Now, Listed companies are allowed to increase their depreciated public shareholdings during implementation of Insolvency Resolution Plan
The Department of Economic Affairs, Government of India (“Department”) has published the Securities Contracts (Regulation) (Amendment) Rules, 2018, which is effective,24th July, 2018. The Amendment Rules is bringing in changes in the Securities Contracts (Regulation) Rules, 1957. The implication of the amendment is discussed in detail below.
There is a new Sub-Section 5 has been inserted in the existing Section 19A (Continuous Listing Requirements), which reads as follows;
“Section 19A(5) – Where the public shareholding in a listed company falls below twenty-five per cent, as a result of implementation of the resolution plan approved under section 31 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), such company shall bring the public shareholding to twenty-five per cent within a maximum period of three years from the date of such fall, in the manner specified by the Securities and Exchange Board of India:
Provided that, if the public shareholding falls below ten per cent, the same shall be increased to at least ten per cent, within a maximum period of eighteen months from the date of such fall, in the manner specified by the Securities and Exchange Board of India.”
The present amendment, inserts a new clause under the provision capturing Continuous Listing Requirement. The new provision provides Listed Companies with a maximum period of three years to bring its public shareholding to twenty-five percent, which had fallen due to implementation of the resolution plan under Section 31 of the Insolvency and Bankruptcy Code, 2016. The amendment also eases the situation where a public shareholding of a Listed Company has fallen below ten percent. It allows such companies with a time frame of eighteen months to increase the same to at least ten percent.
This object of the legislature is to ease the pressure from the listed companies during the implementation of resolution process. The amendment hence provides a window for these companies to raise its share holding pattern and help them perform better in case of such contingent events.
Please refer to the Gazette Copy of the said notification hyperlinked below for reference.
Source: Department of Economic Affairs