Changes in minimum public shareholding standards for listed companies

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(Commercial Representative) Mumbai, Ta. 16 December 2020, Wednesday

The Securities and Exchange Board of India (SEBI), the regulator of the capital market, has made some changes in the minimum public shareholding standards for listed companies going through the Corporate Insolvency Resolution Process (CIRP).

The implementation of the resolution plan has made it mandatory for listed permanent companies to hold a public shareholding of at least five per cent at the time of commencement of trading on the stock exchanges. There is currently no such minimum requirement for companies.

In addition, SEBI has made it mandatory for such companies to increase their public shareholding in these stocks to 10 per cent in 12 months and public shareholding to 5 per cent in six months from the day of re-listing.

Currently, during the corporate insolvency resolution process, such listed companies with a public share holding of less than 10 per cent are required to hold 10 per cent holdings in 12 months and 5 per cent public share holdings in six months.

In another change, the lock-in on equity shares allotted to the resolution applicant for companies listed under the resolution plan will no longer apply until a 10 per cent public shareholding is achieved. According to a SEBI circular, the resolution will not apply to shares allotted to the applicant until a lock-in of 10 per cent public shareholding is achieved within 18 months.

In addition, according to a SEBI circular, such companies may require additional disclosures such as resolution plan details, asset details after CIRP, minimum public shareholding, proposed steps taken by new entrant-acquirers to achieve this minimum public shareholding status. Including disclosure.

SEBI, meanwhile, has removed the requirement of minimum promoter stake and consequent lock-in for issuers to offer additional securities. This rule will be subject to certain conditions. In which the equity shares of an issuer should be traded continuously on the stock markets for at least three years. The second is for the issuer to comply with SEBI's listing obligations for three years. Third, the issuer will have to resolve 4% of the complaints received from investors.

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