June 23, 2021
On August 19, 2020, SEBI released a Consultation Paper on ‘Recalibration of threshold for Minimum Public Shareholding Norms in Companies which undergo Corporate Insolvency Resolution Process (CIRP)’.
Existing legal position: Relaxations provided to listed entities undergoing CIRP
For ensuring the smooth revival of the corporate debtor post-approval of the resolution plan, SEBI has provided relaxations under various regulations. These exemptions are exclusive to entities involved in IBC cases and are not even provided when companies seek approval for schemes of arrangement. Some of them are:
In cases where the decrease in public shareholding is as a result of a resolution plan being implemented under the IBC:
(a) If the public shareholding is below 10%, within
18 months- it should be 10% and within,
3 years- it should be 25%
(b) If the public shareholding is between 10%-25%, within
3 years- it should be 25%.
Concerns and Issues:
(a) Option 1: Mandate such companies to achieve-
10 percent- in six months
25 percent- in three years
(b) Option 2: Mandate such companies to achieve-
5 percent- at the time of listing
10 percent- in twelve months
25 percent- in twenty-four months
(c) Option 3: Mandate such companies to achieve-
10 percent- at the time of listing
25 percent- in three years
A proposal has also been made to standardize reporting framework under SEBI (LODR) Regulations, 2015 pursuant to approval of a resolution plan.
~ Sara Jain
 Rule 19A(5), Securities Contract (Regulation) Rules, 1957
 Preferential issue means an issue of specified securities by a listed issuer to any select person or group of persons on a private placement basis. It does not include ESOPs, depository receipts and sweat equity shares.
 Regulation 158(2), SEBI (Issue and Capital Disclosure Requirements) Regulations, 2018
 The lock-in period for shares contributing toward minimum promoter contribution i.e. 20% of total capital is 3 years. The lock-in period for any shareholding exceeding 20% is 1 year.
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Abbreviations Used Code – Insolvency and Bankruptcy Code, 2016 CIRP – Corporate Insolvency Resolution Process AA – Adjudicating Authority (NCLT) CD – Corporate Debtor FC – Financial Creditor OC – Operational Creditor CoC – Committee of Creditors IRP – Interim Resolution Professional RP – Resolution Professional RA – Resolution Applicant NEW DELHI BENCH-III AA’s power […]September 29, 2021