“The changes in the nature of ownership could lead to situations where persons with no controlling rights and minority shareholding continue to be classified as promoter,”
It also sought public feedback on whether “the existing concept of promoter and promoter group should continue or there is a need to shift to the concept of ‘person in control’ or ‘controlling shareholders’ and ‘persons acting in concert’.”
Harish Kumar, partner, L&L Partners, said: “The shift from the concept of ‘promoter’ to ‘persons in control’ is likely to have a material impact on different regulations framed to govern family-driven businesses in India. Considering the continued subjectivity around the concept ‘control’, Sebi would have to work on clear guidelines to define that.”
Sebi has also proposed rationalising the definition of “promoter group” by dropping the clause which treated a group of individuals or companies holding 20 per cent or more stake in a company as promoter.
“Capturing the details of holdings by financial investors, while being a challenging task, may not result in any meaningful information to investors,” Sebi said.
The regulator has also proposed doing away with the requirement of disclosing financial and other details of the top five listed or unlisted group companies in the IPO prospectus.
Instead, only the names and registered office addresses of all the group companies should be disclosed in the offer document and other details can be made available on the websites of the listed companies.
Vidisha Krishan, partner at law firm MV Kini, said “such disclosures made the offer documents bulky and chasing after such entities prior to IPOs
was a dead end task for most issuers”.
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