Public float defaulters to face fresh penal actions: SEBI
New Delhi: Capital markets watchdog Sebi has initiated the process of fresh penal actions against companies having defaulted on minimum public holding norms, with a stricter crackdown against 'wilful defaulters'.
At the same time, Sebi has also stepped up its efforts to engage with about a dozen listed public sector companies, which need to achieve minimum 10 percent public float by sale of shares worth an estimated Rs 3,000 crore before a separate deadline of August 8.
The deadline for private sector listed companies to achieve minimum 25 percent public shareholding expired on June 3, following which Sebi had taken interim actions against 105 companies that failed to comply with the norms.
As per Sebi's interim order dated June 4, these companies were given 21-day time to present their case before the regulator with regard to their non-compliance.
"As the time to respond to the Sebi show-cause notice has expired, the regulator is now considering further actions against defaulters for the minimum public holding norms," a senior official said.
While some companies made made genuine efforts to meet this regulatory requirement of having minimum 25 percent public float, Sebi has also come across certain "wilful defaulters" who did not make any visible attempts to increase the public shareholding, he added.
Since the time Sebi passed its interim order, about two dozen companies have initiated steps to comply with the minimum public holding norms and some of them have already complied with the norms.
However, even these companies face the risk of further action as they failed to meet the deadline.
However, the final Sebi action against the defaulter companies and their promoters would be taken after taking into account the efforts made by them in meeting the norms, the official said, while adding that the regulator would also try to safeguard the interest of minority shareholders.
The actions being considered against defaulter companies and their promoters and directors include levying of monetary penalties, initiating of criminal proceedings, moving their shares to restricted trade categories, among others.
In its June 4 interim order, Sebi had cracked the whip on promoters and directors of 105 companies by barring them from dealings in shares and from holding any new position on boards of listed entities.
Besides, Sebi had also ordered freezing the voting rights and corporate benefits of promoters of these companies, in proportion of their non-compliance to the minimum public holding norms that require at least one-fourth of the share capital to be held by the non-promoter public shareholders.
In the run-up to the expiry of deadline for private sector companies, Sebi had held consultations with the non-compliant companies to encourage them meet the deadline and had also sent them reminders. Besides, various relaxations were given to them to help them comply with the norms.
A similar process is being followed to help about a dozen PSUs meet the norms within the due date, an official said, while adding that Sebi has already written to various government departments in this regard.
Initially, the government had assured Sebi that all PSUs, except for loss-making ones, would meet the deadline, but the regulator insisted on compliance by loss-making PSUs as well.
Sebi has written to the non-compliant PSUs directly as well to request them to take appropriate steps immediately to ensure compliance to the deadline.
Last month, the Finance Ministry also wrote to the controlling ministries of these PSUs to ensure compliance to the Sebi deadline and told them that non-compliance would invite punitive action by the regulator.
The companies were asked on June 4, 2010 to achieve minimum 25 percent public shareholding within three years and this deadline ended on Monday.
However, the norms for public sector entities were relaxed later on August 9, 2010 and they were asked to attain minimum 10 percent public holding in three years and that deadline would end on August 8 this year.
As per Sebi, the minimum public float norms were put in place "with a view that 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."