Analysis of Regulation 31 and 31A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) related to  Holding of specified securities and shareholding pattern and Disclosure of Class of shareholders and Conditions for Reclassification.

31. HOLDING OF SPECIFIED SECURITIES AND SHAREHOLDING PATTERN:-

♣ Statement of Share Holding:

The [1]listed entity shall submit to the stock exchange(s)

  • A statement showing holding of securities and shareholding pattern separately for each class of securities, in the format specified by the Board from time to time within the following Timelines

  • Timeline for requirement of filling: Timelien Listing Regulations

In case of listed entities which have listed their specified securities on SME Exchange, the above statements shall be submitted on a half yearly basis within twenty one days from the end of each half year.

♠ Promoter Shareholding in Dematerialize form:

  • The listed entity shall ensure that 100% (Hundred Percent) of shareholding of [2]promoter(s) and promoter group is in Dematerialized form and
  • The same is maintained on a continuous basis in the manner as specified by the Board

♠ Comply with circulars or directions issued by the BOARD:

The listed entity shall comply with circulars or directions issued by the Board from time to time with respect to maintenance of shareholding in dematerialized form.

31A. DISCLOSURE OF CLASS OF SHAREHOLDERS AND CONDITIONS FOR RECLASSIFICATION:

♠ Disclosure of Shareholding of Promoter and Promoter Group:

  • Shareholding pattern of Promoter and Promoter group will appear on Website of Stock Exchange having nationwide trading terminals where the specified securities of the entity are listed.
  • In this Shareholding patter ALL the entities falling under Promoter and Promoter group shall be disclosed.
  • Format provided by the SEBI

♠ Conditions Modification or reclassification of the Status of above disclosure:

The stock exchange, disclosure specified in sub-regulation (1), shall allow modification or reclassification of the status of the shareholders only on fulfilling the conditions given below:

  • Upon receipt of a request from the concerned listed entity or the concerned shareholders, along with
  • All relevant evidence,
  • On being satisfied with the compliance of conditions mentioned in this regulation.

♠ If listed on more than one stock exchange:

the concerned stock exchanges shall jointly decide on the application of the entity/ shareholders, as specified in sub-regulation(2).

Who will consider as Promoter in case of transmission/succession/inheritance?

In case of transmission/succession/inheritance, the INHERITOR shall be Classified as promoter

♠ Reclassification of Promoter:

When a new promoter replaces the previous promoter subsequent to an open offer or in any other manner, re-classification may be permitted subject to approval of shareholders in the general meeting and compliance of the following conditions:

  • Such promoter along with the promoter group and the Persons Acting in Concert shall not hold more than 10% (ten per cent) of the paid-up equity capital of the entity.
  • Such promoter shall not continue to have any special rights through formal or informal arrangements.
  • All shareholding agreements granting special rights to such entities shall be terminated.
  • Such promoters and their relatives shall not act as key managerial person for a period of more than three years from the date of shareholders’ approval.

Condition: The resolution of the said shareholders’ meeting must specifically grant approval for such promoter to act as key managerial person. Resolution will be ordinary resolution.

♠ Reclassification of Promoter as Public:

Where an entity becomes professionally managed and does not have any identifiable promoter the existing promoters may be re-classified as public shareholders [3]subject to approval of the shareholders in a general meeting. Entity may be considered as professionally managed, if-

  • No person or group along with persons acting in concert taken together shall hold more than one per cent paid-up equity capital of the entity including any holding of convertibles/outstanding warrants/ Depository Receipts.
  • Any mutual fund, bank, insurance company, financial institution, foreign portfolio investor may individually hold up to ten per cent paid-up equity capital of the entity including any holding of convertibles/outstanding warrants/Depository Receipts.
  • Such promoter shall not continue to have any special rights through formal or informal arrangements.
  • All shareholding agreements granting special rights to such entities shall be terminated.
  • Such promoters and their relatives shall not act as key managerial person for a period of more than three years from the date of shareholders’ approval.

CONDITIONS for Re- classification of promoter as public shareholders required to fulfill following conditions:

  • Such promoter shall not, directly or indirectly, exercise control, over the affairs of the entity
  • Non Consideration as rule 19A of the Securities Contracts (Regulation) Rules, 1957:

If because of re-classification of promoter as public shareholder, public shareholding of increased. Such increase in public shareholding shall not be counted towards achieving compliance with minimum public shareholding requirement under [4]rule 19A of the Securities Contracts (Regulation) Rules, 1957 and the provisions of these.

  • Disclosure to the Stock Exchange:

This reclassification shall be considered as a Material event and required to disclosed the Stock Exchange this reclassification.

Relaxation in the Conditions of Re-classification:

Board may relax any condition for re-classification in specific cases, if it is satisfied that outgoing promoter and person acting in concert with outgoing partner non- exercising any control.

CONDITIONS for Re- classification of public shareholders as promoter required to fulfill following conditions:

If any public shareholder seeks to re-classify itself as promoter, it shall be required to make an open offer in accordance with the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

32. STATEMENT OF DEVIATION(S) OR VARIATION(S):-

(1) The listed entity shall submit to the stock exchange the following statement(s) on a quarterly basis in regards of public issue, rights issue, preferential issue The statement shall include following:

♠ Deviation in the Use of Fund:

The Listed entity shall submit with stock exchange a quarterly statement indicating deviation in use of proceeds from the objects stated in the offer document or explanatory statement to the notice for the general meeting (of public issue, rights issue, preferential issue).

♠ Variation in utilization of Fund:

  • The Listed entity shall submit with stock exchange a quarterly statement indicating category wise variation between projected utilization of funds made by it in its offer document or explanatory statement to the notice for the general meeting, (of public issue, rights issue, preferential issue).
  • The Listed entity shall submit with stock exchange a quarterly statement indicating the actual utilization of funds.

♦ Time period for submission of statement with Stock Exchange:

  • The listed entity shall continued to be given till such time the issue proceeds have been fully utilized; or
  • Till such time purpose for which these proceeds were raised has been achieved

♦ Submission to Audit Committee:

  • The listed entity shall be placed such statement before the audit committee for review and after such review, shall be submitted to the stock exchange(s).
  • The listed entity shall prepare an annual statement of funds utilized for purposes other than those stated in the offer document/prospectus/notice, certified by the statutory auditors of the listed entity, and place it before the audit committee till such time the full money raised through the issue has been fully utilized.

♦ Disclosure in Directors Report:

The listed entity shall furnish an explanation for the variation, in the directors’ report in the annual report

♦ Monitoring Agency, If any: If the listed entity has appointed a monitoring agency to monitor utilization of proceeds of a public or rights issue,

Placement before Audit Committee:

The monitoring report of such agency shall be placed before the audit committee on an annual basis, promptly upon its receipt.

Submission of report with Stock Exchange(s):

The listed entity shall submit to the stock exchange(s) any comments or report received from the monitoring agency.

Note:

Monitoring Agency means monitoring agency specified in regulation 16 of the Securities and Exchange Board of India [5](Issue of Capital and Disclosure Requirements) Regulations, 2009.

♦ Listed entity listed their specified securities on SME Exchange:

For the purpose of this regulation, any reference to “quarterly/quarter” shall respectively be read as “half yearly/half year” for the in listed entity which have listed their specified securities on SME Exchange

Requirement of Intimation to Stock Exchange as per Regulation No. 5 – 14:

S. No. Regulation No. Particular of Regulation Time Period of filing of Certificate
1. 31(1) The listed entity shall submit to the stock exchange(s)

§ A statement showing holding of securities and shareholding pattern separately for each class of securities, in the format specified by the Board from time to time within the following Timelines

 

a) One day prior to listing of its securities on SE.

b) On a quarterly basis, within 20 days from the end of each quarter

c) Within 10 days of any capital restructuring

2. 31A(1)

All entities falling under promoter and promoter group shall be disclosed separately in the shareholding pattern appearing on the website of all stock exchanges having nationwide trading terminals where the specified securities of the entity are listed, in accordance with the formats specified by SEBI.

3. 32(1) The listed entity shall submit to the stock exchange the statement(s) for public issue, rights issue, preferential

issue etc. ,-

Quarterly Basis
4. 31(3) The statement(s) specified in sub-regulation (1), shall be placed before the audit committee for review and after such review, shall be submitted to the stock exchange(s).
5. 31(6) Where the listed entity has appointed a monitoring agency to monitor utilisation of proceeds of a public or rights issue, the listed entity shall submit to the stock exchange(s) any comments or report received from the monitoring agency.

I. “Promoter” and “promoter group” 2(w)

It shall have the same meaning as assigned to them respectively in clauses (za) and (zb) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

Promoter:

“Promoter” includes:

(i) the person or persons who are in control of the issuer;

(ii) the person or persons who are instrumental in the formulation of a plan or programme pursuant to which specified securities are offered to public;

(iii) the person or persons named in the offer document as promoters:

A director or officer of the issuer or a person shall not be deemed as a promoter, if such director or officer or person is acting as such merely in his professional capacity. A financial institution, scheduled bank, foreign portfolio investor other than Category III foreign portfolio investor, and mutual fund shall not be deemed to be a promoter merely by virtue of the fact that ten percent or more of the equity share capacity of the issuer is held by such person. A financial institution, scheduled bank and foreign portfolio investor other than Category III foreign portfolio investor shall be treated as promoter for the subsidiaries or companies promoted by them or for mutual fund sponsored by them.

For Better understanding we are reproducing below the extract of Regulation 31 and 31A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations)

Holding of specified securities and shareho lding pattern.

31. (1) The listed entity shall submit to the stock exchange(s) a statement showing holding of securities and shareholding pattern separately for each class of securities, in the format specified by the Board from time to time within the following timelines –

(a) one day prior to listing of its securities on the stock exchange(s);

(b) on a quarterly basis, within twenty one days from the end of each quarter; and,

(c) within ten days of any capital restructuring of the listed entity resulting in a change exceeding two per cent of the total paid-up share capital: Provided that in case of listed entities which have listed their specified securities on SME Exchange, the above statements shall be submitted on a half yearly basis within twenty one days from the end of each half year.

(2) The listed entity shall ensure that hundred percent of shareholding of promoter(s) and promoter group is in dematerialized form and the same is maintained on a continuous basis in the manner as specified by the Board.

(3) The listed entity shall comply with circulars or directions issued by the Board from time to time with respect to maintenance of shareholding in dematerialized form.

Disclosure of Class of shareholders and Conditions for Reclassification.

31A. (1) All entities falling under promoter and promoter group shall be disclosed separately in the shareholding pattern appearing on the website of all stock exchanges having nationwide trading terminals where the specified securities of the entity are listed, in accordance with the formats specified by SEBI.

(2) The stock exchange, specified in sub-regulation (1), shall allow modification or reclassification of the status of the shareholders, only upon receipt of a request from the concerned listed entity or the concerned shareholders along with all relevant evidence and on being satisfied with the compliance of conditions mentioned in this regulation.

(3)In case of entities listed on more than one stock exchange, the concerned stock exchanges shall jointly decide on the application of the entity/ shareholders, as specified in sub-regulation(2).

(4) In case of transmission/succession/inheritance, the inheritor shall be classified as promoter.

(5) When a new promoter replaces the previous promoter subsequent to an open offer or in any other manner, re-classification may be permitted subject to approval of shareholders in the general meeting and compliance of the following conditions:

(a) Such promoter along with the promoter group and the Persons Acting in Concert shall not hold more than ten per cent of the paid-up equity capital of the entity.

(b) Such promoter shall not continue to have any special rights through formal or informal arrangements. All shareholding agreements granting special rights to such entities shall be terminated.

(c) Such promoters and their relatives shall not act as key managerial person for a period of more than three years from the date of shareholders’ approval: Provided that the resolution of the said shareholders’ meeting must specifically grant approval for such promoter to act as key managerial person.

(6) Where an entity becomes professionally managed and does not have any identifiable promoter the existing promoters may be re-classified as public shareholders subject to approval of the shareholders in a general meeting. Explanation.- For the purposes of this sub-regulation an entity may be considered as professionally managed, if‑

(i) No person or group along with persons acting in concert taken together shall hold more than one per cent paid-up equity capital of the entity including any holding of convertibles/outstanding warrants/ Depository Receipts:

Provided that any mutual fund, bank, insurance company, financial institution, foreign portfolio investor may individually hold up to ten per cent paid-up equity capital of the entity including any holding of convertibles/outstanding warrants/Depository Receipts.

(ii) The promoters seeking reclassification and their relatives may act as key managerial personnel in the entity only subject to shareholders’ approval and for a period not exceeding three years from the date of shareholders’ approval.

(iii) The promoter seeking reclassification along with his promoter group entities and the persons acting in concert shall not have any special right through formal or informal arrangements. All shareholding agreements granting special rights to such outgoing entities shall be terminated.

(7) Without prejudice to sub-regulations (5) and (6), re-classification of promoter as public shareholders shall be subject to the following conditions:

(a) Such promoter shall not, directly or indirectly, exercise control, over the affairs of the entity.

(b)Increase in the level of public shareholding pursuant to re-classification of promoter shall not be counted towards achieving compliance with minimum public shareholding requirement under rule 19A of the Securities Contracts (Regulation) Rules, 1957, and the provisions of these regulations.

(c) The event of re-classification shall be disclosed to the stock exchanges as a material event in accordance with the provisions of these regulations.

(d) Board may relax any condition for re-classification in specific cases, if it is satisfied about non-exercise of control by the outgoing promoter or its persons acting in concert.

(8) If any public shareholder seeks to re-classify itself as promoter, it shall be required to make an open offer in accordance with the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

——————–

[1] “Listed entity”2(P)

Listed entity means an entity which has listed, on a recognized stock exchange(s), the designated securities issued by it or designated securities issued under schemes managed by it, in accordance with the listing agreement entered into between the entity and the recognized stock exchange(s);

[2] Defined Below the article.

[3] By passing of Ordinary Resolution in General Meeting.

[4] Rule 19A of the Securities Contracts (Regulation) Rules, 1957

[5] Monitoring agency

(1) If the issue size exceeds five hundred crore rupees, the issuer shall make arrangements for the use of proceeds of the issue to be monitored by a public financial institution or by one of the scheduled commercial banks named in the offer document as bankers of the issuer: Provided that nothing contained in this clause shall apply to an offer for sale or an issue of specified securities made by a bank or public financial institution 47[or an insurance company].

CS Divesh Goyal(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)

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