Securities and Exchange Board of
India (SEBI) on 11th May 2021 proposed to rationalize the definition
of 'promoter group’ and move to the concept of 'person in control' as well as
reduce the minimum lock-in periods for promoters' and other shareholders post
an IPO.
In a consultation paper, the watchdog
has also suggested streamlining the disclosure requirement of group companies.
The Securities and Exchange Board of
India (SEBI) has sought comments from the public on the proposals till June 10.
About the lock-in period, SEBI has proposed that if the object of the issue
involves an offer for sale or financing other than for capital expenditure for
a project, then the minimum promoters' contribution of 20 per cent should be
locked in for one year from the date of allotment in the Initial Public Offer
(IPO). Currently, the lock-in period is three years.
However, shares held by promoters
should be exempt from lock-in requirements after six months from the date of
allotment in the IPO, only towards the purpose of achieving compliance with
minimum public shareholding norms.
"Promoters' holding in excess of
minimum promoters' contribution shall be locked in for a period of six months
as opposed to the existing requirement of one year from the date of allotment
in the IPO," SEBI suggested.
The entire pre-issue capital held by
persons other than the promoters should be locked in for six months from the
date of allotment in the IPO as against the current requirement of one year.
In addition, the regulator has
suggested rationalizing the definition of 'promoter group' as the current
definition focuses on capturing holdings by a common group of individuals or
persons and often results in capturing unrelated companies with common
financial investors.
SEBI noted that capturing the details
of holdings by financial investors while being a challenging task, may not
result in any meaningful information to investors.
Further, post listing, it is more
relevant to identify and disclose related parties and related party
transactions. The regulator has proposed to do away with the current definition
of promoter group specified in the ICDR (Issue of Capital and Disclosure
Requirements) norms as the deletion would rationalize the disclosure burden and
bring it in line with the post listing disclosure requirement.
The definition for promoter group
under the ICDR rules stipulates that promoter group includes "any body
corporate in which a group of individuals or companies or combinations thereof
acting in concert, which hold 20 percent or more of the equity share capital in
that body corporate and such group of individuals or companies or combinations
thereof also holds 20 percent or more of the equity share capital of the issuer
and are also acting in concert".
In respect of group companies, the
regulator has proposed that only the names and registered office address of all
the group companies should be disclosed in the Draft Red Herring Prospectus.
All other disclosure requirements
like financials of top 5 listed or unlisted group companies, litigation, among
others, in the draft papers, can be done away with. However, these disclosures
should continue to be made available on the websites of the listed companies.
Amid changing investor landscape in
India, SEBI suggested that there is a need for revisiting the concept of
'promoter' to a concept of 'person in control' and a period of three years has
been proposed for such a shift over in a smooth and progressive manner without
causing any disruption.
Also, increased focus on the quality
of board and management has reduced the relevance of the concept of the
promoter, SEBI said.
"Unlike the past, the concentration of ownership and controlling rights does not vest completely in the hands of the promoters or the promoter group. There has been a significant increase in the number of private equity and institutional investors who invest in companies and take up substantial shareholding, and in some cases, control," SEBI noted. Such private equity and institutional investors invest in unlisted companies and continue to hold shares post listing, many times being the largest public shareholders, having special rights on the listed company, such as the right to nominate directors, it added.
Moreover, several businesses,
including new age and tech companies, are non-family owned and do not have a
distinctly identifiable promoter group.
According to SEBI, the aggregate
shareholdings of promoters in the top 500 listed entities in terms of market
value, peaking at 58 percent in 2009 and is showing a downward trend.
The promoters' shareholding was
around 50 percent in 2018. At the same time, the shareholding of institutional
investors in the top 500 listed firms increased from about 25 percent in 2009
to 34 percent in 2018.
"Changes in nature of ownership,
could lead to situations where the persons with no controlling rights and
minority shareholding continue to be classified as a promoter. being called
promoters, such persons may have influence over the listed entity
disproportionate to their economic interest, which may not be in the interests
of all stakeholders," SEBI noted.
The shift from the concept of
'promoter' to the concept of 'person in control' may have implications on laws
administered by other regulators such as the MCA, RBI and IRDAI, the regulator
pointed out.
Given that the freezing of promoter
holdings is presently an important tool of enforcement in the securities
market, the shift would also necessitate reorientation of enforcement
strategies, it added.
Source
No comments:
Post a Comment