Re-classification of promoters: SEBI moots relaxing holding limit to 15%

Promoters of listed companies whose shareholding falls below 15 per cent and those who do not play any role in the day- to-day management may get to opt out from the promoter category.

The Securities and Exchange Board of India on Monday put out a public consultation paper for proposing change to the minimum threshold for voting rights for re-classification of a promoter as a public shareholder and suggested all promoter entities disclose shareholding even in case of ‘nil’ holding.

However, SEBI said the re-classification condition on shareholding should be amended such that the promoter and related persons seeking re-classification should not together hold 15 per cent or more of the total voting rights in the listed entity. Earlier, the threshold was a fall in shareholding below 10 per cent.

The reclassification is subject to the condition that promoter does not remain in control of the listed entity, SEBI said.

Case-to-case basis

SEBI said that it has received feedback from market participants to review the current threshold. Promoters who desired reclassification found it difficult under the current regulatory regime.

As of now, relaxation from existing requirements on classification is given by SEBI on a case-to-case basis. SEBI said it wanted to minimise the number of exemptions provided on a case-to-case basis.

“The exemption from... Listing Obligations and Disclosure Requirements (LODR), as extended in case of re-classification of promoter, pursuant to resolution plan, approved under ... the Insolvency Code, may also be extended to re-classification pursuant to an order/ direction of the government / regulator and/or as a consequence of operation of law,” SEBI said.

Open offer cases

Also, exemption from the procedure for re-classification should be granted to existing promoters in cases where such re-classification is pursuant to an open offer, SEBI said. It further suggested that exemption should be granted in cases where, pursuant to an open offer, a listed entity intends to re-classify erstwhile promoter group entities but such entities are not traceable or not co-operative.

Exemptions under the open offer cases are subject to certain conditions, including that the intent of the existing promoter to re-classify should be disclosed in the letter of offer.

SEBI has sought comments from the public till December 24.