The Hindu Business Line : New norms for overhaul of listing requirements proposed

New Delhi, Feb. 1 The legal framework governing initial and continuous listing of shares of companies in stock exchanges is in for an overhaul. The Finance Ministry on Friday sought views from the public and other stakeholders on a set of measures proposed to strengthen the existing listing requirements.

The Government now proposes to stipulate a public stake of 25 per cent for a company to be listed and to continue to be listed in stock exchanges. The new norms being proposed also seek to withdraw the powers of the Securities and Exchange Board of India (SEBI) to relax listing requirements.

At the moment, companies in certain sectors are allowed to list and continue to list if they have a minimum public shareholding of 10 per cent as long as certain conditions are met.

Defining the ‘public’

The Finance Ministry has now, as part of a discussion paper titled ‘Requirement of public holding for listing’, sought views on how “public” should be defined. The draft proposals also specify that if for any reason the public holding reduces below 25 per cent, then the promoters, management and company may be “jointly and severally” liable to bring the public holding to 25 per cent within three months, in the manner prescribed by SEBI, failing which appropriate enforcement action including delisting may be taken.

The Finance Ministry paper has also highlighted that there should not be any discrimination between a Government and a non-Government company. “The powers of the stock exchanges to relax any of the conditions of listing with the prior approval of SEBI in respect of a Government company needs to be withdrawn. Similarly, the powers of SEBI to relax listing requirements may be withdrawn,” the paper adds.

It is also proposed that the standards for initial and continued listing be prescribed in the Securities Contracts (Regulation) Rules (SCRR). The paper highlighted that the standards for initial and continuous listing may be uniform, as the objective is the same.

Public, public offer

Moreover, it has suggested that the SCRR may speak in terms of allotment to public and not just public offer. It has been pointed out that the public offer envisaged at the initial listing is of no consequence unless the public are actually allotted shares. “As of now, the word ‘public’ is not defined. If public means ‘non-promoters’ and includes FIs, FIIs, MFs, employees, NRIs/OCBs, private corporate bodies among others, the floating stock would be insignificant,” the paper adds and states that a view needs to be taken on this matter.

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