BC | Legislative Alert | Maintenance of public shareholding in listed companies for whom resolution plan is approved | SCRR amended

1. In cases of public shareholding falling below 25%. Where the public shareholding in a listed company falls below 25%, as a result of implementation of the resolution plan approved under section 31 of the Code, such company shall bring the public shareholding to 25% within a maximum period of 3 years from the date of such fall, in the manner specified by the Securities and Exchange Board of India (“SEBI”);

2. In cases of public shareholding falling below 10%. However, if the public shareholding falls below 10%, the same shall be increased to at least 10%, within a maximum period of 18 months from the date of such fall, in the manner specified by the SEBI.

The SEBI, in its recent circular issued on February 22, 2018 (available here), had added two more methods of maintaining MPS Requirement, that is, open market sale and qualified institutional placements. These methods were added in addition to already existing methods (as per SEBI circular dated November 30, 2015, available here) like further issue of shares to public, offer for sale by promoters to public, sale of shares by promoters through secondary market, institutional placement programme, rights / bonus issue to public shareholders, any other methods approved by SEBI on a case to case basis.

With the introduction of the aforesaid amendment, the SEBI has made it clear that the norms to maintain MPS Requirement are required to be followed even in cases of companies where the public shareholding falls below 25 or 10% (as the case may be), as a result of implementation of the resolution plan approved under section 31 of the Code, as per the timelines mentioned above.