SEBI tweaks public shareholding norms for companies under insolvency process
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Markets regulator Sebi decided to tweak norms pertaining to 25 per cent minimum public shareholding for companies which undergo corporate insolvency resolution and seek relisting following the process.
Besides, it decided to enhance disclosure for such companies, Sebi said in a statement after its board meeting.
The move would ensure revival of the corporate debtor pursuant to the resolution plan and provide any listing gains over the next three years to shareholders.
Post the Corporate Insolvency and Resolution Process (CIRP), such companies will be mandated to have at least 5 per cent public shareholding at the time of their admission to dealing on stock exchange.
At present, there is no such minimum requirement.
Further, such companies will be provided 12 months to achieve public shareholding of 10 per cent and further 36 months to reach 25 per cent public shareholding.
Currently, the norms mandate that in case public holding of such company falls below 10 per cent, then the same will be increased to at least 10 per cent within 18 months and 25 per cent within three years.
In addition, Sebi said the lock-in on equity shares allotted to the resolution applicant under the resolution plan will not be applicable to the extent to achieve 10 per cent public shareholding within 12 months.
Typically, in view of preferential issuance of shares to the incoming investor/promoter under the resolution plan, such shares would be under lock-in for at least one year.
Thus, achieving minimum public shareholding (MPS) compliance through means involving off-loading of shares by the incoming investor/ promoter within one year is not possible.
Sebi said such companies will be required to make additional disclosures, such as specific details of resolution plan including details of assets post-CIRP and details of securities continuing to be imposed on the companies' assets and other material liabilities imposed on the firm.
Besides, they need to make disclosure about proposed steps to be taken by the incoming investor/acquirer for achieving the minimum public shareholding and quarterly disclosure of the status of achieving the MPS.
In August, the Securities and Exchange Board of India (Sebi) came out with a consultation paper in this regard.
Besides, it decided to enhance disclosure for such companies, Sebi said in a statement after its board meeting.
The move would ensure revival of the corporate debtor pursuant to the resolution plan and provide any listing gains over the next three years to shareholders.
Post the Corporate Insolvency and Resolution Process (CIRP), such companies will be mandated to have at least 5 per cent public shareholding at the time of their admission to dealing on stock exchange.
At present, there is no such minimum requirement.
Further, such companies will be provided 12 months to achieve public shareholding of 10 per cent and further 36 months to reach 25 per cent public shareholding.
Currently, the norms mandate that in case public holding of such company falls below 10 per cent, then the same will be increased to at least 10 per cent within 18 months and 25 per cent within three years.
In addition, Sebi said the lock-in on equity shares allotted to the resolution applicant under the resolution plan will not be applicable to the extent to achieve 10 per cent public shareholding within 12 months.
Typically, in view of preferential issuance of shares to the incoming investor/promoter under the resolution plan, such shares would be under lock-in for at least one year.
Thus, achieving minimum public shareholding (MPS) compliance through means involving off-loading of shares by the incoming investor/ promoter within one year is not possible.
Sebi said such companies will be required to make additional disclosures, such as specific details of resolution plan including details of assets post-CIRP and details of securities continuing to be imposed on the companies' assets and other material liabilities imposed on the firm.
Besides, they need to make disclosure about proposed steps to be taken by the incoming investor/acquirer for achieving the minimum public shareholding and quarterly disclosure of the status of achieving the MPS.
In August, the Securities and Exchange Board of India (Sebi) came out with a consultation paper in this regard.
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