Shareholder Rights Outweigh Promoter Privacy: Sebi to HC

Sebi's filing is the latest development in a high-stakes legal battle initiated by Kirloskar firms

- Neha Joshi

The Securities and Exchange Board of India (Sebi) has told the Bombay High Court that shareholders' right to information outweighs promoters' claims of privacy when it comes to disclosure of private agreements.

In an affidavit filed in response to a challenge by five Kirloskar Group companies, the market regulator argued that investors must be informed of any pact that could affect a listed company's management, control, or business, even if the firm is not a party to it.

Mint has reviewed a copy of the affidavit, which firmly rejects the petitioners' claims that the rules are arbitrary and overreaching.

Sebi clarified that its rules do not force a firm to be bound by such agreements, stating the regulatory requirement is not to assume contractual obligations, "but merely to disclose the existence of agreements that may have a material impact on the governance, control, or operations of the listed entity".

"Non-disclosure of material information creates information asymmetry and results in significant market reaction when it is known to the public at large at a later stage," Sebi said.