Revised listing norms as amended by 2nd amendment to SCRR, 1957

TG Team 14 Aug 2010 699 Views 0 comment Print SEBI | Articles, Featured

Revised listing norms for new as well as existing companies as amended by second amendment to the Securities Contracts (Regulation) Rules, 1957 (SCRR)

Securities Contracts (Regulation) (Amendment) Rules, 2010 notified on 4 June, 2010, inter-alia, provided for the following amendments:

Every listed company shall have a minimum public shareholding of at least 25% (without any exception).
Existing listed companies with less than 25% public shareholding shall increase the public shareholding by at least 5% per annum.
New listing shall be allowed with public shareholding of 10% in case post issue capital of the company, calculated at the offer price, is more than INR 4,000 Cr. However, it would be required to increase the public shareholding to 25% by at least 5% per annum.
Where the draft offer document is pending with the Securities and Exchange Board of India (‘SEBI’), irrespective of amount of post issue capital, company shall increase public shareholding by at least 5% per annum.

The above-mentioned rules have been further amended by Securities Contracts (Regulation) (Second Amendment) Rules, 2010 to provide flexibility to all companies in attaining 25% (10% for public sector companies (‘PSC’)) public shareholding level within 3 years without any annual floor.

Key amendments

1. Continuous listing norms for the existing listed companies – Rule 19A

All existing companies shall have a minimum public shareholding of at least 25% (10% for PSC).
Existing listed companies with public shareholding of less than 25% (10% for PSC) shall bring the public shareholding to at least 25% (10% for PSC) within a period of 3 years.

2. Listing norms for new companies – Rule 19(2Xb) and 19(2Xc)

All companies, other than PSC, may issue at least 10 % of the shares or convertible debentures to the public in terms of offer document, if the post issue capital of the company, calculated at the offer price, is more than INR 4,000 Cr. Such companies shall bring the public shareholding to the level of at least 25% by increasing its public shareholding within a period of 3 years from the date of listing of securities.
A PSC is allowed to issue at least 10 % of the shares or convertible debentures to the public in terms of offer document (irrespective of amount of post issue capital) without any requirement to increase the public shareholding in future.

3. Way forward :-The manner of increase in public shareholding as required above will be specified by SEBI in due course. Hence, it would be appropriate to analyse the overall impact once SEBI comes up with the same.