Relaxation in Minimum Publish Shareholding by SEBI
SEBI has issued a Circular on 10th October 2017, regarding the imposition of penalties and other restrictive actions on the listed entities, their promoters, and directors, for non-compliance of provisions of Minimum Public Shareholding (MPS), it includes levy of fines, freezing of promoter’s holding, etc.
Vide Circular dated 14th May 2020, SEBI has relaxed the applicability of the Circular issued on 10th October 2017 for those listed entities whose deadline to meet the Minimum Public Shareholding (MPS) requirement falls between 1st March 2020 to 31st August 2020. All the Stock Exchanges are advised not to take any action against such entities during the said period and any action already taken against such companies may be withdrawn.
CIRCULAR
CFD/CMD/CIR/P/2017/115
October 10, 2017
To
All Listed entities
All the Recognised Stock Exchanges
All Depositories
Dear Sir/Madam,
Sub: Non-compliance with the Minimum Public Shareholding (MPS) requirements
1. Regulation 38 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”) mandates a listed entity to comply with the Minimum Public Shareholding(“MPS”) requirements specified in rules 19(2) and 19A of the Securities Contracts (Regulation) Rules, 1957 in the manner as specified by the Board from time to time.
2. In terms of sub-regulation (1) of regulation 97 of the Listing Regulations, recognized Stock Exchanges are mandated to monitor compliance by listed entities with the provisions of the Listing Regulations.
3.Sub regulations (1) and (2) of regulation 98 of Listing Regulations inter- alia specify the liability of a listed entity or any other person for contravention and action which can be taken by the respective recognized stock exchange and the revocation of such action, in the manner specified by the Board.
4. In order to maintain consistency and uniformity of approach in the enforcement of MPS norms mandated under regulation 38 of the Listing Regulations, the below-mentioned procedure shall be followed by the recognized stock exchanges /depositories, as applicable, with respect to non-compliant listed entities, their promoters, and directors:
4.1. The recognized stock exchanges shall review compliance with MPS requirements based on shareholding pattern/ other filings made with them by the listed entities from time to time. Within 15 days from date of observation of non- compliance, the stock exchanges shall issue notices to such entities intimating all actions taken/ being taken as per this circular and advise the entities to ensure compliance.
4.2. On observing non-compliance:
4.2.1. The recognized stock exchange shall impose a fine of ₹5,000/- per day of non-compliance on the listed entity and such fine shall continue to be imposed till the date of compliance by such listed entity.
4.2.2. The recognized stock exchange shall intimate the depositories to freeze the entire shareholding of the promoter and promoter group in such a listed entity until the date of compliance by such entity. The above restriction shall not be an impediment for the entity for compliance with the minimum public shareholding norms through the methods specified
/approved by SEBI.
4.2.3. The promoters, promoter group, and directors of the listed entity shall not hold any new position as director in any other listed entity till the date of compliance by such entity. An intimation to this effect shall be provided to the listed entity by the recognized stock exchange and the listed entity shall subsequently intimate the same to its promoters,
promoter group, and directors.
4.3. In cases where the listed entity continues to be non-compliant for a period of more than one year:
4.3.1. The recognized stock exchange shall impose an increased fine of ₹ 10,000/- per day of non-compliance on the listed entity and such fine shall continue to be imposed till the date of compliance by such listed entity.
4.3.2. The recognized stock exchange shall intimate the depositories to freeze all the securities held in the Demat account of the promoter and promoter group till the date of compliance by such entity.
The above restriction shall not be an impediment for the entity with respect to compliance with the minimum public shareholding norms through the methods specified/approved by SEBI.
4.3.3. Direction as per clause 4.2.3 above shall continue till the date of compliance by such entity.
5. The recognized stock exchange may also consider compulsory delisting of the non-compliant listed entity in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956, the Securities Contracts (Regulation) Rules, 1957 and the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009
as amended from time to time.
6. The recognized stock exchanges may keep in abeyance, the action, or withdraw the action in specific cases where a specific exemption from compliance with MPS requirements under the Listing Regulations /moratorium on enforcement proceedings has been provided under any Act, Court/Tribunal Orders, etc.
7. In case it is observed that the listed entity has adopted a method for complying with MPS requirements which is not prescribed by SEBI under clauses (2)(i) to (vi) under SEBI circular No. CIR/CFD/CMD/14/2015 dated November 30, 2015, and approval for the same has not been obtained from SEBI under clause 2 (vii) of the said circular, the recognized stock exchanges shall refer such cases to SEBI.
8. With respect to the fines as stated above:
8.1. The amount of fine realized as per the above structure shall be credited to the “Investor Protection Fund” of the concerned recognized stock exchange.
8.2. If any non-compliant listed entity fails to pay the fine despite receipt of the notice as stated above, the recognized stock exchange may initiate appropriate action.
9. Upon intimation of compliance by the listed entity with the MPS requirements, the concerned recognized stock exchange shall, on being satisfied with such compliance:
9.1. intimate the depositories to unfreeze the shares and other securities of the promoter and promoter group of the listed entity.
9.2. intimate the listed entity that directions imposed in terms of clause 4.2.3 above shall not continue and the listed entity shall subsequently intimate the same to its promoters, promoter group, and directors.
9.3. disseminate the information on its website regarding the compliance achieved by the listed entity.
10. The recognized stock exchanges shall periodically disclose on their website the following–
10.1. Names of non-compliant entities, amount of fine imposed, freezing of shares held by the promoters and promoter group and other actions are taken against the entity;
10.2. Status of compliance including details regarding fine paid by the entity.
11. The recognized stock exchanges may, having regard to the interests of investors and the securities market, take appropriate action in line with the principles and procedures laid down in this Circular. Any deviation, therefore, should not dilute the spirit of the policy contained herein and may be made on reasonable grounds to be recorded in writing.
12. In order to ensure effective enforcement of the Listing Regulations, the depositories, on receipt of intimation from the concerned recognized stock exchange shall freeze or unfreeze the shareholding of the promoter and promoter group in such entity and the other securities held by them, as applicable.
13. The actions specified in this Circular are without prejudice to the power of SEBI to take action under the securities laws for violation of the MPS requirements.
14. The Stock Exchanges are advised to bring the provisions of this Circular to the notice of listed entities and also to disseminate the same on its website.
15. This Circular shall come into force with immediate effect.
16. For entities which are non-compliant as on the date of this circular:
16.1. The stock exchanges shall undertake such action as prescribed under clause 4.2 or clause 4.3 of this circular depending on the period of non-compliance by the entity. However, the fines, as applicable, shall be imposed prospectively from the date of this circular.
16.2. The provisions of this circular shall not apply to those entities where orders have already been passed by SEBI under provisions of Securities and Exchange Board of India Act, 1992/ Securities Contracts (Regulation) Act, 1956 in relation to non-compliance with MPS requirements.
17. This Circular is issued under regulations 97, 98, 99, and 101 of Listing Regulations.
18. This Circular is available on the SEBI website at www.sebi.gov.in under the categories “Issues and Listing” and “Legal”.
Download the copy:
CIRCULAR
SEBI/HO/CFD/CMD1/CIR/P/2020/81
May 14, 2020
To
All listed entities that have listed their specified securities
All Recognized Stock Exchanges
All Depositories
Madam / Sir,
Sub: Relaxation from the applicability of SEBI Circular dated October 10, 2017, on non-compliance with the Minimum Public Shareholding (MPS) requirements
1. SEBI circular No. CFD/CMD/CIR/P/2017/115 dated October 10, 2017, lays down the procedure to be followed by the recognized stock exchanges/ depositories with respect to MPS non-compliant listed entities, their promoters, and directors, including levy of fines, freeze of promoter holding, etc.
2. After taking into consideration requests received from listed entities and industry bodies as well as considering the prevailing business and market conditions, it has been decided to grant relaxation from the applicability of the October 10, 2017 circular. Accordingly, the stipulations of the aforesaid October 10, 2017, SEBI circular are relaxed for listed entities
for whom the deadline to comply with MPS requirements falls between the period from March 1, 2020, to August 31, 2020. Recognized Stock Exchanges are advised not to take any penal action as envisaged on October 10, 2017 circular against such entities in case of non-compliance during the said period. Penal actions, if any, initiated by Stock Exchanges from March 1, 2020, to date for non-compliance of MPS requirements by such listed entities may be withdrawn.
3. This Circular shall come into force with immediate effect. The Stock Exchanges are advised to bring the provisions of this circular to the notice of all listed entities that have issued specified securities and also disseminate on their websites.
4. The Circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with regulations 97, 98,101, and 102 of the LODR.
5. This Circular is available at www.sebi.gov.in under the link “Legal Circulars”.
Download the copy:
Consultant
