Securities and Exchange Board of India
December 16, 2010
All Stock Exchanges
Sub: Amendments to the Equity Listing Agreement
1. In line with the objective of enhancing the quality of disclosures made by listed entities, it has been decided to effect certain amendments to the Equity Listing Agreement (“the LA”) with respect to various continuous disclosures made by listed entities.
2. The full text of amendments to be effected in the LA is given in the Annexure hereto. A gist of the said amendments is as follows:-
(I) Amendments to Clause 35– Disclosure relating to shareholding pattern
(a) Disclosure of 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, in order to ensure public dissemination of updated shareholding pattern. The stock exchanges shall upload the same on their websites before commencement of trading in the said securities.
(b) Disclosure of shareholding pattern of listed entities 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, it has been decided that 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, as per the format specified in clause 35 of the LA alongwith a footnote on what necessitated the filing of the revised shareholding pattern. The stock exchanges shall upload the same on their websites immediately.
(c) Disclosure in respect of Depository Receipts
In the case of listed entities which have issued Depository Receipts (DRs) overseas, in order to ensure a holistic and true picture of the promoter/promoter group holding in such entities, it has been decided that details of ‘shares held by custodians and against which DRs have been issued’ which are presently required to be disclosed in Table (I) (a) of Clause 35 shall be further segregated as those pertaining to the ‘promoter/promoter group’ and to the ‘public’.
(II) Amendments to Clause 40A– Minimum public shareholding
Department of Economic Affairs, Ministry of Finance vide its notification dated June 4, 2010 and August 9, 2010 amended the Rule 19(2)(b) of Securities Contracts (Regulation) Rules, 1957 (“the Rules”), 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 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, it has been decided to amend the LA to provide that:-
(i) the company agrees to comply with the requirements specified in Rule 19(2) and Rule 19A 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;
(c) sale of shares held by promoters through the secondary market.
For adopting methods as specified at point (c) the company agrees to take prior approval of the Specified Stock Exchange, which may impose such conditions as it may deem fit.
(III) Amendments to Clause 5A – Uniform procedure for dealing with unclaimed shares
While the existing clause 5A in the equity listing agreement addresses and resolves the practical difficulties of companies which have issued shares in electronic mode; it does not address the difficulties faced by companies which had in the past issued shares in physical mode. These share certificates may have remained unclaimed by the shareholders due to insufficient/incorrect information or for any other reason. Thus it has been decided to amend the clause to provide for the aforesaid procedure.
(IV) Amendment to Clause 20 & 22- Corporate Announcement
In order to enable investors to manage their cash/securities flows efficiently and to enhance process transparency, it has been decided to mandate companies to have a pre-announced fixed pay date for payment of dividends and for credit of bonus shares.
(V) Amendment to Clause 21 – Notice Period
Consequent to amendment in clause 20 & 22, as above, it has been decided to amend the Clause 21 by removing references to dividend payments.
(VI) Insertion of Clause 53 – Disclosures regarding agreements with the media companies
In order to ensure public dissemination of details of agreements entered into by corporates with media companies, it has been decided that the listed entities shall disclose details of such agreements on their websites and also notify the stock exchange of the same for public dissemination.
(VII) Insertion of Clause 54– Maintenance of a website
In order to ensure/enhance public dissemination of all basic information about the listed entity, it has been decided to mandate that the listed entities 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.
3. The above listing conditions are specified in exercise of the powers conferred under Section 11 read with Section 11A of the Securities and Exchange Board of India Act, 1992. The said listing conditions should form part of the existing Listing Agreement of the stock exchange. A text of amendments in the Listing Agreement is enclosed as Annexure.
a. The provisions of para (2)(I)(a), 2(I)(b) and (2)(I)(c) above, (2)(II), (2) (III) and 2 (VI) shall be applicable with immediate effect.
b.The provisions of para (2) (IV) and (2) (V) shall be applicable for all board /
shareholders’ meetings convened for this purpose on or after January 01, 2011.
c. The provisions of para (2) (VII) above shall be applicable with effect from April 01, 2011.
5. All stock exchanges are advised to ensure compliance with this circular and carry out the amendments in their Listing Agreement as per the Annexure to this circular.
6. This circular is available on SEBI website at www.sebi.gov.in under the categories “Legal Framework” and “Issues and Listing”.
Encl: as above