Sebi board agrees in principle to 'controlling shareholders' concept

Markets regulator Sebi on Friday agreed ''in-principle'' to a proposal to move from the concept of the promoter to ''controlling shareholders'', and decided to reduce the minimum lock-in period for promoters post an IPO.

The watchdog has also decided to streamline the disclosure requirement of group companies, the Securities and Exchange Board of India said in a statement after the board meeting.

About the lock-in period, Sebi said, if the object of the issue involves an offer for sale or financing other than for capital expenditure for a project, then the minimum promoters' contribution of 20 per cent should be locked in for 18 months from the date of allotment in the initial public offer (IPO) and follow on public offer (FPO). Currently, the lock-in period is three years.

Further, in all these cases, the promoter shareholding above the minimum promoter contribution will be locked in for six months, instead of existing one year. Promoters' holding in excess of minimum promoters' contribution will be locked in for six months as opposed to the existing requirement of one year from the date of allotment in the IPO, Sebi said.

The entire pre-issue capital held by persons other than the promoters should be locked in for six months from the date of allotment in the IPO as against the current requirement of one year. The period of holding of equity shares for Venture Capital Fund or Alternative Investment Fund (AIF) of Category II or a Foreign Venture Capital Investor should be reduced to six months from the date of their acquisition of such equity shares instead of existing one year.

The board also agreed in principle to the proposal for shifting from the concept of the promoter to 'person in control' or 'controlling shareholders' in a smooth, progressive and holistic manner.

To this effect, it has been decided to engage with other regulators to ascertain and resolve regulatory hurdles, if any, prepare draft amendments to securities market regulations and analyse the impact of the same and further deliberate at the Sebi's primary market advisory committee (PMAC) and develop a roadmap for implementation of the proposed transition.

The board noted that the investor landscape is now changing, with private equity and institutional investors holding significant shareholding in listed companies. ''In recent years, a number of businesses and new-age companies with diversified shareholding and professional management that are coming into the listed space are non-family owned and/or do not have a distinctly identifiable promoter group,'' the board said.

Further, there is an increasing focus on better corporate governance with responsibilities and liabilities shifting to the board of directors and management, it added.

The board has decided to approve ways to reduce the disclosure requirements at the time of IPO. These measures include rationalising the definition of the promoter group, in the case where the promoter of the issuer company is a corporate body, to exclude companies having common financial investors. In addition, the disclosure requirements in the offer documents, in respect of group companies of the issuer company, should be rationalised to exclude disclosure of financials of top 5 listed or unlisted group companies. These disclosures will continue to be made available on the website of the group companies.

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