Currently, firms are offered 18 months to bring up the minimum public shareholding to 10% and 36 months to attain 25%.
The Securities and Exchange Board of India (Sebi) on Wednesday mandated that the firms emerging from insolvency proceedings will have to have at least a 5% upfront public shareholding, if the resolution approach has resulted in the public shareholding falling under 10%.
The move is aimed at curbing volatility and manipulation in the share costs of these firms. The regulator stated these firms would be offered 12 months to obtain a public shareholding of 10% from the date their shares are admitted for re-trading on the exchanges and 36 months to attain 25%.
To facilitate the upfront 5% public float when trading commences, Sebi has relaxed the lock-in guidelines on the shares held by the resolution applicant. The lock-in on equity shares allotted to the resolution applicant, beneath the resolution strategy, shall not be applicable to the extent essential to obtain 10% public shareholding inside 12 months. Currently, firms are offered 18 months to bring up the minimum public shareholding to 10% and 36 months to attain 25%.
Abhay Bhalaik, companion – Algo Legal, observed that even though there is a transform in promoters, the regulator desires the standard ethos of a listed organization must be maintained. Moin Ladha, companion – Khaitan and Co, stated that whilst a greater public float in listed firms guarantees fair value discovery and prevents manipulation, reaching a 5% public float pre-listing and balance subsequently has many challenges about productive industry for dilution, uncertainty concerning future liquidity, industry situations and volume of the relevant scrip.
Companies will have to make frequent disclosures to the exchanges on particular facts of resolution strategy, such as facts of assets post-CIRP and other material liabilities imposed on the organization..
Sebi’s board also authorized a proposal to do away with the applicability of minimum promoters’ contribution and the subsequent lock-in needs for the issuers producing a additional public provide (FPO), offered the company’s equity shares had been often traded on the exchanges for 3 years, has complied with listing and disclosure guidelines for 3 years and has redressed 95% of investor complaints.