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Inter-se transfer of shares between promoters in a listed company does not require any approval from minority shareholders, according to SEBI. The market regulator has filed an affidavit with the Securities Appellate Tribunal articulating its stand on the issue.
SEBI’s affidavit relates to a petition brought by the minority shareholders of Uttam Galva Steels, who moved SAT against the classification of ArcelorMittal as a non-promoter after the company sold its entire shareholding in Uttam Galva.
The Miglani family and ArcelorMittal together promoted Uttam Galva Steels. But Lakshmi Mittal-promoted ArcelorMittal sold its 29 per cent stake in Uttam Galva back to the Miglani family this year. ArcelorMittal wanted to bid for Essar Steel India, but the Insolvency and Bankruptcy Code bars defaulters from bidding for other stressed assets. Uttam Galva has been a defaulter on loans worth around ₹5,000 crore.
Non-promoter tag
The petition of minority shareholders led by Sulbha Sanjay Naik had alleged that the NSE and the BSE declassified ArcelorMittal as a non-promoter without informal guidelines from SEBI.
“The two exchanges have approved (declassification of ArcelorMittal as a non-promoter) in violation of Regulation 31A (5) and 31A (3) of the listing regulations and without waiting for informal guidance sought from SEBI. Pending disposal of the appeal, impugned decisions of the stock exchanges must be stayed forthwith,” said the petition.
In response, SEBI’s affidavit states, “(the) observation of SAT while passing interim order is correct that the shareholder approval is not required.” SEBI, in its affidavit, said that shareholder approval was not required since no new promoter was coming into the company.
‘Automatic exemption’
“Inter-se transfer between promoters have automatic exemption,” said Sandeep Parekh, founder and CEO of Finsec Law Advisors.
According to earlier observations issued by SEBI, no open offer is triggered due to inter-se transfer of shares between two promoters, who have been listed as promoter entities in the company’s shareholding pattern filings for at least three years.
Hence, no shareholder approval was required, experts say.
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