The Securities and Exchange Board of India (“SEBI”) has issued a circular on Non-Compliance with the Minimum Public Shareholding (“MPS”) requirements under Regulation 38 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”).
Regulation 97(1) of the Listing Regulations makes it mandatory for the recognized Stock Exchanges to monitor compliance of the listed entities with Regulation 38 of the Listing Regulations. Therefore, in order to maintain consistency and uniformity of approach in the enforcement of MPS norms mandated under regulation 38 of the Listing Regulations, the following procedure will be followed by the recognised stock exchanges/ depositories, with respect to the listed entities and their promoters and directors:
- Review compliance with MPS requirements based on shareholding pattern and other filings made with them by the listed entities from time to time.
- Issue notices to the listed entitieswithin 15 daysof observation of non-compliance, informing the listed entities of the actions that have been taken or are being taken and advise such entities to ensure compliance.
- On observing non-compliance, apart from issuing notices, the stock exchanges will:
- Impose a fine of Rs. 5,000/- per day of non-compliance on the listed entity and the fine will continue to be imposed till the date of compliance by such listed entity.
- Intimate the depositories to freeze the entire shareholding of the promoter(s) and promoter group in such listed entity till the date of compliance by such entity.
- The promoters, promoter group and directors of the listed entity will not hold any new position as director in any other listed entity till the date of compliance. The listed entity will be intimated by the recognized stock exchange and the listed entity will subsequently intimate the same to its promoters, promoter group and directors.
- If the listed entity is non-compliant for more than a year, the stock exchanges will:
- Impose an increased fine of Rs. 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.
- 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.
- Impose the directions under 3(c) as mentioned above, till the date of compliance by the listed entity.
- 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.
For a detailed read, please click on the link below for the complete circular.