Market regulator Sebi is all set to issue clarifications on the definition of control regarding shareholder agreements, reports CNBC-TV18's economic policy editor Siddharth Zarabi, quoting sources.
Sebi will consider, as normal, share-holding agreements which stipulate that the seats on the board of directors are proportionate to shareholding and there are drag and tag rights. The regulator has disallowed clauses that mandate decisions or approval from partners.
According to Sebi, wherever there is a strategic partner with the right to appoint a certain number of directors, appoint the vice-chairman, chairman or the audit committee signals a transfer of power and the company has to automatically trigger an open offer.
In another development, the Cabinet has approved an ordinance to amend the Securities and Exchange Board of India Act to bring the governance of chit funds and collective investment schemes (CIS) under the purview of Sebi. This ordinance will be replaced by a legislation in the next session of Parliament which begins on August 5.
The ordinance strengthens Sebi's legal standing in directives issued against companies like Saradha and other the chit fund scams. The ordinance will also allow Sebi to regulate such fund schemes for an interim period till the government takes a decision.
The Cabinet Note also mandates that collective investments schemes having a corpus of more than Rs 100 crore should be brought under the purview of Sebi along with the power to attach and sell properties.
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