The board of the Securities and Exchange Board of India (SEBI) has tweaked the minimum public shareholding norms for listed companies facing bankruptcy under the Insolvency and Bankruptcy Code (IBC) and get relisted on the stock market.
Post the SEBI board's decision, such companies will be mandated to have at least 5 per cent public shareholding at the time of their admission to dealing on stock exchange, as against no minimum requirement at present.
Presently, during Corporate Insolvency Resolution Process (CIRP) where the public shareholding falls below 10 per cent, such listed companies are required to bring the public shareholding to at least 10 per cent within a period of 18 months and to 25 per cent within 36 months.
"Further, such companies will be provided 12 months to achieve public shareholding of 10 per cent from the date such shares of the company are admitted to dealings on stock exchange and 36 months to achieve public shareholding of 25 per cent from the said date," it said.
The lock-in on equity shares allotted to the resolution applicant under the resolution plan shall not be applicable to the extent to achieve 10 per cent public shareholding within 12 months.
In a statement, the capital market regulator said that such companies shall be required to make additional disclosures, such as, specific details of resolution plan including details of assets post-CIRP, details of securities continuing to be imposed on the companies' assets and other material liabilities imposed on the company.
The company will also have to lay down the proposed steps to be taken by the incoming investor or acquirer for achieving the minimum public shareholding (MPS) and quarterly disclosure of the status of achieving the MPS.
SEBI considered the move after the massive surge in Ruchi Soya's share price, post its relisting, with the public shareholding at a meagre 0.97 per cent.
On January 27, the day it was relisted after its acquisition by Patanjali Ayurved, Ruchi Soya's shares on the BSE closed at Rs 16.90 and in June, it touched a high of 1,507.30 per share.
Market experts raised concerns on the incessant rise in prices at a time when the public shareholding is very low.
BSE data shows that as of June, the public shareholding stands at 1.03 per cent and the promoter shareholding at 98.97 per cent.
