Mumbai: With the definition of a promoter undergoing a change as a large number of private equity and venture fund-led companies are getting listed on the stock exchanges, Myself We have decided to do away with this traditional concept.
NS SEBI Board It on Friday approved to initiate the process of changing the concept of ‘promoters’ to ‘controlling person’ or ‘controlling’. shareholders’ and asked the regulator to prepare a road map in consultation with their counterparts. SEBI said, “In recent years, many businesses and new age companies with diversified shareholding and professional management, which are coming into the listed sector, are non-family members and/or do not have a uniquely identifiable promoter group. ”
For example, recently listed zomato, there are no identifiable promoters, as shown by the NSE data. Its early backers such as Info Edge and Alipay (a branch of China’s Alibaba), Deepinder Goyal, the founder as well as Uber BV, which recently sold its food delivery business, are all listed as public shareholders. Traditionally, most bluechips like Reliance Industries, TCS, HDFC Bank and many others have promoters. Exceptions include HDFC, ICICI Bank, ITC and L&T.
The board also decided to halve 20% lock-in of promoter holding in newly listed companies from three years to 18 months and from one year to six months for non-promoters. SEBI said that these will be subject to certain conditions related to the use of funds raised through the IPO.
industry expert Both the decisions are to keep the market regulations in line with the emerging shareholding scenario in the country. According to Sandeep Parekh, a securities lawyer and former executive director of SEBI, the concept of promoter is a rigid one with “almost no international parallel”. “Sebi’s decision to move towards the concept of ‘Person in Control’ is a more realistic, fluid and accurate depiction of what actually controls the company,” Parekh said.
Securities lawyers also feel that the reduction in lock-in of holdings is a forward-looking move. “Private equity investors will welcome the reduction in the post-IPO lock-in period as they can get timely withdrawals,” said Anand Lakra, partner, J Sagar Associates. According to Parekh, the decision is also likely to increase liquidity in the market, “as more shares become available for trading”. Lakra also feels that Sebi can use this opportunity – the move to convert from promoter to person-control – to revisit the definition of control. In a bid to facilitate the government’s objective of ‘ease of doing business’, SEBI on Friday also waived off the requirement of disclosing post-facto nod for acquisition between 2-5% shareholding in market infrastructure institutions. “Stock exchanges, clearing corporations and depositories shall put in place suitable mechanisms to ensure compliance with fit and appropriate norms,” Sebi said.
SEBI merged the two regulations – Issue of Sweat Equity Regulation, and Share Based Employee Benefits Regulations – into a new one called SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.
NS SEBI Board It on Friday approved to initiate the process of changing the concept of ‘promoters’ to ‘controlling person’ or ‘controlling’. shareholders’ and asked the regulator to prepare a road map in consultation with their counterparts. SEBI said, “In recent years, many businesses and new age companies with diversified shareholding and professional management, which are coming into the listed sector, are non-family members and/or do not have a uniquely identifiable promoter group. ”
For example, recently listed zomato, there are no identifiable promoters, as shown by the NSE data. Its early backers such as Info Edge and Alipay (a branch of China’s Alibaba), Deepinder Goyal, the founder as well as Uber BV, which recently sold its food delivery business, are all listed as public shareholders. Traditionally, most bluechips like Reliance Industries, TCS, HDFC Bank and many others have promoters. Exceptions include HDFC, ICICI Bank, ITC and L&T.
The board also decided to halve 20% lock-in of promoter holding in newly listed companies from three years to 18 months and from one year to six months for non-promoters. SEBI said that these will be subject to certain conditions related to the use of funds raised through the IPO.
industry expert Both the decisions are to keep the market regulations in line with the emerging shareholding scenario in the country. According to Sandeep Parekh, a securities lawyer and former executive director of SEBI, the concept of promoter is a rigid one with “almost no international parallel”. “Sebi’s decision to move towards the concept of ‘Person in Control’ is a more realistic, fluid and accurate depiction of what actually controls the company,” Parekh said.
Securities lawyers also feel that the reduction in lock-in of holdings is a forward-looking move. “Private equity investors will welcome the reduction in the post-IPO lock-in period as they can get timely withdrawals,” said Anand Lakra, partner, J Sagar Associates. According to Parekh, the decision is also likely to increase liquidity in the market, “as more shares become available for trading”. Lakra also feels that Sebi can use this opportunity – the move to convert from promoter to person-control – to revisit the definition of control. In a bid to facilitate the government’s objective of ‘ease of doing business’, SEBI on Friday also waived off the requirement of disclosing post-facto nod for acquisition between 2-5% shareholding in market infrastructure institutions. “Stock exchanges, clearing corporations and depositories shall put in place suitable mechanisms to ensure compliance with fit and appropriate norms,” Sebi said.
SEBI merged the two regulations – Issue of Sweat Equity Regulation, and Share Based Employee Benefits Regulations – into a new one called SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.
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