compliance by non-government entities of the public shareholding norms went by on
June 3, 2013. Immediately thereafter, SEBI yesterday issued an order
against 108 companies that have failed to comply with these norms. SEBI’s press
release summarizing its order is available here.
points are noteworthy. The first relates to the rapidity with which SEBI has
acted. This is consistent with its strict stance of not delaying the date of compliance
and also its intention to enforce this rule very strictly. It is almost as if
SEBI had been preparing for this eventuality where some companies would be non-compliant.
The second, and more important, aspect of the order (which is interim in
nature) is that it seeks to proceed against the promoters and controlling
shareholders. The orders passed against them include freezing their corporate rights
(such as voting and other corporate benefits such as dividends, rights
entitlements, etc.), prohibitions on the promoters from buying and selling
shares in those companies and also restraining the promoters from holding any
further positions on the board. By proceeding against the promoters rather than
the company itself, SEBI has sought to impose greater pressure to ensure
compliance. As we had earlier
noted, proceeding against the company would adversely affect the minority
shareholders and ought not to be pursued.
This saga is likely to
continue as some of the companies/promoters may very well appeal against the
order of SEBI considering the severity of the consequences visited upon them.