Background: Regulation 38 of SEBI (LODR): Minimum Public Shareholding
(MPS)
Regulation 38 under Chapter IV (Obligation of Listed Entity which has
listed its specified securities) of securities and Exchange board of India
(Listing Obligations and Disclosure Requirements) Regulations 2015, is as under
All listed companies have to comply with Minimum Public Shareholding
norms, as laid down in Rule 19(2) and 19A of SCRR, in the manner specified by
SEBI from time to time.
Whereas:
In rule 19, in sub-rule (2), in clause (b), before sub-clause (i), the
following shall be inserted, namely:-'The minimum offer and allotment to public
in terms of an offer document shall be-;(iii) in rule 19A, after sub-rule (3),
the following new sub-rule shall be inserted, namely:-
'(4) Where the public shareholding in a listed company falls below
twenty-five per cent in consequence to the Securities Contracts (Regulation)
(Amendment) Rules, 2015, such company shall increase its public shareholding to
at least twenty-five per cent. in the manner specified by the Securities and
Exchange Board of India within a period of three years, as the case may be, from
the date of notification of:
(a) the Depository Receipts Scheme, 2014 in cases where the public
shareholding falls below twenty five per cent as a result of such scheme;
(b) the Securities and Exchange Board of India (Share Based Employee
Benefits) Regulations, 2014 in cases where the public shareholding falls below
twenty-five percent., as a result such regulations.'
The Securities and Exchange Board of India has directed stock exchanges
on 10th October, 2017 to crack the whip on companies that do not comply with the
minimum public shareholding requirements. The regulator has asked exchanges to
impose a fine on non-compliant companies, freeze promoter shares and bar
promoters from being promoters in other listed companies till they do not comply
is explained in detailed as follows:
Please find link of original report:
http://www.bseindia.com/corporates/Displaydata.aspx?Id=b8db4462-8c64-4cbc-908e-d7a7b0a8f907&Page=ci
|
IMPLICATIONS |
PARTICULARS |
|
Penalty Imposition. |
• Rs. 5000/-
fine per day on noncompliance with MPS requirements. • Fine to be
continued till date of compliance |
|
Freeze of Shareholding Depository Account. |
• Entire
shareholding of promoter and promoter groups in respective to defaulting
listed entity will be freezed by depositories if instructed by recognised
stock exchange •
To be
continued till date of compliance • Exception
for those entity who are compliant as per the methods specified/approved
by SEBI |
|
Resulting in Disqualification |
• Promoters,
Promoters group and directors of the listed entity shall not hold new
position as director in other listed entities •
To be
continued till date of compliance • Intimation
will be given to listed entity by recognised stock exchange. |
|
IF DEFAULTS CONTINUE FOR MORE THAN ONE YEAR |
|
|
Penalty Imposition. |
• Rs. 10000/-
fine per day on noncompliance with MPS requirements. • Fine to be
continued till date of compliance |
|
Freeze of all securities Depository Account. |
• All
securities held by promoter and promoter groups held in DEMAT Account
will be freezed by depositories if instructed by recognized stock
exchange • To be
continued till date of compliance by defaulting listed entity • Exception
for those entity who are compliant as per the methods specified/approved
by SEBI |
|
Resulting in Disqualification |
• Promoters,
Promoters group and directors of the listed entity shall not hold new
position as director in other listed entities •
To be
continued till date of compliance • Intimation
will be given to listed entity by recognized stock exchange. |
Kindly Note:
1.
Fines as applicable shall be imposed prospectively from the date of
circular.
2.
Fines so received shall be credited to 'Investor Protection Fund' of the
concerned stock exchange.
3.
Appropriate actions will be initiated, if there is default in payment of
fines
4.
Circular not applicable to those companies, where SEBI has already passed
order in relation to non-compliance with MPS requirements.
OTHER IMPLICATIONS
• It may result in compulsory delisting of non-compliant listed entities in accordance with the provisions of the securities contracts (regulation) Act, 1956; the securities contract (regulation) rules, 1957 and the SEBI (Delisting of Equity Shares) regulations 2009 as amended time to time.
RESPONSIBILITIES ON SHOULDER OF RECOGNISED STOCK EXCHANGE
• Shall review listed
entities from time to time in relation to compliance of MPS based requirements.
•
• Disclosures to be made by recognized stock exchange on their website:
1.
Name of non-compliant entities; amount of fine imposed; freezing of shares
held and other actions taken
2.
Status of compliance (whether complied or not)
• Action to be taken
in interest of investors and securities market
DISCLAIMER: The entire contents of this document have been developed on the basis of relevant information and are purely the views of the authors. Though the authors have made utmost efforts to provide authentic information however, the authors expressly disclaim all or any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document.
READER SHOULD SEEK APPROPRIATE
COUNSEL FOR THEIR OWN SITUATION. I SHALL NOT BE HELD LIABLE FOR ANY OF THE
CONSEQUENCES DIRECTLY OR INDIRECTLY.
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