Sebi floats paper to protect equity shareholders under IBC
Mumbai, Nov 11, 2022
Sebi has said that it is necessary to give the right value to the business of the debtor firm and stakeholders
The Securities and Exchange Board of India (Sebi) on Thursday floated a consultation paper seeking public comments on protection of public equity shareholders in case listed entities undergo the corporate insolvency resolution process.
This follows numerous complaints with regard to companies that have been delisted following the approval of the resolution plan.
The paper proposes that non-promoter public shareholders shall be provided an opportunity to acquire equity of the fully diluted capital structure of the new entity up to the minimum public shareholding percentage, which is 25% at present, on the terms agreed upon by the resolution applicant.
The new entity shall endeavour to achieve at least 5% public shareholding through such mode of offer made to the non-promoter public shareholders. The offer to acquire shares would be made in an equitable manner to such public equity shareholders, according to the consultation paper floated by Sebi.
Sebi has also contended in the consultation paper that it is necessary to give the right value to the business of the debtor company and all stakeholders should get appropriate value of their shareholding.
Moreover, associate companies and subsidiaries, family members of promoter group companies, trusts managed by promoters, key managerial personnel, and directors will not be identified as public shareholders.
As subscription from public equity shareholders under such offer to acquire equity of the fully diluted capital structure of the new entity will not be in the hand of the successful bidder or resolution applicant, it may not be possible for the latter to upfront allot certain percentage of equity to public equity shareholders and get this incorporated as part of resolution plan.
However, to ensure adequate float and liquidity in the new entity after its restructuring, the entity may be permitted to continue as a listed entity only if 5% of the fully diluted capital structure of new entity is with the public shareholders.