A day after the deadline of meeting the minimum public shareholding norms for private companies lapsed on Monday, market regulator SEBI came out with an interim order against erring promoters and directors of 105 companies who had failed to comply with the requirements.

According to a late night press release issued by the Securities and Exchange Board of India (SEBI), of these 105 companies, 33 companies are suspended by the stock exchanges. In addition, there are three companies where the matter is sub judice.

The directions issued by SEBI include freezing of voting rights and corporate benefits like dividend, rights, bonus shares, split, etc. of the promoters or promoter group of the non-compliant companies with respect to the excess of proportionate shareholding in respective companies. These restrictions would be in place till such time these companies comply with the minimum public shareholding requirement.

The regulator has also directed prohibiting the promoters or promoter group and directors of the non-compliant companies from buying, selling or otherwise dealing in the securities of their respective companies except for the purpose of complying with the norms. It has also restrained them from holding any new position as a director in any listed company till such time these companies comply with the norm.

SEBI also reiterated that it may take further action in accordance with law for non compliance with the norms and stated that its latest order be treated as a show cause notice for the same.

The Securities Contracts (Regulation) Rules, 1957 were amended in 2010 to provide for minimum and continuous public shareholding requirement in listed companies in private sector at 25 per cent. The idea behind the move was that a dispersed shareholding structure was essential for the sustenance of a continuous market for listed securities to provide liquidity to the investors and to discover fair prices.

>manisha.jha@thehindu.co.in

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