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Sebi Acts Against Promoters, Directors Of 105 Firms

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Cracking the whip on the promoters of over 100 private sector companies having failed to attain minimum 25 per cent public holding, Sebi on 4 June ordered freezing their voting rights and corporate benefits and barred them from holding any new position on boards of listed firms.

The promoters and directors of non-compliant companies have also been barred from dealings in the market and holding new positions on the boards of listed entities till the time those companies comply with the minimum public shareholding requirements.

In a 13-page late night order, Sebi also warned of further actions including levy of monetary penalties, initiation of criminal proceedings, restricting the trading activities of related stocks and other possible directions.

Sebi said a total of 105 companies failed to meet the norms within the stipulated deadline of 3 June, despite repeated reminders and various relaxations provided to the companies to help them meet the requirements.

These included 72 companies whose shares are actively traded on the stockmarket, while the shares of 33 other companies are currently suspended for various reasons.

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.

The actions announced by Sebi against promoters include "direct freezing of voting rights and corporate benefits like dividend, rights, bonus shares, share split etc., with respect to the excess" shares held by the promoters beyond the 75 per cent limit, 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 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 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.

These companies and their promoters and directors have been asked to file their replies, if any, to the Sebi order within 21 days, Sebi said.

The minimum public holding norms, seeking at least 25 per cent public shareholding, were notified on June 4, 2010, requiring compliance by the private sector listed companies within three years and this deadline ended earlier this week on 3 June 2013.

The PSU companies are required to have at least 10 per cent public shareholding by 8 August 2013.

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 to comply with the requirements despite their attempts.