Non-promoter holding on a continuous basis and minimum number of shareholders - SEBI - SMDRP/POLICY/ CIR- 28/01

SECURITIES AND EXCHANGE BOARD OF INDIA SECONDARY MARKET DEPARTMENT Mittal Court, B Wing, First Floor, 224, Nariman Point, Mumbai 400 021 SMDRP/POLICY/ CIR- 28/01 May 02, 2001 The Presidents/Executive Directors/ Managing Directors of all the Stock Exchanges Dear Sir/Madam, Sub: Non-promoter holding on a continuous basis and minimum number of shareholders The matter of requirement of quantitative continuous listing conditions to be complied by the listed companies to maintain a minimum floating stock post listing was discussed in the meeting of the Secondary Market Advisory Committee. The recommendations of the Committee were considered by the SEBI Board in its meeting held on December 22, 2000. The Board approved the requirement of quantitative continuous listing conditions as a measure of investor protection as it would ensure availability of floating stock on a continuous basis. It was also decided to delete the requirement of minimum number of shareholders in proportion to capital offered. Accordingly, the stock exchanges are directed to amend their Listing Agreement as under 1. The existing clause 40A shall be substituted by following 40A Conditions for continued listing (i) The company agrees that in the event of the application for listing being granted by the Exchange, the company shall maintain on a continuous basis, the minimum level of non-promoter holding at the level of public shareholding as required at the time of listing. ii. Where the non-promoter holding of an existing listed company as on April 01, 2001 is less than the limit of public shareholding as required at the time of initial listing, the company shall within one year raise the level of non-promoter holding to at least 10%. In case the company fails to do so, it shall buy back the public share holding in the manner provided in the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 1997. iii. The company agrees that it shall not make preferential allotment or an offer to buy back its securities, if such allotment or offer result in reducing the non-promoter holding below the limit of public shareholding specified under the SEBI (Disclosure and Investor Protection) Guidelines, as applicable at the time of initial listing or the limit specified in sub-clause (ii) for the existing listed company, as the case may be. iv. The conditions stipulated in sub-clauses (i), (ii) and (iii) shall not apply to the companies referred to BIFR. (v) The company agrees that the following shall also be the condition for continued listing. a. When any person acquires or agrees to acquire 5% or more of the voting rights of any securities, the acquirer and the company shall comply with the relevant provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. b. When any person acquires or agrees to acquire any securities exceeding 15% of the voting rights in any company or if any person who holds securities which in aggregate carries less than 15% of the voting rights of the company and seeks to acquire the securities exceeding 15% of the voting rights, such person shall not acquire any securities exceeding 15% of the voting rights of the company without complying with the relevant provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. 2. SEBI vide its circular No. SMD/RCG/JJ/1819/96 dated May 15, 1996 and circular No. SMDRP/POLICY/CIR-30/98 dated October 16, 1998 had introduced the requirement of at least 5 public shareholders for every ₹ 1 lakh capital issued. This requirement is being withdrawn. You are advised to modify the listing agreement as above and monitor the level of non promoter holding on a half yearly basis from the returns submitted by the companies in specified formats. Yours faithfully, P K BINDLISH Deputy General Manager Secondary Market, Depository Research Publications Dept. E-mail : [email protected]