Minimum Public Shareholding Norms In India, Is It Time For Change?

One of the Big-bang Proposals in the Union Budget Was for the Sebi to consider increasing minimum Public Shareholding Requirement in Listed Companies to 35 Per Cent.

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On July 5, 2019, the Indian finance minister, in her debut budget speech, announced a few big-bang proposals. One such proposal was for capital market regulator Securities and Exchange Board of India (“SEBI”), to consider increasing minimum public shareholding requirement in listed companies from the current threshold of 25% to 35%.

Jabarati Chandra

Partner, S&R Associates

The current threshold

Many Indian listed companies are promoter-owned and controlled (promoters are generally controlling shareholders in a company). For an initial public offering to be successful and for continuous listing, the Securities Contracts (Regulation) Rules, 1957, as amended (“SCRR”), includes the concept of a minimum public float (public is defined to exclude promoters and the promoter group).

The minimum public shareholding requirement has been subject to change from time to time. Prior to September 1993, companies seeking to list their shares were required to offer at least 60% of their capital to the public, whose threshold was subsequently reduced to 25% on September 20, 1993. In 2010, the regulation was further amended to harmonize initial and continuous listing requirements and, the current requirement of maintaining the minimum public float of 25% on a continuing basis after listing, was codified. Companies (other than public sector units (“