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."