Taking a strong position against companies which failed to achieve minimum 25 per cent public holding, market regulator Sebi says it had sent as many as 191 reminders to these firms in the run-up to the deadline.
In these reminders, which began in November 2012 and continued till April this year, the companies were asked to initiate steps to meet the requirement or be ready for penal actions in the event of non-compliance within stipulated time.
Cracking the whip on the promoters and directors of 105 private sector companies that failed to attain minimum 25 per cent public holding by June 3, Sebi late last night barred them from dealings in shares and from holding any new position on boards of listed entities.
Besides, Sebi also ordered freezing the voting rights and corporate benefits of promoters of these companies, in proportion of their non-compliance to the minimum public holding norms that require at least one-fourth of the share capital to be held by the non-promoter public shareholders.
Sebi said a total of 105 companies failed to meet the norms within the stipulated deadline of June 3, despite repeated reminders and various relaxations provided to help them meet the requirements.
These included 72 companies whose shares are actively traded on the stock market. The shares of 33 other companies are currently suspended for various reasons.
Giving details of its communications to the non-compliant companies, Sebi said that the last individual reminders were sent to almost all of them on April 15, 2013. This was in addition to the general circulars and reminders issued by Sebi and the stock exchanges from time to time.
Many companies were sent 4-5 individual reminders in the months preceding the deadline of June 3, 2013 and Sebi had begun sending these communications as early in November 2012.
The market regulator had asked the companies through these letters to initiate steps to achieve minimum 25 per cent public holding and inform about the same to it.
The non-compliant companies were also told that their failure to comply with the norms within the deadline would lead to Sebi "initiating appropriate proceedings or any other action as may be deemed appropriate".
The companies whose promoters and directors face the prohibitory orders, which came into effect yesterday, include Adani Ports, BGR Energy Systems, Essar Ports, Omaxe, Plethico Pharmaceuticals and Tata Teleservices.
Out of these, Adani Ports carried out an Institutional Placement Programme of shares to meet the guidelines yesterday, while Starcom Information Technology's Offer for Sale was underway today. However, both of them missed the deadline.
Sebi said the boards and audit committees of the non-compliant companies would need to submit a compliance report at the end of each quarter to the stock exchange, giving the extent to which the compliance has been achieved and the efforts taken for the same.
The actions announced by Sebi against promoters of these companies include "direct freezing of voting rights and corporate benefits like dividend, rights, bonus shares, share split", among others, with respect to the excess shares held by the promoters in proportion to the public holding. This will be till the time these firms comply with the norms.
Besides, promoters and directors of such companies have been prohibited from buying, selling or other dealing in shares of their respective companies, except for the purpose of complying with the minimum public holding norms.
The other possible actions that Sebi might take against these companies include moving their shares to trade-to-trade segment, excluding them from futures and options trade, monetary penalties under adjudication proceedings, initiation of criminal case by way of prosecution and other actions, as may be deemed appropriate at a later stage.
The last few days saw a spurt in activities by non-compliant companies to meet the norms, but some of them including Tata Tele, BGR Energy, Essar Ports and Omaxe could not sell the required number of promoter shares.
Sebi said it had provided the non-compliant companies with various routes to meet the requirements, including through issuance of public shares by the companies and promoters selling shares through one-day Offer For Sale (OFS) and Institutional Placement Programme (IPP) routes.
Besides, Sebi had also allowed the companies to meet the norms through rights issues, bonus issues, and any other method to be approved on case-to-case basis.
The regulator said many companies availed of these initiatives to meet the requirement, but some of them failed to do so, despite repeated reminders to them.
Passing the order, Sebi's whole-time member Prashant Saran said: "I am of the considered opinion that the persons forming part of the promoter/promoter group and the directors of such non-compliant companies are mainly responsible for the non compliance with the minimum public shareholding requirements within specified timelines.
"The promoters/promoter group of such companies would have an advantage on account of their disproportionate stake compared to the public in their respective companies and also place them in a more advantageous position as compared to the promoter/promoter groups of the compliant companies..."
Sebi said that the availability of a minimum number of shares with the public ensures a reasonable depth in markets and prices of such stocks are not susceptible to manipulation.
The regulator said that action against promoters of non-compliant companies was necessary to ensure a level playing field, while also safeguarding the interests of public shareholders.
