SEBI: Strict actions for non-compliance of Minimum Public Shareholding

SEBI specified strict action against companies which are not complying with Minimum Public Shareholding norms

Security Exchange Board of India (SEBI) issued a Circular dated 10th October, 2017 with respect to non-compliance with Minimum Public Shareholding (MPS) requirements.

Listing Regulations mandates a listed entity to comply with Minimum Public Shareholding (MPS) requirements specified in Rule 19(2) and 19A of SCRR, 1957. It is duty of recognised stock exchanges (RSX) to monitor the compliance by listed company in this regard. Additionally, Listing Regulations has already specified the liability of listed entity for contravention and action which can be taken by respective RSX.

SEBI, by this circular, has specified following procedure to maintain consistency and uniformity of approach in the enforcement of MPS norms against non-compliant listed entities, their promoters and directors.

1. RSX shall review compliance with MPS requirements based on submitted shareholding pattern.
2. On observing non-compliance, RSX can impose fine of Rs 5,000 per day. RSX shall also intimate Depositories to freeze shareholding of promoters and promoter group. Promoters and Promoters Group shall not hold any new position as director in other listed entities till the date of compliance.
3. In case of non-compliance for more than one year, RSX shall impose fine of Rs 10,000 per day of non-compliance. RSX shall intimate depositories to freeze all the shares in demat account held by promoter and promoter group.
4. RSX may also have an option to delist this non-compliant listed entity.

SEBI further stated that if listed entity has adopted new method for complying with MPS norms other than specified in law, then SEBI has asked RSX to refer matter to them.

SEBI has also asked RSX to display on its website list of non-compliant entities, amount of fine imposed, freezing of shares etc. and status of compliance including details of fine paid by such entities.

For more details, you can have a look at the Circular.