Sebi tightens shareholding norms, eases MF norms
3 min read 16 Dec 2020, 06:11 PM ISTSebi amended the norms related to minimum public shareholding norms for listed companies that are going through corporate insolvency resolution process
PremiumMUMBAI: The Securities and Exchange Board of India or Sebi, on Wednesday, tightened the public shareholding norms for listed companies and eased the rules for entities that wish to launch mutual fund business in the country.
Following a board meeting, Sebi amended the norms related to minimum public shareholding norms for listed companies that are going through corporate insolvency resolution process (CIRP).
The market watchdog said that CIRP-bound companies need to maintain a public shareholding of at least 5% to be able to qualify for trading of their shares on stock exchanges.
As per the extant norms, all companies need to ensure a minimum public shareholding of 10% to stay listed and need to enhance this holding to at least 25% within three years. And this 25% needs to be maintained at all times thereafter.
CIRP-bound entities are treated differently.
At present, during CIRP, if the public shareholding falls below 10% they can continue to have their shares traded on exchanges but are required to bring the public shareholding to at least 10% within a period of 18 months and to 25% within 36 months.
This essentially means there is no minimum public shareholding requirement for such companies at present and they can freely trade their shares on bourses.
Sebi has now decided that for companies which continue to remain listed as a result of implementation of the resolution plan under the Insolvency and Bankruptcy Code (IBC), it will be mandatory to have at least 5% public shareholding at the time of their re-admission to dealing on stock exchange platforms.
Such companies will be given 12 months to increase their public shareholding from 5% to at least 10%.
However, for attaining the public shareholding of 25%, such companies will be continued to be given 36 months, said Sebi.
As per the existing rules, following the approval of resolution plan by NCLT, the new owners or promoters are subjected to certain lock-in periods during which they cannot sell their shares to the public.
Sebi, on Wednesday said that such a lock-in on equity shares will not be applicable if a sale of shares by the new owner of the company is required to achieve the stipulated 10% public shareholding threshold within 12 months.
However, such companies will be required to make additional disclosures, such as, specific details of resolution plan including details of assets post-CIRP, details of securities continuing to be imposed on the companies’ assets and so on.
Such companies will also need to disclose other material liabilities imposed on the company, proposed steps to be taken by the incoming investor or acquirer for achieving the minimum public shareholding and quarterly disclosure of the status of achieving the same.
In another move, Sebi has eased the eligibility norms for entities who intend to launch mutual fund companies.
In a bid to enhance the penetration of MFs in the country, Sebi said that even loss-making entities can launch or become sponsors of mutual fund companies as long as such entities have a net-worth of at least Rs. 100 crore.
“To facilitate innovation and enhanced reach to more investors at a faster pace including tech-enabled solutions, sponsors that are not fulfilling profitability criteria at the time of making application, shall also be considered eligible to sponsor a mutual fund subject to having a net-worth of not less than Rs. 100 Crore for the purpose of contribution towards the net-worth of the Asset Management Company (AMC)."
This networth of the AMC has to be maintained till the time the AMC makes profit for five consecutive years, said Sebi.
Sebi said this move follows a proposal made by a working group that was constituted under the aegis of Sebi’s mutual fund advisory committee (MFAC).
Sebi has directed all mutual funds to segregate and ring-fence all assets and liabilities of each MF scheme from other schemes of the mutual fund.
Mutual funds are no longer required to issue physical unit certificates, said Sebi.
This, according to Sebi, will reduce maximum permissible exit load, reduce the timeline for payment of dividend, permit other modes for payment of dividend and provide clarity with regards to payment of interest and penalty in case of delay in dividend payments.
In another key move, the market regulator has done away with the applicability of minimum promoters’ contribution and the lock in requirements for companies making further public offers (FPOs).
Sebi said that such an exemption will be available to a company only if its shares have been frequently traded on a stock exchange for at least three years, and if it has redressed at least 95% of the complaints received from the investors.
