every 1 share held.	Yes, the shares in the new entity were issued to the brokers in lieu of their member shares in the old entity.	Shares in the new entity were issued to the members in lieu of their ownership in the old entity.
4.	If yes, whether any consideration for above	N.A.	No cash consideration.	No cash consideration.	No cash consideration.	No cash consideration.	No cash consideration.

POST DEMUTUALISATION

*S.NO*	*details*	*nse*	*australia*	*singapore*	*london*	*toronto*	*hongkong*
1.	Strength of the Board	18 Directors, out of which 3 are SEBI Nominees and 3 are PR Directors approved by SEBI.	9 Directors. 1 is executive (MD), and the other 8 non-executive. (Minimum 7 and Maximum 15)	11 Directors. 2 are executive and non - independent (the chairman and the CEO) and 9 are non-executive and independent Directors.	12 Directors. 9 Non-executive including the Chairman, and 3 Executive Directors.	Details not available	Exact numbers not available, but the Board is comparatively small to ensure efficiency in policy-formulation and decision making. Comprises of broadly equal no. of directors appointed by the shareholders, and those, representing market and public interests, by the Financial Secretary.
2.	No. of Brokers in the Board	None.	4, including the Chairman.	6 of the non-executive and independent Directors have a primarily stock-broking background.	7	Details not available.	Details not available.
3.	Any trading restrictions on the Broker members	Not Appl.	Yes. Special rules for dealing in ASX securities by ASX Directors. Also, general prohibitions in the law on Insider Trading.	No special restrictions.	No special restrictions.	Details not available.	Details not available.
4.	How Directors elected / selected	As per the relevant provisions of the Companies Act, 1956. 3 sebi nominees and 2 PR Directors approved by SEBI.	Appointed by the shareholders, in consonance with the Australian corporate Laws. However, no share qualification, no maximum term, & no retirement age. 1/3^rd Directors (except the MD) retire by rotation every year.	Appointment of Chairman & CEO is subject to MAS' (MONETARY AUTHORITY OF SINGAPORE) Approval. A "Nominating Committee" (approved by -MAS) recommends the appointment of the Board.	Appointed by the shareholders, in consonance with the English corporate Laws.	Details not available.	Broadly equal no. of directors appointed by the shareholders, and those representing market and public interests, by the Financial Secretary.
5.	Whether any Capital issue made	No. Closely held.	No further issue made.	Plans to bring an IPO ( view as on December 2000).	Details not available.	Details not available.	Shares already existed, no new issue.
6.	Whether listed on itself	Not Listed.	Yes.	Plans to get self- listed once the IPO is made.	Yes.	Details not available.	Yes
7.	Any instructions as to restriction of voting rights	No.	Persons & their associates are restricted from owning or controlling, more than 5% of the voting shares. It is proposed to modify the limit to 15%.	MAS' approval required for individual share holding that exceeds 5%.	No persons or bodies corporate can acquire or retain an interest in the Ordinary shares which carry more than 4.9% of the total voting right.	Share ownership limited to 5% of the voting right, unless prior consent of ONTARIO SECURITIES COMMISSION (OSC) is obtained.	Persons & their associates are restricted from owning or controlling, more than 5% of the voting shares.
8.	Corporate Governance norms, whether followed	Not applicable.	Yes.	MAS will ensure this, once listed.	Yes.	Details not available.	Details not available.