Raising of threshold for non- promoter, public shareholding for all listed companies

The Securities Contracts (Regulation) Rules 1957 provide for the
requirements which have to be satisfied by companies for the purpose
of getting their securities listed on any stock exchange in India. A
dispersed shareholding structure is essential for the sustenance of a
continuous market for listed securities to provide liquidity to the
investors and to discover fair prices. Further, the larger the number
of shareholders, the less is the scope for price manipulation.
Accordingly, the Finance Minister in his Budget speech for 2009-10,
inter- alia, proposed to raise the threshold for non- promoter, public
shareholding for all listed companies. To implement the Budget
announcement the Securities Contracts(Regulation) (Amendment) Rules,
2010 has been notified vide Press Release F.No.5/35/2006-CM dated 4th
June 2010 through this Notification

a) The minimum threshold level of public holding will be 25% for all
listed companies.

b) Existing listed companies having less than 25% public holding have
to reach the minimum 25% level by an annual addition of not less than
5% to public holding.

c) For new listing, if the post issue capital of the company
calculated at offer price is more than Rs. 4000 crore, the company may
be allowed to go public with 10% public shareholding and comply with
the 25% public shareholding requirement by increasing its public
shareholding by at least 5% per annum.

d) For companies whose draft offer document is pending with Securities
and Exchange Board of India on or before these amendments are required
to comply with 25% public shareholding requirement by increasing its
public shareholding by at least 5% per annum, irrespective of the
amount of post issue capital of the company calculated at offer price.

e) A company may increase its public shareholding by less than 5% in a
year if such increase brings its public shareholding to the level of
25% in that year.

f) The requirement for continuous listing will be the same as the
conditions for initial listing.

g) Every listed company shall maintain public shareholding of at least
25%. If the public shareholding in a listed company falls below 25% at
any time, such company shall bring the public shareholding to 25%
within a maximum period of 12 months from the date of such fall.

New definitions in Rule 2 of SCRR:

(d) "public" means persons other than - (i) the promoter and promoter
group; (ii) subsidiaries and associates of the company. Explanation:
For the purpose of this clause the words "promoter" and "promoter
group" shall have the same meaning as assigned to them under the
Securities and Exchange Board of India (Issue of Capital and
Disclosure Requirements-ICDR) Regulations, 2009.

(e) "public shareholding" means equity shares of the company held by
public and shall exclude shares which are held by custodian against
depository receipts issued overseas".

New Rule 19(2)(b) of SCRR:

(i) At least 25% of each class or kind of equity shares or debentures
convertible into equity shares issued by the company was offered and
allotted to public in terms of an offer document; or
(ii) At least 10% of each class or kind of equity shares or debentures
convertible into equity shares issued by the company was offered and
allotted to public in terms of an offer document if the post issue
capital of the company calculated at offer price is more than Rs. 4000
crores;

Provided that the requirement of post issue capital being more than
Rs. 4000 crores shall not apply to a company whose draft offer
document is pending with SEBI on or before the commencement of the
Securities Contracts (Regulation) (Amendment) Rules, 2010, if it
satisfies the conditions prescribed in clause (b) of sub-rule 2 of
rule 19 of the Securities Contracts (Regulation) Rules, 1956 as
existed prior to the date of such commencement (which is: offering
atleast 10% if there are 20 lakh in number of securities, Rs.100
crores of offer size is given to public and follows bookbuilding by
offering 60% to QIB)

Provided further that the company, referred in sub-clause (ii), shall
bring the public shareholding to the level of at least 25% by
increasing its public shareholding to the extent of at least 5% per
annum beginning from the date of listing of the securities, in the
manner specified by the Securities and Exchange Board of India .
Provided further that the company may increase its public shareholding
by less than 5% in a year if such increase brings its public
shareholding to the level of 25% in that year.

New Rule 19(4) of SCRR - fresh application in all cases now!!!

An application for listing shall be necessary in respect of the
following: (a) all new issues of any class or kind of securities of a
company to be offered to the public; (b) all further issues of any
class or kind of securities of a company if such class or kind of
securities of the company are already listed on a recognised stock
exchange.

New Rule 19(6A) - taking away the power from Clause 40A of Listing
Agreement of stock exchanges as there is no more Provisio!!!

All the requirements with respect to listing or continuous listing
requirement prescribed by these rules, shall, so far as they may be,
also apply to a body corporate constituted by an Act of Parliament or
any State Legislature. [Old Provisio deleted]

Note: SEBI's power to relax listing requirements under SCRR is
withdrawn.  Also note, there is no more Clause 40A continuous listing
requirement of 10% if the company has 2 crores of listed shares with a
market capitalisation of Rs.1000 crore or more.

Clause 40A is now Rule 19A mandating 25% as CONTINUOUS LISTING
REQUIREMENT for all Companies:

Every listed company shall maintain public shareholding of at least
25%

Provided that any listed company which has public shareholding below
25% on the commencement of the Securities Contracts (Regulation)
(Amendment) Rules, 2010, shall bring the public shareholding to the
level of at least 25% by increasing its public shareholding to the
extent of at least 5% per annum beginning from the date of such
commencement, in the manner specified by SEBI.

Provided further that the company may increase its public sharholding
by less than 5% in a year if such increase brings its public
shareholding to the level of 25% in that year.

(2) Where the public shareholding in a listed company falls below 25%
at any time, such company shall bring the public shareholding to
25%within a maximum period of 12 months from the date of such fall in
the manner specified by the Securities and Exchange Board of India."

SEBI CIR/CFD/DIL/1/2010 dated 5th April 2010 - Though little old information but important one

As part of a review of the policies of disclosure requirements for
listed entities and  also  to  bring  more  transparency  and
efficiency  in  the  governance  of  listed entities  it  has  been
decided  to  specify  certain  listing  conditions  so  to  amend  the
Equity Listing Agreement.

Voluntary  adoption  of  International  Financial Reporting Standards
(IFRS)  by listed entities having subsidiaries - Insertion of Clause
41(I) (g)

Various  regulatory  authorities  are  working  on  arriving  at  a
roadmap  for implementation of IFRS in India and on the steps to be
taken for convergence of the Indian Accounting Standards with IFRS by
April 01, 2011.

Requirement of a valid peer review certificate for statutory auditors-
Insertion of Clause 41(1) (h)

It  has  been  decided  that  in  respect  of  all  listed  entities,
limited review/statutory audit reports submitted to the concerned
stock exchanges shall be given only by those auditors who have
subjected themselves to the peer review process of ICAI and  who
hold  a  valid  certificate  issued  by  the  ‘Peer  Review  Board’
of  Institute of Chartered Accountants of India.

Interim disclosure of Balance Sheet items by listed entities-
Insertion of clause 41(V) (h) and Annexure IX

With  a  view  to  have more  frequent  disclosure  of  the  asset-
liability position  of entities, it has been decided that listed
entities shall disclose within forty-five days from  the  end  of
the  half-year,  as  a  note  to  their  half-yearly  financial
results,  a statement of assets and liabilities in the specified
format.

Approval of appointment of ‘CFO’ by the Audit Committee- Insertion of
Clause 49(II)(D)(12A)

GIST OF SEBI CIRCULAR 5TH APRIL 2010 – AMENDMENT OF LISTING AGREEMENT

AMENDMENT OF CIRCULAR

1

Clause 24 (i)

Company while filing for approval with the Stock Exchange any draft
scheme of amalgamation / merger / reconstruction, etc under Clause
24(f) is required to file with the Stock Exchange an Auditors’
Certificate that the accounting treatment contained in the scheme of
amalgamation is in compliance with the Accounting Standards specified
by ICAI.

Effective Date: 5th April 2010.

2

Clause 41 (I)(c)

Companies have an option to submit audited or un-audited quarterly and
year to date financial results within 45 days of the end of each
quarter instead of 1 month of the end of each quarter. [The above
clause is for results to be submitted for other than last quarter]

3

Clause 41 (I) (c)

For Companies which opt to submit un-audited financial results, the
copy of the Limited Review report should be furnished to Stock
Exchange within 45 days from the end of the quarter instead of 2
months earlier. [The above clause is for results to be submitted for
other than last quarter]

4

Clause 41 I (d)

In respect of the last quarter, Companies have an option to submit un-
audited financial results for the quarter within 45 days of the end of
the Financial Year OR if the Company decides to submit audited
financial results for the entire Financial Year it should do so within
60 days of the end of the Financial Year

5

Clause 41 I (d)

The Limited Review Report in respect of the last quarter should be
furnished to the Stock Exchange within 45 days of the end of the
Financial Year

6

Clause 41 I (e) (i)

In case of a Company having subsidiaries, it may in addition to
submitting quarterly and y-t-d stand alone financial results to the
Stock Exchange within 45 days from the end of the quarter, also submit
quarterly and year to date consolidated financial results within 45
days from the end of the quarter

7

Clause 41 I (e) (ii)

For a Company having subsidiaries, it should submit the annual audited
consolidated financial results along with the annual audited stand
alone financial results within 60 days from the end of the Financial
Year to the Stock Exchange

8

Clause 41 I (ea) & (eaa)

A Statement of Assets & Liabilities as at the end of the half-year
should be disclosed within 45 days from the end of the half-year to
the Stock Exchange. The said information should be disclosed as a part
of the audited or un-audited financial results for the half-year to
the Stock Exchange so as to keep the shareholders informed about the
solvency position of the Company

9

Clause 41 I (g)

If the Company has subsidiaries, it may opt to submit consolidated
financial results as per IFRS

10

Clause 41 I (h)

Company to ensure that the Limited Review / Audit Reports is given by
an Auditor who has subjected himself to the peer review process of the
ICAI and holds a valid certificate issued by the Peer Review Board of
the ICAI.

Effective Date: For appointment of Auditors after 1st April 2010.

11

Clause 41 V (g)

Disclosure of Balance Sheet items as per Cl 41 I (eaa) to be in the
format specified in Annexure IX drawn from the Schedule VI of the
Companies Act, 1956

12

Clause 41 VI (b)

Disclosure of Consolidated financial results along with the following
items on a stand alone basis as a foot note (a) Turnover (b) Profit
before Tax (c) Profit after tax instead of only consolidated financial
results

13

Clause 41 VI (b) (iv)

Companies that are required to prepare consolidated financial results
for the first time at the end of the Financial Year should exercise
the option mentioned in Cl. 41 VI (b) in respect of the quarter during
the Financial Year in which they first acquire the subsidiary

14

Annexure V to Clause 41 – Limited Review Report for Companies other
than Banks

Disclosures regarding “Public Shareholding” and “Promoter & Promoter
Group Shareholding” which have been traced from the disclosures made
by the management and have not been audited by us inserted

15

Annexure VI to Clause 41 – Limited Review Report for Banks

Same as point 14 above.

16

Annexure VII & VIII  (both parts)

Except for the disclosures regarding ‘Public Shareholding’ and
‘Promoter & Promoter Group Shareholding’ which have been traced from
the disclosures made by the management and have not been audited by us
inserted after the words pursuant to the requirement of Clause 41 of
the Listing Agreement

17

Annexure IX

Statement of Assets & Liabilities introduced

18

Clause 49 II D (12A)

Audit Committee to approve the appointment of CFO - Approval of the
appointment of CFO after assessing the qualifications, experience and
background of the candidate.

Recent AMENDMENTS in ESI and GRATUITY

Ministry of Labour & Employment vide G.S.R. 394(E), dated 20th April,
2010 has made Employees State Insurance Act, 1948 read with ESI
(Central) (Amendment) Rules, 2010 applicable to employees whose wages
does not exceed Rs. 15,000/- (Fifteen Thousand Only).The said
notification shall come into effect from 1st May 2010.

The Payment of Gratuity (Amendment) Act, 2010 is notified in Official
Gazette on 18th May 2010, amending the Payment of Gratuity Act, 1972
with revision in maximum ceiling from Rs. 3.5 lac to Rs. 10 lakhs.
Whereas the date of effect of the revised ceiling may be decided by
the Central Government through Official Gazette as per THE PAYMENT OF
GRATUITY (AMENDMENT) ACT 2010.Notification in Effective Date for
Revision of Gratuity Amendment Act to Rs. 10 lakhs: Notification in
Official Gazette as on 24th May 2010

The Payment of Gratuity Act, 1972 definition of the term “employee”
under Section 2 got widened.  It is no more the old definition of
persons employed in administrative or managerial capacity.

The new definition is as follows,

"Employees" means any persons [NOT being an Apprentice] employed for
wages in any kind of work (manual or otherwise) or in connection with
work of factory, mine, plantation, oilfield, railway company, port or
other establishment.