INSUBCONTINENT EXCLUSIVE:
Mumbai: Erstwhile company promoters, who do not wish to be classified as one as per regulatory requirements, may get some respite soon
The Securities and Exchange Board of India is planning to simplify rules on re-classification of promoters as public shareholders as it aims
to bring the existing rules in line with the Uday Kotak Committee recommendations on corporate governance, said two people familiar with the
development.
At present, rules are specified for a scenario where a new promoter replaces the previous one following a buyout and where a
company is professionally managed and does not have any identifiable promoters.
The norms, however, do not deal with situations where there
are multiple individuals classified as promoters out of which one does not wish to continue as one
As promoters, individuals are required to follow higher disclosure norms.
Sebi has received various representations from such promoters on
the matter.
The Kotal Panel had suggested that there should be a mechanism to enable such re-classification to ensure persons, who may have
been promoters but are no longer in the day-to-day control and management and have a low shareholding, should have the option to be
has to meet all the obligations on insider trading etc
shareholders are hazy.
Sebi is proposing that if a promoter wishes to be re-classified as a public shareholder, she would have to first
apply to the listed company
reclassification request at the general meeting, which will be approved by shareholders through ordinary resolution
One is declassification of exiting promoters post change of control and open offer; and the other one is either listed company or an
Sebi plans to increase the current threshold of promoters wanting to reclassify
Currently, promoters with 1% or above can apply for reclassification as public shareholders
Now, the regulator intends to raise this to 10 %.
Under current rules, if a promoter wants to be re-classified, she cannot hold more than
10% of the voting power in a company, exercise any form of control directly or indirectly, have any special rights through any shareholder
agreements and can not be on the board or act as a key managerial person in the listed firm.
Companies would also be mandated to disclose
the information on re- classification of promoters to stock exchanges within 24 hours.
