Brief Overview:

The Securities and Exchange Board of India (“SEBI”) has published a circular that reviews and rationalises the current approaches for reaching MPS in listed entities along with recommending two new approaches.

Technical Details:

SEBI has reviewed and rationalized the following existing method to facilitate listed entities to achieve compliance with the MPS:

1)   Sale of shares by promoter(s) / promoter group of the listed entity in the open market of:

(a)  up to two percent (2%) of the total paid-up equity capital, provided it does not exceed five times the average trading volume of the company (existing provision).

In addition to the above existing provision, the following provisions/conditions have been added/ modified.

(b)  up to five percent (5%) of the total paid-up capital subject to

(i)   the public holding remaining at twenty-five percent (25%) post sale; and

(ii)  the shares sold do not exceed the trading volume of the company during the preceding 12-months from the date of such announcement of sale.

Provided that the promoter(s) / promoter group shall be entitled to use any of the above mechanisms, but not both.

SEBI has prescribed the following additional methods to achieve MPS:

1)   Transfer of shares to an Exchange Traded Fund (“ETF”) managed by a SEBI-registered mutual fund, subject to a maximum of 5% of the paid-up equity share capital.

Provided that, such transfer shall require additional disclosures to be disclosed to the stock exchange with respect to intention, details, number of shares transferred, the details of ETF to which the shares are proposed to be transferred and undertaking from the promoter(s) / promoter group to not subscribe to the units of ETF.

2)   Increase in public shareholding by exercise of options and allotment under employee stock option (ESOP) scheme, subject to maximum of two percent (2%) of paid-up equity share capital.

Provided that, no shares can be allotted to the promoter(s) / promoter group and the ESOP Scheme shall comply with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

For further details, please see:

SEBI | Manner of achieving minimum public shareholding

For any queries / clarifications, please feel free to ping us and we will be happy to chat:

 Ms. Apurva Kanvinde (apurva.kanvinde@jclex.com)
Mr. Smit Parekh (smit.parekh@jclex.com)
Mr. Mannan Gala (mannan.gala@jclex.com)