Sebi board to meet on December 16, discuss a range of issues

The Securities and Exchange Board of India (Sebi) is planning to discuss new shareholding norms for companies under the purview of the Corporate Insolvency Resolution Process (CIRP) as well as amendments to Listing Obligations and Disclosure Requirements (LODR) during its upcoming board meeting on December 16.

This will be the last meeting of the regulator’s board before the Union budget. “The Sebi board is meeting almost a month before the budget preparation. So, this meeting’s importance is high, since some of the proposals will be sent to the ministry for announcement during the budget speech,” a source close to the development told Moneycontrol.

Post-CIRP shareholding options

The meeting is likely to discuss a revamp of shareholding norms for companies that are facing CIRP insolvency proceedings. Sebi has received public comments on its discussion paper, in which it has put forward three options for consideration.

In the first option, the regulator proposed that after exiting CIRP, companies need to achieve at least 10 percent public shareholding within six months and 25 percent within 3 years from the date of breach of the minimum public shareholding requirement.

The second option proposes that post-CIRP, companies have at least 5 percent public shareholding during the time of relisting and the third option suggests at least 10 percent public shareholding at the time of re-listing.

Amit Tandon, Managing Director of proxy firm IIAS, told Moneycontrol: “Sebi’s charter is to protect the small shareholder. Rather than delist and re-list, one option that they need to examine is letting small investors holding less than Rs 2,00,000 in shares on a predefined date to continue to remain whole. So, once trading commences, you already have a set of investors.”

However, public comments support the three-year period for completion of minimum public shareholding and emphasis on 10 percent dilution during relisting of stocks, similar to the Initial Public Offer requirement.

Sebi issued this discussion paper on August 11, after Ruchi Soya’s stock surged 8,764 percent and its public shareholding came down to 0.67 percent. A lower public shareholding impacts price discovery of the share price.

“The proposal to prescribe a minimum public shareholding of 1 percent within the first six months or relisting followed by a 25 percent threshold would bring stability and avoid price fluctuations, which can be detrimental to small investors who can get lured by price movements in the short run to overlook fundamentals. This move by Sebi, in that sense, is timely and protective of the interests of retail investors,” said Saurabh Singh, Partner at corporate law firm Khaitan & Co.

Other items on the agenda

Sebi may also discuss amendments to the Listing Obligations and Disclosure Requirements (LODR). The regulator may discuss having listed companies disclose their financial results to exchanges within 30 minutes of board approval. Currently, such disclosures have to be made when the meeting is completed.

The regulator may ask the top 1,000 listed companies to formulate a dividend distribution policy applicable to the top 500 companies as per market capitalisation.

Apart from this, Sebi may discuss a framework for a T+1 settlement. After board approval, Sebi may issue a discussion paper for public comments.

Speaking to Moneycontrol, Anil Chaudhary, partner with Finsec Law Advisors, said: “The Sebi Board during the pandemic has provided various relaxations to listed companies and market intermediaries. One would believe those relaxations would continue along with reforms in listing norms for companies undergoing resolution plans.”

He added: “Sebi should be especially commended for its focus on developing a fast and efficient IPO market in India. The overwhelming success of recent IPOs with record oversubscriptions, even during the pandemic, bears evidence of a digital and seamless securities market that is accessible at ease on your smartphone. Introduction of T+1 settlement would be another welcome step.”

Moneycontrol had reported earlier that the Secondary Market Advisory Committee was discussing the proposal for a T+1 settlement.

At the meeting, the Sebi board is also expected to review the status of ongoing cases, including the Franklin Templeton mutual fund scheme closure case.