Promoters get more time to increase public shareholding, SEBI eases listing norms amidst coronavirus

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Published: May 15, 2020 10:42 AM

In a breather for listed companies with promoter shareholding exceeding the 75% limit, the Securities and Exchange Board of India on Thursday relaxed norms for compliance under the Minimum Public Shareholding requirement.

Sebi in October 2019 in consultation with Amfi and after deliberations with Mutual Fund Advisory Committee (MFAC) had proposed calibrated reduction in limits for investment in unlisted securities in mutual fund schemes.SEBI has also asked the respective stock exchanges to not take any penal action against the listed companies that fail to bring down the promoter shareholdings and also guided them to withdraw any penal action, if initiated after March 1.

In a breather for listed companies with promoter shareholding exceeding the 75% limit, the Securities and Exchange Board of India (SEBI) on Thursday relaxed norms for compliance under the Minimum Public Shareholding (MPS) requirement. “Accordingly, the stipulations of the October 10, 2017 SEBI circular are relaxed for listed entities for whom the deadline to comply with MPS requirements falls between the period from March 1, 2020 to August 31, 2020,” SEBI said in a circular. The decision, according to SEBI, was taken after taking into consideration requests received from listed entities and industry bodies as well as considering the prevailing business and market conditions.

SEBI has also asked the respective stock exchanges to not take any penal action against the listed companies that fail to bring down the promoter shareholdings and also guided them to withdraw any penal action, if initiated after March 1. The market regulator has a set timeline for promoters to bring down their shareholding from the date of listing. In three years from listing the promoter, shareholding should be brought down to 75%. According to brokerage firm Samco Securities, public sector enterprise Coal India is one firm listed on the Nifty 50 stock exchange with promoter holding exceeding 75% mark. The rule mandating a 25% minimum public shareholding was brought into force in 2013.

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The rules were aimed at improving liquidity and better stock price discovery by making higher floats available with the public. Promoter holding in India is among the highest globally. As per the norms exchanges can impose a fine of up to Rs 10,000 on firms for each day of non-compliance with the minimum public shareholding norms. The rules also allow exchanges to intimate depositories to freeze the entire shareholdings of the promoter group in the company if it fails to comply.

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