Securities market regulator SEBI has added two additional options for promoters of companies to help them achieve the minimum public shareholding norm of 25 per cent.
This includes selling the promoter shareholding in the open market by up to two per cent of the company’s share capital, besides offloading stakes to institutional investors via a qualified institutional placement (QIP) programme.
The decision follows an announcement by the regulator in its board meeting held on December 28, 2017. SEBI had then observed that the QIP regulations needed amendment, as only those entities that had already achieved the minimum public shareholding norm of 25 per cent were allowed to do a QIP.
With this the number of options available to promoters becomes eight.
The other six options are issuance of shares through a prospectus, offer for sale by promoters through a prospectus, sale of shares through the secondary market (stock exchanges), use of institutional placement programme, rights issue of shares to public shareholders with the promoters forgoing their rights, plus a bonus issue of shares to public shareholders with the promoters forgoing their entitlement.
SEBI has prescribed that the open market sale by two per cent would be subject to a limit of five times the company’s average monthly trading volume. Promoters have been asked to spell out details regarding the purpose of the sale by the promoter/promoter group, name of entities which will divest their shareholding, number of shares, and the percentage of shareholding proposed to be divested by each entity, besides the period within which the entire process of divestment would be completed.
Listed entities have been asked to give a written undertaking that none of its promoter/promoter group entities would purchase its shares from the open market during the period of divestment.