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Minimum public stake in listed cos. proposed

NEW DELHI: In a significant beneficial move for investors, the Union Finance Ministry has proposed a minimum public stake of 25 per cent in any company listed on the stock exchanges.

According to an official statement here on Friday, this amendment, proposed along with a slew of other proposals, is based on a review of the Securities Contracts (Regulation) Rules, 1957 (SCRR) for both initial and continuous listing requirements of companies on the stock exchanges.

In a discussion paper titled ‘Requirement of public holding for listing’, the Ministry has proposed that the Securities and Exchange Board of India (SEBI), as the market regulator, should be entitled to take enforcement action, including delisting of shares, in case the company failed to hike the public equity holding to 25 per cent within three months.

“If, for any reason, the public holding reduces below 25 per cent, the promoters, management and the company may be jointly and severally be liable to bring the public holding to 25 per cent within three months, in the manner prescribed by SEBI, failing which appropriate enforcement action, including delisting, may be taken,” the paper said. The Ministry also suggested that the standards for initial listing and continued listing should be uniform and must be prescribed in the SCR rules since the objective is the same.

Concerned over the fact that most of the retail investors were not getting shares in initial public offerings (IPOs) despite having applied for them, the Ministry said: “The public offer envisaged at initial listing is of no consequence unless the public are actually allotted shares.”

On the discrimination against private companies, the paper pointed out that the powers of the stock exchanges to relax any of the conditions of listing with the prior approval of SEBI in respect of a government company is required to be withdrawn. “Similarly, the powers of SEBI to relax listing requirements may be withdrawn,” it said.

Explaining the rationale for the proposed amendments, the Ministry said: “A large number of shares distributed among a large number of shareholders is essential for the sustenance of a continuous market for listed securities to provide liquidity to the investors and to discover fair prices. The larger the number of shares and the number of shareholders, that is, the larger the public float, the less is the scope for price manipulation.”

The statement noted that the discussion paper had been posted on the Finance Ministry’s website inviting comments from the public by February 28, at shuvom2002@gmail.com .

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