The Hindu Business Line : SEBI may amend norms for disclosing shareholding

THE Securities and Exchanges Board of India (SEBI) is proposing to amend the provisions of the disclosure requirements relating to the shareholding pattern of companies.

According to the proposed provision, companies will have to file with SEBI the shareholding pattern as per the guidelines, for each quarter of the year within 15 days of each quarter ending.

In addition, the company should file these forms within two days of change of one per cent or more in the shareholding of any entity in the `Controlling/Strategic Holdings' group.

The report, now placed for public opinion, also states that the disclosure must cover 100 per cent shareholding. This is being done as the shareholding pattern of the Indian listed companies has undergone a remarkable change, primarily due to the entry of several new categories of investors, according to SEBI.

One of the key changes in this new format relates to the term `Promoters.' Historically, the term `Promoter' has had the connotation of the initial entrepreneur/stakeholder and was appropriate when companies used to be family-run and takeovers/acquisitions rarely took place. This is not true anymore.

If more than one individual has promoted a company, it is not necessary that all of them remain with the company through its life and the departing ones, therefore, have to be excluded from any future reckoning of promoters.

Also, there are examples where a single entity holds the majority of the shares in a company but still does not describe itself as a `Promoter' as the company was not initially promoted by it or that the company was subsequently acquired by it.

The key issue, therefore, is not who initially promoted the company but who controls it as of date. The new disclosure format does away with the term `Promoters' and replaces it with `Controlling Interest.'

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