The Securities and Exchange Board of India finalised new norms Wednesday for companies that find a new owner after going through a bankruptcy resolution process.
The capital markets regulator said in a statement after a board meeting that insolvent companies must have at least 5% public shareholding at the time of their admission to stock exchanges. There is no such cap at present.
Also, such companies will get 12 months to achieve public shareholding of 10% from the date their shares are admitted for trading on stock exchanges and 36 months to achieve public shareholding of 25%.
Currently, companies undergoing a resolution process under the Insolvency and Bankruptcy Process are required to bring the public shareholding to at least 10% within 18 months and to 25% within 36 months of relisting. This will ensure such companies meet SEBI’s minimum public shareholding norm of 25% applicable to all listed companies.
SEBI also said that the lock-in requirement on equity shares allotted to a resolution applicant will not be applicable to achieve the norm of 10% minimum public shareholding within 12 months.
Such companies must also make additional disclosures related to the resolution plan, SEBI said. These include proposed steps by the new owners for minimum public shareholding on a quarterly basis, details of assets with the target company after the resolution process, details of securities that continue to be imposed on their assets and other material liabilities imposed on the company.
The SEBI board also approved a proposal to do away with the minimum promoters’ contribution towards a follow-on public offering and the subsequent lock-in requirements. But it imposed three riders: the equity shares of the issuer are frequently traded on a stock exchange for at least three years; the issuer is SEBI-compliant for last three years; and the issuer has redressed at least 95% of investor complaints.
At present, promoters are mandated to contribute 20% towards a follow-on public offering.
SEBI also amended its regulations for alternative investment funds such as private equity and venture capital vehicles. It approved certain exemptions to investment committee members but this is conditional upon capital commitment of at least Rs 70 crore from each investor accompanied by a suitable waiver.
The SEBI board also tweaked norms for mutual funds and investment advisers, among other decisions.