Sebi to relax norms for promoters to reclassify as ordinary shareholders

Maximum promoter holding to be eligible for reclassification to be raised from 10% to 15%; waiting time to be brought down to one month from three

Promoters of listed companies that wish to re-classify themselves as ordinary shareholders may find it easy to do so. The Securities and Exchange Board of India (Sebi) on Monday proposed to relax and streamline existing re-classification process.

To begin with, the market regulator has said the eligibly threshold can be relaxed from 10 per cent to 15 per cent. Currently, only promoters that hold less than 10 per cent in a company can initiate the process of re-classifying themselves are public shareholders.

“…the persons who may have been promoters but are no longer in day-to-day control having shareholding of less than 15 per cent may “opt-out” from being classified as “promoters”, without having to reduce their share-holding,” Sebi has said.

Also, the time gap between the shareholders’ reclassification request and board meeting to consider the same is proposed to be brought down from three months to just one month. This would help shorten the reclassification process.

Sebi has also proposed that the reclassification criteria could be relaxed if it is being done following a government or a regulatory body’s order. Currently, such exemption is given only in case of IBC (Insolvency and Bankruptcy Code) cases.

Further, the regulator has also proposed to ease the norms if the re-classification in pursuant to an open offer. However, Sebi has said the intent of the existing promoters to re-classify has to be disclosed in the letter of offer.

Sebi said cases where the erstwhile promoters are not traceable or are not co-operative can be re-classified into ordinary shareholders. However, listed entity has to demonstrate that efforts have taken to contact the promoters and also ensure that the promoters are no longer in control.

What could change
 

> Eligibility threshold eased from 10% to 15%

> Board meeting timeline reduced

> Relaxations in case of govt/ regulatory order

> Relaxations in case of open offers

> Disclose name of promoters even if nil shareholding

Meanwhile, Sebi has proposed to tighten the disclosure requirements.  It has said the names of entities that fall under the promoter group category need to be disclosed in the shareholding data even if they don’t hold any shares.

Sebi has invited public feedback on the various proposals till December 24.

Several entities had approached Sebi citing difficulties in the current framework. The regulator has been providing relaxations from some of the existing requirement on a case to case basis. Sebi has said new proposals will help reduce the number of exemptions provided on a case to case basis.

Under the current provisions, the board of directors of the listed entity has to analyse the request of promoter reclassification and place it before the shareholders in a general meeting for approval along with the views of the board. The resolution then needs to be voted upon with promoter seeking reclassification and entities related to promoters abstaining from voting.

Investors get option to apply in public issue of debt securities

Markets regulator Sebi on Monday provided an option to investors to apply in public issues of debt  securities through the online interface of stock exchanges with a facility to block funds through UPI mechanism for application value up to Rs 2 lakh.

The regulator has permitted the unified payment interface (UPI) mechanism to block funds for such application submitted through intermediaries. These debt securities included non-convertible redeemable preference shares, securitised debt instruments and municipal debt securities.

The new framework would be applicable to a public issue of debt securities which opens on or after January 1, 2021, the Securities and Exchange Board of India (Sebi) said in a circular.

Stock exchanges would have to formulate and disclose the operational procedure for applying through the app or web-based interface developed by them in order to apply in public issue on their websites, the regulator said. PTI