Compliance of Clause 40A of Listing Agreement till June 2013

As decided in the SEBI Board Meeting held on 16th August 2012, SEBI has vide its Circular No. CIR/CFD/ DIL/11/2012 dated 29 th August 2012 made amendments in the SCR Rules, 1957 and Cl 40A of Equity Listing Agreement.

Ms. Anjali Aggarwal
Vice President
+919971673336
anjali@indiacp.com
Vide the said Circular, SEBI has amplified the modes for listed companies to comply with the provisions of Cl 40A of Listing Agreement. Now, following additional modes have been allowed for attaining the minimum public shareholding:
  • Rights Issues to public shareholders, with promoters/promoter group shareholders forgoing their rights entitlement.
  • Bonus Issues to public shareholders, with promoters/promoter group shareholders forgoing their bonus entitlement.
SEBI has further opened the avenues for other modes as well, wherein, listed companies, desirous of availing any other modes, may approach SEBI seeking relaxation. SEBI may grant the same on a case to case basis.
These new modes are in addition to the following existing modes, as provided in Cl 40A:
  1. Follow on Public Issue;
  2. Offer for Sale;
  3. E-Offer for Sale;
  4. E-IPP

CP Comments:

The said amendments have been brought out in view of the large scale discussions going on amongst the corporate as well as media circles that the existing modes, as mentioned in the extant Cl 40A, may not be sufficient and in many a under-performing companies, no investors/ QIBs might be interested in investing therein, thus making all the efforts futile.

Since the last date (i.e. June ’13) is only 9 months away, these additional modes would surely interest the Promoters to comply with the requirements. Further, as per the media sources, the Regulators are quite serious about the Minimum Public holding norms and do not intend to extend the last date or accept any fall outs this time.

In fact, in a situation where none of the specified modes suit a particular Company and it desires to follow any other mode, it may write to SEBI for a specific exemption, mentioning all the details. SEBI, if satisfied, may grant the same on a case to case basis.

Corporate Professionals

So, its advisable for listed companies not to wait for the last date and then take steps to comply with the same, so as to avoid any penal/ other adverse action, including suspension/ compulsory delisting etc.

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