SEBI has released a new circular outlining enhanced procedures for monitoring shareholding limits, public shareholding requirements, and the ‘fit and proper criteria’ in both listed and unlisted MIIs requiring them to disclose their shareholding pattern. The key highlights of the said circular are as under:
1. 𝐃𝐞𝐬𝐢𝐠𝐧𝐚𝐭𝐞𝐝 𝐃𝐞𝐩𝐨𝐬𝐢𝐭𝐨𝐫𝐲: MIIs must adhere to shareholding norms and fit & proper criteria. Each MII must appoint a Designated Depository (“DD”) to monitor shareholding limits. All shareholders with 2% or more equity must meet fit and proper criteria. A non-associated depository will act as the DD, monitoring thresholds of 5%, 15%, 45%, or 49% under SECC Regulations, 2018 and D&P Regulations, 2018.
2. 𝐃𝐢𝐬𝐜𝐥𝐨𝐬𝐮𝐫𝐞 𝐫𝐞𝐪𝐮𝐢𝐫𝐞𝐦𝐞𝐧𝐭𝐬: Quarterly disclosure of shareholding patterns on their respective websites is mandatory.
3. 𝐌𝐨𝐧𝐢𝐭𝐨𝐫𝐢𝐧𝐠 𝐫𝐞𝐬𝐩𝐨𝐧𝐬𝐢𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬 𝐚𝐧𝐝 𝐜𝐨𝐧𝐬𝐞𝐪𝐮𝐞𝐧𝐜𝐞𝐬: DDs will alert MIIs and exchanges about breach of thresholds. In case of breach, the DD will freeze excess shares, disable voting rights, and transfer dividends from excess holdings to the Investor Protection Fund (IPF) or Settlement Guarantee Fund (SGF).
4. 𝐈𝐦𝐩𝐥𝐞𝐦𝐞𝐧𝐭𝐚𝐭𝐢𝐨𝐧 𝐭𝐢𝐦𝐞𝐥𝐢𝐧𝐞: The circular will take effect on 12 January 2025 i.e., after 90 days.
This measure is aimed at enhancing transparency and to identify the beneficial owners of securities in MIIs (BSEIndia, NSE India, Multi Commodity Exchange of India, CDSL – Central Depository Services India Ltd, National Securities Depository Limited (NSDL), MCX, NSCCL nsccl.
The securities law participants can find interesting conflicts between the provisions of the Companies Act, 2013 and powers of SEBI, limits of delegation, established constitutional precedents and judicial precedents from academic and practitioners’ perspectives.
What is intriguing is the rationale of providing these far-reaching amendments through a mere circular rather than amendments to the regulations itself. Mr. Sumit Agrawal (Regstreet Law Advisors) and Mr. M. S. Sahoo had written in the past about misuse of circulars as disguised legislation, available at: https://lnkd.in/gqz-MFpx.
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