SEBI mulls easing shareholding norms for firms under insolvency
Proposed guidelines
– It has been suggested that post corporate insolvency resolution process, companies may be mandated to achieve at least 10% public shareholding within six months and 25% within three years from the date of breach of minimum public shareholding norm
– Another option which has been suggested is that post-CIRP companies may be mandated to have at least 5% public shareholding at the time of relisting. Such firms may be provided 12 months to achieve public holding of 10% and further 24 months to achieve public shareholding of 25%
New Delhi, August 19
Markets regulator SEBI on Wednesday proposed relaxation in norms pertaining to 25% minimum public shareholding for companies which undergo corporate insolvency resolution and seek relisting following the process.
Besides, it proposed enhanced disclosure for such companies.
SEBI said it is possible that pursuant to implementation of the resolution plan, the public shareholding in such companies may drop to abysmally low levels.
In fact, in one recent case it was observed that post corporate insolvency resolution process (CIRP), the public holding decreased to 0.97%, and it showed 8,764% jump in share price in spite of additional preventive surveillance actions, including reduction in price band and moving the scrip into trade for trade segment. According to SEBI, such low public shareholding raises multiple concerns like failure of fair discovery of price of the scrip and need for increased surveillance measures and may therefore be a red flag for future cases. Low float also prohibits healthy participation in trading of such companies majorly due to issues related to demand and supply gap of shares, the regulator added.
Accordingly, the regulator has proposed recalibration of threshold for minimum public shareholding (MPS) norms in companies which undergo CIRP and seek relisting of shares pursuant to implementation of the approved resolution plan. It has sought views of public and market intermediaries till September 18 in this regard.
It has been suggested that post-CIRP companies may be mandated to achieve at least 10% public shareholding within six months and 25% within three years from the date of breach of minimum public shareholding norm.
Currently, the norms mandate that in case public holding of such company falls below 10%, then the same will be increased to at least 10% within 18 months and 25% within three years.
Another option which has been suggested is that post-CIRP companies may be mandated to have at least 5% public shareholding at the time of relisting. Such firms may be provided 12 months to achieve public holding of 10% and further 24 months to achieve public shareholding of 25%.
Post-CIRP companies may also be mandated to have at least 10% public shareholding at the time of relisting. Such firms may be provided three years to achieve minimum public shareholding of 25%.
