Update | Modes of meeting Minimum Public Shareholding requirements

Pursuant to the discussions in the SEBI board meeting held on December 28, 2017 (“SEBI Board Meeting”), SEBI issued: (i) Circular no. SEBI/HO/CFD/CMD/CIR/P/43/2018 dated February 22, 2018 (available here) (“Circular”), and (ii) the SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2018 (“Amendment”), vide a notification no. SEBI/LAD-NRO/GN/2018/01 dated February 12, 2018 (available here).

The said Circular sets out two additional methods for listed entities to comply with the minimum public shareholding requirements, namely:

1. An open market sale by the promoters and the promoter group of upto 2% of the total paid up equity share capital of the listed entity; and
2. Allotment of eligible securities through a Qualified Institutions Placement (“QIP”).

The following conditions apply to listed companies in respect of an open market sale:

1. Announce to the stock exchange, the intention and details of the promoter/promoter group, the purpose of the sale, the total number of shares and percentage of shareholding to be divested, along with the time period for the divestment process, one day prior to making of the proposed sale;
2. Give an undertaking to the stock exchange that the promoter/promoter group will not buy shares in the open market during the time of an open market sale; and

Regulation 82(c) under Chapter VIII (Qualified Institutions Placements) of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (“ICDR Regulations”) has been omitted by the Amendment. The said Regulation 82 set outs the conditions to be satisfied by a listed issuer prior to making a qualified institutions placement. The deleted condition under Regulation 82 (c) required the listed issuer to be in compliance with the requirement of minimum public shareholding for the purposes of making a QIP.