Adopting a key non-legislative recommendation of FSLRC panel for overhaul of financial sector regulatory framework, Sebi is launching public consultation for framing rules to allow re-classification of promoters at listed firms looking to become public shareholders.
The new norms can have a significant impact on the way some merger and acquisition deals are structured, as also in cases involving corporate restructuring that take place due to disputes among members of business families or after settlements between rival corporates.
Some of the scenarios where such re-classification has already been sought by promoters include cases of split in a promoter family, a main promoter selling majority stake to another investor, marriage between members of rival business families and a promoter group wanting to exit from day-to-day operations of a listed company.
While the government is looking to implement many legislative and administrative recommendations of the Financial Sector Legislative Reforms Commission (FSLRC) in days to come, it has asked regulators including Sebi to begin adoption of governance-enhancing and non-legislative suggestions made by this panel on a proactive basis.
Consequently, the Securities and Exchange Board of India (Sebi) has decided to frame all its major policy decisions after a public consultation process, as suggested by the FSLRC, a senior official said.
“As the change in process of reform continues … I have not the least doubt that a large number of these (FSLRC) recommendations will actually see implementation in the days to come,” Finance Minister Arun Jaitley said at a seminar organised by the BSE.
While Sebi has been framing most of its key regulations after a public consultation over the draft norms, it would now onwards follow this procedure for all policy matters having any significant implications for various market participants.
As part of the new procedure, Sebi would make necessary amendments to its existing regulations governing re-classification of promoters after finalising a policy in this regard pursuant to a public consultation process.
Among others, amendments might be required to the regulations governing takeovers, listing norms and the disclosure rules applicable to listed companies, the official added.