Money & Banking

Why State Bank of India has not been categorised as promoter of YES Bank

K Ram Kumar Mumbai | Updated on March 19, 2020 Published on March 18, 2020

 

Why has State Bank of India (SBI) been categorised as a public shareholder and not promoter despite having a majority 48.21 per cent stake in crisis-hit YES Bank?

Experts reason that if India’s largest bank had come in the capacity of YES Bank’s promoter, it would have been subject to the liability provisions governing promoters under the Companies Act, 2013.

Now, as a public and single largest non-promoter shareholder, the liability provision is not applicable to SBI. Referring to para 5(9) of the ‘YES Bank Reconstruction Scheme, 2020’, Makarand Joshi, Partner, MMJC and Associates LLP, observed that it clearly states that the investor bank and investors will be treated as ‘public shareholders’ of the reconstructed bank for five years from the date of allotment of shares to them under all applicable laws.

Moreover, this scheme has been prepared under regulation 45 of the Banking Regulation Act and sub-section (14) of Section 45 also clearly states that this scheme will override other laws.

Had SBI been categorised as a promoter shareholder under the Companies Act, 2013, it would have been subject to certain liabilities, including for furnishing false or incorrect information for incorporation of the company, and obligation to give exit opportunity to the dissenting shareholders.

Further, it would also have been subject to liability to pay compensation for misstatement or omission in prospectus, and liability to compensate for gain resulting from non-disclosure or insufficient disclosure of information in explanatory statement.

Open offer

SEBI takeover regulations mandate that if an acquirer acquires more than 25 per cent voting shares of any listed company, it should make an open offer to other shareholders to exit. Now, SBI has acquired more than 25 per cent voting shares of YES Bank, but did not make such an announcement or open offer.

Published on March 18, 2020
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