Securities and Exchange Board of India [SEBI] has, on 16 December 2010, directed Stock Exchanges [SE] to amend the Equity Listing Agreement [LA]. The highlights of the amendments to LA are as under:
A. Disclosure requirements
(1) Shareholding pattern prior to listing of securities
Entities which seek listing of their securities post-IPO shall mandatorily submit their shareholding pattern as per Clause 35 of the LA one day prior to the date of listing. The stock exchanges shall upload the same on their websites before commencement of trading in the said securities. This amendment is applicable from 16 December 2010.
(2) Shareholding pattern pursuant to material changes in the capital structure
With a view to ensure public dissemination of the shareholding pattern pursuant to capital restructuring in listed entities, in all cases wherein the change in capital structure due to such restructuring exceeds +/- 2% of the paid up share capital of the entities, the listed entities shall file a revised shareholding pattern with the stock exchanges within 10 days from the date of allotment of shares pursuant to such change in the capital structure, in the specified format alongwith a note on reasons that necessitated the filing of the revised shareholding pattern. The stock exchanges shall upload the same on their websites immediately. This amendment is applicable from 16 December 2010.
(3) Depository Receipts
In case of listed entities which have issued Depository Receipts (DRs) overseas, disclosures of details of „shares held by custodians and against which DRs have been issued? shall be further segregated as those pertaining to the „promoter / promoter group? and to the „public?. This amendment is applicable from 16 December 2010.
(4) Agreements with the media companies
In order to ensure public dissemination of details of agreements entered into by corporates with media companies, a new Clause 53 has been inserted in the LA. Accordingly listed entities shall disclose details of such agreements on their websites and also notify the stock exchange of the same for public dissemination. This amendment is applicable from 16 December 2010.
(5) Website
In order to ensure / enhance public dissemination of all basic information about the listed entity, the listed entities shall maintain a functional website that contains certain basic information about them, duly updated for all statutory filings, including agreements entered into with media companies, if any. For this purpose a new Clause 54 has been inserted in the LA. This amendment is applicable from 1 April 2011.
B. Minimum public shareholding
Ministry of Finance, Government of India, had amended the Rule 1 9(2)(b) of Securities Contracts (Regulation) Rules, 1957 (“the Rules”) on 4 June, 2010 and 9 August, 2010, which requires a company which has issued shares under Rule 19 (2) (b) (ii) of the Rules to raise its public shareholding to the specified minimum (i.e. 25%) in the manner specified by SEBI. In order to align the requirements in the LA with the amended Rules and to specify the manner in which public shareholding may be raised to the prescribed minimum, Clause 40A of the LA has been amended to provide that :-
(i) the company agrees to comply with the requirements specified in Rule 19(2) and Rule 1 9A of the Rules,
(ii) Where the company is required to achieve the level of public shareholding as specified in Rule 19(2) and/or 19A of the Rules, it shall adopt any of the following methods to raise the public shareholding to the required level:
(a) issuance of shares to public through prospectus; or
(b) offer for sale of shares held by promoters to public through prospectus; or
(c) sale of shares held by promoters through the secondary market after taking prior approval of the Specified Stock Exchange.
This amendment is applicable from 16 December 2010.
C. Uniform procedure for dealing with unclaimed shares
The existing Clause 5A of the LA does not address the difficulties faced by companies which had in the past issued shares in physical mode. The share certificates in such cases may have remained unclaimed by the shareholders due to insufficient / incorrect information or for any other reason. The LA has been amended to provide for the procedure for dealing with such unclaimed shares. This amendment is applicable from 16 December 2010.
D. Corporate Announcement
In order to enable investors to manage their cash / securities flows efficiently and to enhance process transparency, Clauses 20 and 22 of the LA have been amended to mandate companies to have a pre-announced fixed pay date for payment of dividends and for credit of bonus shares. Consequential amendment has been carried out in Clause 21 by removing references to dividend payments. These amendments are applicable for all board / shareholders? meetings convened for this purpose on or after 1 January 2011.
Source: Circular No. CIR/CFD/DIL/10/2010 dated December 16, 2010 issued by SEBI.
