SEBI restricts voting rights of promoters not meeting minimum public holding norms

Market regulator Securities and Exchange Board of India (SEBI) has put a set of restrictions on promoters of 105 listed companies who have failed to meet the June 3 deadline for meeting minimum public holding norms. The norms were envisaged to disperse shareholding structure for listed securities to provide liquidity to the investors and to discover fair prices.

SEBI has restricted the voting rights and other corporate activity such as dividend payment, rights issue, stock split, bonus, etc to the promoters beyond their proportional holding. For this purpose, it has said the excess proportional holding would be calculated with respect to the public holding of the firms.

For instance, a firm which has promoter holding of 90 per cent (against 75 per cent) and thereby public holding of 10 per cent, the excess promoter stake would be counted as the holding over and above three times (from the minimum 3:1 proportional holding in a firm with 25 per cent public shareholding) that of the public holding. This would be 60 per cent in this case; therefore, promoters of such firms with that much holding will be entitled to dividends only up to 30 per cent holding.

The regulator has also barred promoters of such firms from taking fresh directorships in other listed firms and from buying or selling securities of the firm, till the company meets the norms. SEBI has said it may take further action for non-compliance with the minimum public shareholding requirement and the said order shall be treated as a show cause notice for the same.

The big firms whose promoters have been brought under these restrictions include Bombay Rayon, Fresenius Kabi Oncology, Hubtown, Plethico, Omaxe, Sundaram Clayton and Videocon Industries. The PE-backed companies which are in the dock for missing the deadline include Singapore’s sovereign wealth fund GIC-backed Adani Ports & Special Economic Zone, CVCI-backed BGR Energy, EILSF-backed Dr Agarwals Eye Hospital and Navis Capital-backed Sah Petroleums.

According to SEBI, 200 companies were not complying with the minimum public holding norm as on June 30, 2012. It had held discussions with these firms on the modality to bring down the promoter holding and some managed to meet the norms but 108 firms did not confirm to the norms by the deadline. There are three companies where the matter is sub judice and the regulator has put restrictions on the promoters of the other 105 firms.

For some of the companies the due date of compliance falls beyond June 3, 2013 including an extended period for PSU entities to meet the norms.

(Edited by Joby Puthuparampil Johnson)

Leave Your Comment(s)