SEBI vide its circular dated August 07, 2019 have asked for additional disclosure w.r.t. encumbrance of shares by promoter of listed companies along with PAC, the detailed reason to be specified. The said circular will come into effective from October 1, 2019.
Applicability: Combined encumbrance by Promoter + PAC is equal or exceeds
- 50% of their (Promoter+PAC) shareholding in the company or
- 20% of the total share capital (Equity + Preference) of the company.
The disclosure shall also be made if such encumbrance level increases the thresholds.
Initial disclosure: The initial disclosure shall be provided on or before 4th October 2019 reporting details as on 30th September 2019 to company and the stock exchange.
Thereafter, if, the company crosses the above thresholds, it shall give disclosure as per Annexure – II along with the reasons of encumbrance in Annexure A provided vide circular No. CIR/CFD/POLICYCELL/3/2015 dated August 05, 2015 to company and the stock exchange.
The Annexure – II shall be uploaded on website of the company within 2 working days of receipt of disclosure from promoter.
Hence, once the promoter along with PAC crosses the above thresholds, they shall be required to disclose under Regulation 31(1) of Takeover Code in Annexure I & II along with reasons in Annexure A.
Kindly download excel format of Annexure II below link;
Download Annexure – II- Format for disclosure of reasons for encumbrance
Frequently asked questions:
- How to assess the applicability to the company/promoters?
Please note that every listed company submits shareholding pattern on quarterly basis which also includes details of encumbrance of shares of promoters. For ex: If 36% of total share capital is promoter’s holding and 20% is under pledge as on 30th September 2019. It means more than 50% of promoter’s holding i.e., more than 18% (50% of 36%) is under pledge and also 20% of total share capital, the promoter + PAC meets both the criteria, hence will be required to give disclosure on or before 4th October 2019 and the company shall publish the same on its website within 2 working days of receipt.
- Whether company shall repost the disclosure received from Promoter i.e., Annexure II?
The company may disclose on voluntary basis, but it is not required under the regulations.
- How the promoter shall disclose?
The promoter may mail to respective email of stock exchanges where the shares of the company are listed.
- Is Annexure –II is continual disclosure?
Whenever, the company triggers the above thresholds, it shall provide 3 disclosures Annexure A, Annexure 1 and Annexure II of Reg 31(1) of Takeover Code, 2011 and the company shall upload Annexure II on its website. The relevant annexures can be obtained from Stock exchange website.
- Is the company require to disclose under Annexure II in case of decrease below thresholds limits on release of encumbrance?
No, disclosure is not required in case of decrease or release in encumbrance below the threshold limits.
- If the promoters’ shareholding under encumbrance increases from 20% of total share capital to 22% of total share capital, then disclosure under Annexure-II is required?
Yes, any increase in encumbrance above threshold shall be reported within 2 working days to Company and stock exchanges by promoters.
- What shall be disclosed on or before 4th October 2019?
The promoter + PAC shall provide disclosure in Annexure II to Company and Stock Exchanges of combined encumbrance as on 30th September 2019 in the below link format:
Download Annexure – II- Format for disclosure of reasons for encumbrance
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