Reclassification of Promoters and Promoter Group Shareholders:
SEBI has issued SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015 (“SEBI LODR Regulations”) on September 2, 2015. In that Regulations, Regulation 31A defines the shareholders reclassification from the promoter’s category to public category or vice versa with execution of open offer.
Regulation 31A of SEBI LODR Regulation define shareholder reclassification of listed companies only. However, the Companies Act, 2013 and other acts are silent on this matter.
Reclassification has been divided into the two categories i.e.
1. Existing promoter and shareholder reclassify into the public category
2. Public Shareholder reclassify into the promoter category
For the Existing promoters and shareholder reclassify into the public category the procedure has been provided under amended Regulation 31A of SEBI (LODR) Regulations, 2015 vide notification dated November 16, 2018. However, If any public shareholder seeks to re-classify as promoter, it shall be required to make an open offer in accordance with the provisions of SEBI (SAST) Regulations 2011 as required under Listing Regulation 31A (5). No separate application needs to be done to the Exchange for this purpose, however intimation of the same may be provided to the Stock Exchange.
1. The entities/individuals seeking to reclassify themselves under Public Category should be amongst those disclosed by the Company under Promoter and Promoter Group as per the latest shareholding pattern submitted to the Exchange.
2. Persons related to the promoter(s) seeking re-classification “shall mean such persons with respect to that promoter(s) seeking re-classification who fall under sub-clauses (ii), (iii) and (iv) of clause (pp) of sub-regulation (1) of regulation 2 of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018”.
3. Application shall be for prior approval only, i.e. cases where the Reclassification has not already been made effected.
4. As per the Regulations, the entity should be compliant with Minimum Public Shareholding (MPS) requirement as prescribed under Regulation 38 and trading in shares should not have been suspended. Further, there should be no outstanding dues against the company which is either payable to SEBI, Exchanges or Depositories.
5. The entity(ies)/Individual seeking reclassification shall not be represented on the board of directors (including as a nominee director) and shall not act as Key Managerial Person in the listed entity for a period of 3 years from the date of such re-classification.
6. The outgoing promoter should not be a ‘wilful defaulter’ as per the Reserve Bank of India Guidelines and should not be a fugitive economic offender.
7. Prior to and Post reclassification, the promoter(s) seeking re-classification:
8. shall not hold more than ten percent of the total voting rights in the listed entity,
9. shall not exercise control over the affairs of the listed entity directly or indirectly, and
10. shall not have any special rights with respect to the listed entity through formal or informal arrangements including through any shareholder agreements.
1. Application by the Promoter to the Company along with requisite undertaking.- The Company shall Intimate to the Stock Exchanges within 24 hours of receipt of application.
2. Resolution must be passed in the meeting of Board of Directors for approving reclassification.- The Company shall Intimate to the Stock Exchanges within 24 hours of conclusion of Board meeting.
3. To Hold Shareholder’s meeting and pass ordinary resolution for approving reclassification. (Ensure time gap of at least three months but not exceeding six months between the date of board meeting and the shareholder’s meeting.)- The Company shall intimate to the Stock Exchange within 24 hours of conclusion of Shareholder meeting.
4. Submit reclassification application along with supporting documents to the Exchange within 30 days of conclusion of shareholder’s meeting.
5. Deficiencies in application must be rectified by the company within 30 days of intimation.
6. Letter of acceptance to be issued by the stock exchanges to the Company to effect the reclassification.- the Company shall Intimate to the Stock Exchanges within 24 hours of receipt of Letter of acceptance by the company.
1. Application on Letter head of the company along with details of listing on other Exchange (if applicable).
2. Copy of BOD resolution approving the application of the promoter along with its recommendation to shareholders.
3. Copy of the notice sent to the shareholders seeking their approval inter-alia including the views of the Board on the application made by the promoter
4. Shareholders voting outcome (Voting results) along with certified true copy of the resolution passed.
5. Latest Pre and Post Reclassification shareholding pattern as per format along with all the Annexure.
6. Undertaking from the Company Secretary of the Company.
7. Letter from Promoter seeking reclassification from promoter to public inter-alia containing the rationale for seeking such re-classification and how conditions specified in clause 31A(3)(b) are satisfied.
8. List of persons related to the promoter(s) seeking reclassification specifying the relation with the person seeking reclassification as per Reg 2(1) (pp) of SEBI (ICDR), 2018.
9. Chronology of Events including details of various disclosures related to reclassification made by the company as required under Reg.31A (8)
10. RTGS/ NEFT Payment of Rs. 50,000* + GST (18%) towards Processing Fees.