SEBI prescribes the Manner of achieving Minimum Public Shareholding [Read Circular]

The Securities Exchange Board of India, i.e., SEBI, last day prescribed the manner of achieving minimum public shareholding.

In November 2015, the Board has issued a circular allowing various methods that may be used by a listed entity to achieve compliance with the minimum public shareholding requirements mandated under rules 19(2) (b) and 19A of the Securities Contracts (Regulation) Rules, 1957 (“the SCRR”) read with regulation 38 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The present circular is issued with a view to further facilitate listed entities to comply with the minimum public shareholding requirements. For this, the following additional methods are allowed.

1. Open market sale: Sale of shares held by the promoters/promoter group up to 2% of the total paid-up equity share capital of the listed entity in the open market, subject to five times’ average monthly trading volume of the shares of the listed entity;
2. Qualified Institutions Placement: Allotment of eligible securities through Qualified Institutions Placement in terms of Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

Conditions for open market sale:

1. a) In respect of the method mentioned at paragraph 2(a) above, the listed entity shall, at least one trading day prior to every such proposed sale, announce the following details to the stock exchange(s) where its shares are listed:
2. the intention of the promoter/promoter group to sell and the purpose of sale;
3. the details of promoter(s)/promoter group, who propose to divest their shareholding;

iii. the total number of shares and percentage of shareholding proposed to be divested; and

1. the period within which the entire divestment process will be completed.
2. b) The listed entity shall also give an undertaking to the recognized stock exchange(s) obtained from the persons belonging to the promoter and promoter group that they shall not buy any shares in the open market on the dates on which the shares are being sold by promoter(s)/promoter group as stated above.
3. c) The listed entity, its promoter(s) and promoter group shall ensure compliance with all applicable legal provisions including that of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 and Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.