No promoter sale before pref issue: Sebi panel

The recommendations follow misuse of the preferential allotment route by some promoters. The committee, which met on December 1, has suggested that the promoters' entire stake should be in demat mode so that the stock exchange can ensure the freeze on sale before and after the allotment.

The panel has also suggested that in case the promoters of a company sell their shares in the six months preceding the relevant date, they will not be eligible to acquire shares through the preferential allotment.

In case shares are being issued to the promoter of the company through preferential allotment, the entire promoter shareholding in the company before the preferential issue will be locked in for six months from the date of preferential allotment.

The committee also discussed the issue of shares allotted as part of the corporate debt restructuring scheme and agreed that it might not be feasible for companies to comply with certain provisions stipulated in the guidelines.

The panel also said it should be ensured that corporate debt restructuring schemes did not work against the interests of common shareholders.