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SEBI MAY FREEZE PROMOTER'S VOTING RIGHTS FOR SHAREHOLDING NORM VIOLATION


Over a hundred companies listed on the NSE and the BSE face penal action from SEBI for non-compliance of the 25 per cent minimum public shareholding
norm by June 3.
Action ranging from freezing of voting rights and corporate
benefits has been mooted.Only three times the existing
percentage of public
shareholding would be exempt.
That is, companies having 10 per cent public shareholding as on date will have 60 per cent of its promoter holding frozen.Strict action
Promoters can also be barred from buying and selling in the
securities market and restrained from taking up directorial roles in other companies, said SEBI.
Other possible actions include fines, criminal proceedings,moving of the scrip to the trade-to-trade segment and exclusion from the futures and options
segment.
Repeated reminders
SEBI said companies are aware of this norm since December 16,2010 and, despite repeated reminders, some had not
complied.
M.S. Sahoo, Secretary, ICSI, and former SEBI member, adds: “SEBI
has the powers to direct depositories to sell the excess promoter stake through the stock exchange mechanism at the current market price within a specific time frame, say three
days.”Tejesh Chitlangi, partner of law firm IC Legal, said: “Out of the
errant promoters, the majority did not make an attempt to sell
because of likely failure to offload
excess shares at/near market price. Many of them, despite
making an attempt, were unable to find buyers.”
Experts said shifting to the trade-to-trade segment would not
penalise the promoter.
Arun Kejriwal,Founder, KRIS
Research, said: “The shift would make the exit of retail investors
doubly difficult as liquidity would dry up . Why should the minority shareholder suffer in any way for
a fault that is entirely the promoter’s?”
The SEBI order does not include companies listed in regional
stock exchanges.
Directing the companies to file their replies with 21 days, SEBI said the order was also a show cause notice.