Sebi to launch consultation for promoter reclassification

Mumbai:  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 yesterday. 

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.