Analysis of Regulation 31 & 31A of SEBI Regulations 2015

Analysis of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) related to:-

Regulation 31 – Holding of specified securities and shareholding pattern.
Regulation 31A – Disclosure of Class of shareholders and Conditions for Reclassification.

[ Board here means “ Security and Exchange Board of India” ]

REGULATION 31 – HOLDING OF SPECIFIED SECURITIES AND SHAREHOLDING PATTERN.

The Listed Entity shall submit to the stock exchange(s):

A statement showing holding of securities and shareholding pattern separately for each class of securities, in the format specified by the Board from time to time within the following Timelines.

Timeline:

One day prior to the listing of its securities on stock exchange(s)
On a quarterly basis, within twenty-one days from the end of each quarter.
Within ten days of any capital restructuring of the listed entity resulting in a change exceeding two percent of the total paid-up share capital.

In the case of listed entities which have listed their specified securities on SME Exchange, the above statements shall be submitted on a half-yearly basis within twenty-one days from the end of each half year.

Promoter Shareholding in Dematerialize form:

The listed entity shall ensure that 100% (Hundred Percent) of shareholding of promoter(s) and promoter group is in Dematerialized form and

The same is maintained on a continuous basis in the manner as specified by the Board.

Comply with circulars or directions issued by the BOARD:

The listed entity shall comply with circulars or directions issued by the Board from time to time with respect to maintenance of shareholding in dematerialized form.

REGULATION 31A – DISCLOSURE OF CLASS OF SHAREHOLDERS AND CONDITIONS FOR RECLASSIFICATION.

Disclosure of Shareholding of Promoter and Promoter Group:

The shareholding pattern of Promoter and Promoter group will appear on Website of Stock Exchange having nationwide trading terminals where the specified securities of the entity are listed.
In this Shareholding pattern, all the entities falling under Promoter and Promoter group shall be disclosed.
Format provided by the SEBI

Conditions Modification or reclassification of the Status of above disclosure:

The stock exchange, disclosure specified in sub-regulation (1), shall allow modification or reclassification of the status of the shareholders only on fulfilling the conditions given below:

Upon receipt of a request from the concerned listed entity or the concerned shareholders, along with
All relevant evidence,
On being satisfied with the compliance of conditions mentioned in this regulation.

If listed on more than one stock exchange:

The concerned stock exchanges shall jointly decide on the application of the entity/ shareholders, as specified in sub-regulation (2).

Who will be considered as Promoter in the case of transmission/succession/inheritance?

In the case of transmission/succession/inheritance, the INHERITOR shall be classified as a promoter.

Reclassification of Promoter:

When a new promoter replaces the previous promoter subsequent to an open offer or in any other manner, reclassification may be permitted subject to the approval of shareholders in the general meeting and compliance of the following conditions:

Such promoter along with the promoter group and the Persons Acting in Concert shall not hold more than 10% (ten per cent) of the paid-up equity capital of the entity.
Such promoter shall not continue to have any special rights through formal or informal arrangements.
All shareholding agreements granting special rights to such entities shall be terminated.
Such promoters and their relatives shall not act as a key managerial person for a period of more than three years from the date of shareholders’ approval.

Condition: The resolution of the said shareholders’ meeting must specifically grant approval for such promoter to act as a key managerial person. The resolution will be an ordinary resolution.

Reclassification of Promoter as Public:

Where an entity becomes professionally managed and does not have any identifiable promoter the existing promoters may be re-classified as public shareholders subject to the approval of the shareholders at a general meeting. Entity may be considered as professionally managed, if-

No person or group along with persons acting in concert taken together shall hold more than one per cent paid-up equity capital of the entity including any holding of convertibles/outstanding warrants/ Depository Receipts.
Any mutual fund, bank, insurance company, financial institution, foreign portfolio investor may individually hold up to ten per cent paid-up equity capital of the entity including any holding of convertibles/outstanding warrants/Depository Receipts.
Such promoter shall not continue to have any special rights through formal or informal arrangements.
All shareholding agreements granting special rights to such entities shall be terminated.
Such promoters and their relatives shall not act as a key managerial person for a period of more than three years from the date of shareholders’ approval.

Conditions for Reclassification of promoter as public shareholders required to fulfill following conditions:

Such promoter shall not, directly or indirectly, exercise control, over the affairs of the entity
NonConsideration as rule 19A of the Securities Contracts (Regulation) Rules, 1957:

If because of re-classification of a promoter as a public shareholder, the public shareholding of increased. Such increase in public shareholding shall not be counted towards achieving compliance with a minimum public shareholding requirement under [4] rule 19A of the Securities Contracts (Regulation) Rules, 1957 and the provisions of these.

Disclosure to the Stock Exchange:

This reclassification shall be considered as a Material event and required to disclose the Stock Exchange this reclassification.

Relaxation in the Conditions of Re-classification:

Board may relax any condition for re-classification in specific cases if it is satisfied that outgoing promoter and person acting in concert with outgoing partner now- exercising any control.

Conditions for Reclassification of public shareholders as promoter required to fulfill following conditions:

If any public shareholder seeks to re-classify itself as a promoter, it shall be required to make an open offer in accordance with the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

Hence, the introduction of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) is a welcoming move of SEBI that aims at streamlining the existing listing regulations with the new Listing Regulations 2015.