SEBI consultation paper – Recalibration of threshold for MPS norms
On 19 August 2020, after reviewing the existing regulatory framework, the Securities and Exchange Board of India (SEBI)
released a consultation paper1 placing proposed changes envisaged in the regulatory framework for the maintenance of Minimum Public Shareholding norms (MPS) in companies that undergo Corporate Insolvency Resolution Process (CIRP) under the
Insolvency and Bankruptcy Code, 2016 (IBC) and seek relisting of their shares pursuant to the implementation of the approved resolution plan.
Present framework
As per the current regulatory framework for listed companies whose public shareholding falls below the MPS due to the implementation of the resolution plan approved under the IBC, where:
● the public shareholding falls below 10%, such a listed company should bring public shareholding to at least 10% within a period of 18 months and to 25% within three years from the date of such fall;
● the public shareholding falls below 25% but is above 10%, such a listed company should bring public shareholding to 25%
within three years from the date of such fall.
Proposal
A. Three options have been proposed by SEBI for companies post CIRP:
Option 1 – Post-CIRP companies may be mandated to achieve at least 10% public shareholding within six months and 25% within three years from the date of breach of the MPS norm.
It is proposed that the period of 18 months as currently prescribed to increase the shareholding to at least 10% may be reduced to six months.
Option 2 – Post-CIRP companies may be mandated to have at least 5% shareholding at the time of relisting.
Companies may be provided 12 months to achieve a public shareholding of 10% and further 24 months to achieve public shareholding of 25%. It will incentivise companies to stay listed, and any higher threshold may push for total delisting.
Option 3 – Post-CIRP companies may be mandated to have at least 10% public shareholding at the time of relisting.
Companies may be provided three years to achieve minimum public shareholding of 25%. (In case of initial public offerings, companies are mandated to have at least 10% minimum public shareholding.)
B. Removal of Lock-in Requirement
It is proposed to remove the lock-in requirement of one year on incoming investors/ promoters who are issued shares on a preferential basis as per the resolution plan, so as to achieve MPS (only to the extent that it enables MPS compliance).
C. Introduction of a standardised reporting framework pursuant to approval of the resolution plan
Certain information is proposed to be introduced that covers the details of funds infused, creditors paid off, impact on the investor, brief description of business strategy, resolution plan, etc.
Next Step
The above proposals from SEBI are open for public comments until 18 September 2020.
1SEBI Consultation Paper – Recalibration of threshold for Minimum Public Shareholding norms, enhanced disclosures in Corporate Insolvency Resolution Process (CIRP) cases dated 19 August 2020
If your interest lies in a specific area or subject, do advise us so we can send you only the relevant alerts. For any additional information, please reach out to your PwC relationship manager or write in to[email protected]
About PwC
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with over 276,000 people who are committed to delivering quality in advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.
In India, PwC has offices in these cities: Ahmedabad, Bengaluru, Bhopal, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai, Pune and Raipur.
For more information about PwC India's service offerings, visit www.pwc.com/in
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
@2020 PwC. All rights reserved
Follow us onFacebook,Linkedin,TwitterandYouTube.
©2020 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, “PwC”refers to PricewaterhouseCoopers Private Limited (a limited liability company in India having Corporate Identity Number or CIN : U74140WB1983PTC036093), which is a member firm of
PricewaterhouseCoopers International Limited (PwCIL), each member firm of which is a separate legal entity.
