Over a hundred companies listed on the NSE and the BSE face penal action from SEBI for non-compliance of the 25 per cent minimum public shareholding norm by June 3.
Action ranging from freezing of voting rights and corporate benefits has been mooted.
Only three times the existing percentage of public shareholding would be exempt. That is, companies having 10 per cent public shareholding as on date will have 60 per cent of its promoter holding frozen.
Strict action
Promoters can also be barred from buying and selling in the securities market and restrained from taking up directorial roles in other companies, said SEBI. Other possible actions include fines, criminal proceedings, moving of the scrip to the trade-to-trade segment and exclusion from the futures and options segment.
Repeated reminders
SEBI said companies are aware of this norm since December 16, 2010 and, despite repeated reminders, some had not complied.
M.S. Sahoo, Secretary, ICSI, and former SEBI member, adds: “SEBI has the powers to direct depositories to sell the excess promoter stake through the stock exchange mechanism at the current market price within a specific time frame, say three days.”
Tejesh Chitlangi, partner of law firm IC Legal, said: “Out of the errant promoters, the majority did not make an attempt to sell because of likely failure to offload excess shares at/near market price. Many of them, despite making an attempt, were unable to find buyers.”
Experts said shifting to the trade-to-trade segment would not penalise the promoter.
Arun Kejriwal, Founder, KRIS Research, said: “The shift would make the exit of retail investors doubly difficult as liquidity would dry up . Why should the minority shareholder suffer in any way for a fault that is entirely the promoter’s?”
The SEBI order does not include companies listed in regional stock exchanges.
Directing the companies to file their replies with 21 days, SEBI said the order was also a show cause notice.