Listed public sector companies will have to comply with the norm of 25 per cent minimum public shareholding by August 21, 2017. This will help the Government’s disinvestment programme as well as ensure more PSU shares for retail investors.

At present, public sector companies are required to maintain 10 per cent minimum public shareholding, while listed private sector entities are required to have 25 per cent public shareholding.

However, On June 19, the SEBI board decided that there should be a uniform norm for all companies listed on stock exchanges. According to the website, there are 25 Central Public Sector Enterprises (CPSEs), nine public sector banks (PSBs) and one State-level public enterprise (SLPE) which are listed and have less than 25 per cent minimum public shareholding.

The Finance Ministry has notified an amendment to the Securities Contracts (Regulation) Rules, 1957, according to which “every listed public sector company which has public shareholding below 25 per cent, on the date of commencement of the Securities Contracts (Regulation) (Second Amendment), Rules, 2014, shall increase its public shareholding to at least 25 per cent, within a period of three years, in the manner, as may be specified, by the Securities and Exchange Board of India.” The date of effect is August 22, 2014.

SEBI’s norms mandated minimum public shareholding norms of 25 per cent for listed private sector companies by June 3, 2013.

Accordingly, on June 4, the SEBI passed an order against 105 private companies for not fulfilling these norms. It first issued a show-cause notice to these companies and, based on their replies, initiated action, including freezing voting rights, dividend, imposing penalty among other things.

According to an order by Prashant Sharan, whole-time member of SEBI, dated June 4, 2013, the availability of a minimum portion/number of shares (floating stock) of the listed securities with the public ensures that there is a reasonable depth in the market and the prices of the securities are not susceptible to manipulation.

Moreover, a dispersed shareholding structure is also essential for the sustenance of a continuous market for listed securities in order to provide liquidity to investors and offer fair prices.

SEBI has prescribed various instruments for achieving minimum public shareholding.

These include follow-on public offer, offer for sale through stock exchanges, institutional placement programme, rights issue (with promoters forgoing their rights entitlements) and bonus issue (with promoters forgoing their bonus entitlements).