Sebi on Monday proposed to change the minimum threshold for voting rights for re-classification of a promoter as a public shareholder and suggested all promoter entities disclose shareholding even in case of ‘nil’ holding. Under the proposal, Sebi said the re-classification condition on shareholding should be amended such that the promoter and related persons seeking re-classification should not together hold 15 per cent or more of the total voting rights in the listed entity. At present, the minimum threshold requirement is 10 per cent.
The regulator received feedback from market participants to review the current threshold of 10 per cent so that 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 shareholding. The regulator said it received feedback regarding cases where promoters have desired re-classification but have found it difficult under the current regulatory regime.
Relaxation from existing requirement on a case-to-case basis has been given by Sebi and the existing provisions should be revisitied to minimise the number of exemptions provided on a case-to-case basis, the regulator said in a consultation paper. “The exemption from… Listing Obligations and Disclosure Requirements (LODR), as extended in case of re-classification of promoter, pursuant to resolution plan, approved under … the Insolvency Code, may also be extended to re-classification pursuant to an order/ direction of the government / regulator and/or as a consequence of operation of law,” Sebi said.
This is subject to the condition that such promoter seeking re-classification should not remain in control of the listed entity, it added. Also, exemption from the procedure for re-classification should be granted to existing promoters in cases where such re-classification is pursuant to an open offer. It further suggested that exemption should be granted in cases where, pursuant to an open offer, a listed entity intends to re-classify erstwhile promoter group entities but such entities are not traceable or not co-operative.
Exemption under the open offer cases are subject to certain conditions, including that the intent of the existing promoter to re-classify should be disclosed in the letter of offer. The Securities and Exchange Board of India (Sebi) has sought comments from public till December 24 on the proposals. The regulator has suggested that all entities falling under promoter and promoter group should be disclosed separately even in case of ‘nil’ shareholding.
Further, listed entities has been proposed to obtain a declaration on a quarterly basis from their promoters on the entities or persons that form part of the ‘promoter group’. The regulator has recommended that current time gap of at least three months between the date of board meeting and the shareholders’ meeting for considering the request of the promoter seeking re-classification should be reduced to at least one month.
According to Sebi, a listed entity should place the re-classification request before its board within one month of receiving the re-classification request from its promoter or promoter group entities. The present framework does not prescribe a definitive timeline for the company to place such re-classification proposals before the board.
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