Securities and Exchange Broad of India
Neelam Bhardwaj
Deputy General Manager
Corporation Finance Department Division of Issues and Listing
Phone: +91 22 2284 2826 (D), +91 22 2285 0451-56, 2288 0962-70 (Extn: 367)
Fax: +91 22 2204 5633. Email: neelamb@sebi.gov.in
SEBI/CFD/DIL/LA/2006/13/4
April 13, 2006
The Managing Director/Executive Director/
Administrator of All Stock Exchanges
Dear Sirs,
Sub.: Amendments to Clause 40A and Clause 35 of Equity Listing Agreement
I. In order to ensure availability of floating stock on a continuous basis and to bring about greater transparency in respect of disclosure of shareholding pattern of companies, SEBI has decided to bring in the following policy changes to the continuous listing requirements:
1. Minimum Level of public shareholding
All listed companies, other than those mentioned hereunder, will be required to ensure minimum level of public shareholding at 25% of the total number of issued shares of a class or kind for the purpose of continuous listing:
a. Companies which, at the time of initial listing, had offered less than 25% but not less than 10% of the total number of issued shares of a class or kind, in terms of Rule 19(2)(b) of Securities Contract (Regulation) Rules 1957 (SCRR) or companies desiring to list their shares by making an Initial Public Offering (IPO) of at least 10% in terms of Rule 1 9(2)(b) of SCRR.
b. Companies which have, irrespective of the percentage of their shares with public at the time of initial listing, reached a size of two crore or more in terms of number of listed shares and Rs. 1000 crore or more in terms of market capitalization.
The companies at (a) and (b) above will be required to maintain the minimum level of public shareholding at 10% of the total number of issued shares of a class or kind for the purpose of continuous listing.
The aforesaid requirement of maintaining minimum level of public shareholding on a continuous basis will not be applicable to government companies (as defined under Section 617 of the Companies Act, 1956), infrastructure companies (as defined under clause 1 .2.1(xv) of the SEBI (DIP) Guidelines, 2000) and companies referred to the Board for Industrial and Financial Reconstruction.
The “public shareholding” for the purpose of continuous listing, will continue to comprise of shares held by entities other than promoters and promoter group and shares held by custodians against which depository receipts are issued overseas. The terms “Promoter” and “Promoter group” shall have the same meaning as is assigned to them under the SEBI (Disclosure & Investor Protection) Guidelines, 2000.
2. Increasing the public shareholding to the minimum level
As on the date of this circular coming into force, there may be two categories of companies, viz., those which are non-compliant and those which may subsequently become non-compliant on account of factors such as compliance with directions of a court, tribunal, regulatory or statutory authority, compliance with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, re-organization of capital by way of a scheme of arrangement, etc.
It has been decided to provide a transparent mechanism to such noncompliant companies for enabling them to graduate to the level of compliant companies. The mechanism for increasing the public shareholding to the minimum level will inter alia provide for various modes of issuing shares in domestic market and reasonable time period, as approved by Specified Stock Exchange.
3. Revision in the reporting format for shareholding pattern
It has been decided to revise the existing reporting format of shareholding pattern provided in Clause 35 of the Listing Agreement. The shareholding pattern will now be indicated under three categories, viz.,
“shares held by promoter and promoter group”, “shares held by public” and “shares held by custodians and against which Depository Receipts have been issued,”. Further, details such as number of shareholders, number and percentage of shares held, number of shares held in dematerialized form, etc. will be given for all the three categories. It is clarified that for the purpose of Clause 40A, percentage of “public shareholding” shall be computed as “shares held by public” as a percentage of “total number of shares held by promoters, promoter group and public”.
II. Applicability
1. The revised Clause 40A of Equity Listing Agreement shall come into force with effect from May 1, 2006.
2. The revised Clause 35 of Equity Listing Agreement shall come into force with immediate effect. The quarterly reporting as per the revised Clause 35 shall start from quarter ending June 30, 2006.
III. Direction to Stock Exchanges
1. All Stock Exchanges are advised to do the following before the date of this circular coming into force, i.e., by May 1, 2006 :
a. Give effect to the above mentioned policies and appropriately amend Clause 40A and Clause 35 of Equity Listing Agreement in line with the text of the amendments specified in Annexure I and II.
b. Make consequential changes, if any, in other clauses of Equity Listing Agreement, e.g., Clause 41.
2. All Stock Exchanges are further advised to do the following:
a. Monitor compliance with the minimum level of public shareholding, based on quarterly returns submitted by companies.
b. Submit a report to SEBI on quarterly basis as per the format specified in Annexure III. The said report shall be submitted within 45 days of the end of each quarter, first such report to be submitted for the quarter ending June 30, 2006.
c. Communicate to SEBI, status of implementation of the requirements of this circular in the next Monthly Development Report.
3. Specified Stock Exchanges are advised to grant necessary approvals as specified in Clause 40A after examining and satisfying themselves about the circumstances of the case and after recording reasons in writing. The decision taken by Specified Stock Exchanges shall be binding on other Stock Exchanges on which the shares of the company are listed.
IV. This circular is issued in exercise of powers conferred by sub-section (1) of Section 11, read with sub-section (2) of Section 1 1A, of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. The provisions of SEBI circular no. SMDRP/POLICY/CIR-28/01 dated May 02, 2001 regarding Clause 40A of Equity Listing Agreement shall stand superseded with effect from May 1, 2006. The provisions of SEBI circular no. SMDRP/POLICY/CIR-7/01 dated February 1, 2001 regarding Clause 35 of Equity Listing Agreement shall stand superseded with immediate effect.
V. This circular is available on SEBI website at www.sebi.gov.in. Yours faithfully,
Neelam Bhardwaj
Encl.: 1. Annexure I – Revised Clause 40A of Equity Listing Agreement.
2. Annexure II – Revised Clause 35 of Equity Listing Agreement.
3. Annexure III – Format of Report indicating Compliance with Minimum level of Public Shareholding (Clause 40A of Equity Listing Agreement
