New public holding rules for companies under insolvency – Times of India
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MUMBAI: The board of Sebi on Wednesday said that when a company under Insolvency and Bankruptcy Code (IBC) resolution is re-listed, it should have at least 5% public shareholding. Currently, there is no such regulation.
The markets regulator also said the company should achieve 10% public holding within 12 months of re-listing, and 25% within 36 months. At present, all listed companies should have a 25% public holding to continue to remain listed.
The regulator’s board also decided to do away with the minimum promoter contribution in case of follow-on offers, a Sebi release said. It relaxed profitability criteria to become a sponsor for a mutual fund (MF), which is expected to facilitate expansion in the fund management sector. It added that all the assets and liabilities of every MF scheme should be segregated and ring-fenced.
In relation to Corporate Insolvency and Resolution Process (CIRP), the Sebi board said that the lock-in on equity shares allotted to the resolution applicant under the process should not be included to achieve the 10% public holding limit (set to be attained within 12 months under the new rule). In most cases under CIRP, the incoming investors are allotted shares through the preferential allotment route with a lock-in clause of at least one year. These companies will also be required to make additional disclosures, the release said.
Relating to eligibility of MF sponsors, Sebi said those who do not fulfil profitability criteria at the time of applying to set up a fund management business will also be considered as a sponsor. Under current rules, a prospective MF sponsor should have net profit in three out of the past five years, including in the fifth year.
However, all sponsors should have a net worth of at least Rs 100 crore and this should be maintained till the time the asset management company (AMC) makes profit for five consecutive years. Industry players feel this will prompt innovation and attract new players to sponsor fund houses.
The markets regulator also said the company should achieve 10% public holding within 12 months of re-listing, and 25% within 36 months. At present, all listed companies should have a 25% public holding to continue to remain listed.
The regulator’s board also decided to do away with the minimum promoter contribution in case of follow-on offers, a Sebi release said. It relaxed profitability criteria to become a sponsor for a mutual fund (MF), which is expected to facilitate expansion in the fund management sector. It added that all the assets and liabilities of every MF scheme should be segregated and ring-fenced.
In relation to Corporate Insolvency and Resolution Process (CIRP), the Sebi board said that the lock-in on equity shares allotted to the resolution applicant under the process should not be included to achieve the 10% public holding limit (set to be attained within 12 months under the new rule). In most cases under CIRP, the incoming investors are allotted shares through the preferential allotment route with a lock-in clause of at least one year. These companies will also be required to make additional disclosures, the release said.
Relating to eligibility of MF sponsors, Sebi said those who do not fulfil profitability criteria at the time of applying to set up a fund management business will also be considered as a sponsor. Under current rules, a prospective MF sponsor should have net profit in three out of the past five years, including in the fifth year.
However, all sponsors should have a net worth of at least Rs 100 crore and this should be maintained till the time the asset management company (AMC) makes profit for five consecutive years. Industry players feel this will prompt innovation and attract new players to sponsor fund houses.
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