Public sector units freed from 25% public shareholding norm

Shishir Sinha New Delhi | Updated on August 01, 2021

The Finance Ministry has tweaked the Securities Contracts (Regulation) Rules, 1957 to exempt listed public sector companies from the minimum public shareholding norm. The move comes just ahead of the expiry of the three-year timeframe given to listed PSUs to conform to this norm.

Rule 19 A of the Securities Contracts (Regulation) Rules prescribes that a listed entity must have at least 25 per cent of public shareholding, that is, anyone other than a promoter. It could be an institution or an individual.

A Finance Ministry’s notification, dated July 30, said: “In the Securities Contracts (Regulation) Rules, 1957, in Rule 19A, after sub-rule (5) the following sub-rule shall be inserted, namely: (6) Notwithstanding anything contained in sub-rules (1) to (5), the Central Government may, in the public interest, exempt any listed public sector company from any or all of the provisions of this Rule.”

Listing requirement

Rule 19 A deals with Continuous Listing Requirement. Till now, it had five sub-rules. On listed public sector companies, which have public shareholding below 25 per cent, it says post the Securities Contracts (Regulation) (Second Amendment) Rules, 2018, they will increase the public shareholding to at least 25 per cent within three years. That is, they must achieve it by the end of this fiscal year.

The second sub-rule gives public sector entities two years to bring the shareholding to 25 per cent from the date it fell below that threshold.

While the third sub-rule has been removed, the fourth prescribes a three-year timeline for a listed company (including PSUs) to get back to 25 per cent if the public shareholding had come down below that level on account of implementation of Depository Receipts Scheme or the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014.

The fifth sub-rule deals with listed companies going for resolution under the Insolvency and Bankruptcy Code. Such a company, post-implementation of the resolution plan, will have 12 months and 36 months to achieve minimum public shareholding of 10 per cent and 25 per cent, respectively. It will have to maintain public shareholding of at least 5 per cent. as a result of the implementation of the resolution plan.

Published on July 31, 2021

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