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Markets regulator SEBI on Thursday floated a consultation paper on certain aspects of the Superior Voting Rights Share (SR share) Framework, including networth requirements of SR shareholders.
In addition, suggestions have been sought from the public with regard to issuance of SR shares to trusts and other entities on behalf of the promoters and timing of the issuance of such shares, according to the consultation paper.
Market participants are of the view that certain aspects of the current framework on SR shares are onerous, which delays such issuer companies from raising funds from capital markets.
SEBI's Primary Market Advisory Committee (PMAC) deliberated upon the matter and considered mandating the networth requirement of SR shareholders on an individual basis. The threshold for such networth requirement can also be enhanced, the consultation paper noted.
SEBI has sought suggestions till July 30 on several aspects, including whether networth requirement for SR shareholders be determined individually or as part of the promoter group.
The regulator also asked whether the networth threshold for SR shareholders should be retained at Rs 500 crore or enhanced. If it is to be enhanced, then suggestion has been sought on the new threshold and whether the proceeds from sale of shares of the issuer company should be excluded while determining networth.
According to market participants, the current norms, which say an SR shareholder will not be part of the promoter group whose collective net worth is more than Rs 500 crore, are too onerous to comply with and to keep prospective SR shareholders away from utilising the SR shares framework, the consultation paper said.
SEBI has sought suggestions on whether holding companies or registered family trusts or partnerships where promoters or founders are in control or sole trustees can also be permitted to hold SR shares as long as such promoters/ founders/ trustees continue to hold executive positions in the issuer company.
At present, SR shares are only issued to promoters and founders who hold an executive position in the issuer company.
In addition, suggestions have been sought on whether the requirement of holding SR shares for a period of 6 months prior to the date of red herring prospectus (RHP) should be deleted.
Currently, the rules stipulate that SR shares should have been held for a period of at least six months prior to the filing of the RHP.
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