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Market regulator SEBI’s proposal to make shareholder approval mandatory for companies wishing to divest in major subsidiaries received ‘ayes’ from more than two-thirds of the respondents -- 17 votes for and seven against.
SEBI’s Primary Market Advisory Committee (PMAC) had recommended that listed companies had to obtain shareholder approval for divestment in ‘material’ subsidiaries through a special resolution.
In line with the PMAC’s recommendation, SEBI has mandated that listed companies should have a policy of identifying ‘material’ subsidiaries, which should be duly disclosed to stock exchanges and also in their annual reports. SEBI further said that a subsidiary would be considered ‘material’ if a company had invested more than 20 per cent of its previous year’s consolidated net worth in the subsidiary or if the subsidiary has generated 20 per cent of the consolidated income of the company during the last fiscal.
Earlier, shareholder nod was not mandatory for divestment of subsidiaries. This had come up for discussion while SEBI was looking to plug violations of related-party transactions by inserting a provision in the listing agreement.
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