Sebi acts against public float violators

Market regulator Sebi on Tuesday barred promoters of companies which failed to comply with its 25% minimum public shareholding norms by denying partially their rights to dividend, bonus and voting. Sebi also barred these promoters from accessing the market other than for reducing their stakes in the company. Sebi said the sanctions will be lifted once the companies meet the shareholding norms. The denial of voting rights in the companies which have not complied with the Sebi rules will be proportional to current promoter shareholding, which is three times the public shareholding. For example, if the public shareholding in a company is 10%, the promoters would be entitled to get only 30% (that is 10% X 3 = 30%) of the total dividend paid by the company. In other words although promoters hold 90% in the company, they will have to forgo 60% of the dividend paid by the company, which in normal course would have come to them. The same would apply for voting rights, bonus, rights offers, split etc, an order by Prasant Saran, wholetime member, Sebi, noted. The Sebi order also barred the promoters and directors with these companies from holding any new position on the board of a listed firm.

In its 13-page late evening order, Sebi also warned of further action, including levy of monetary penalties, initiation of criminal proceedings, restricting the trading activities of related stocks and other possible directions. Sebi said 105 companies failed to meet the norms within the stipulated deadline of June 3, despite repeated reminders and various relaxations provided to the companies to help them meet the requirements. The companies whose promoters and directors would face the prohibitory orders, which have come into immediate effect, include Adani Ports, BGR Energy Systems, Essar Ports, Omaxe, Plethico Pharmaceuticals and Tata Teleservices. These included 72 companies whose shares are actively traded on the stock market, while the shares of 33 other companies are currently suspended for various reasons.

The promoters and directors of these companies have also been restrained from holding "any new position as a director in any listed company , till such time these companies comply with the minimum public shareholding requirement," Sebi said. The other possible actions that Sebi might take against these companies include moving their shares to trade to-trade segment, excluding them from the derivatives segment, 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. These companies and their promoters and directors have been asked to file their replies, if any, to the Sebi order within 21 days.

Source : Times Of India