Alteration of Share Capital in Order to Meet the Minimum Public Holding Requirement - An Analysis

Abstract

Initially, the Securities Contracts (Regulation) Act (“SCRA”) Rules 1957, required public listed companies to comply with certain minimum public shareholding requirements. However, this was subject to the discretionary power of SEBI to waive or modify this criterion – thereby rendering these requirements hardly stringent.

On 4 June 2010, the Government amended the SCRA Rules and ordered all public listed companies to ensure a minimum of 25 per cent public shareholding, setting June 2013 as the deadline for all private sector companies and August 2013 for all public sector undertakings to meet these norms.

Various methods including Offer for Sale and Institutional Placement Programmes have been listed by SEBI to facilitate the mandated change. The question then is – can all these methods be availed of by all companies and be of benefit to them, irrespective of their financial position? Are all of them scrutinized to the same extent?

This paper seeks to compare SEBI’s methods to those offered by foreign regulatory agencies thereby analysing the most viable means through which these companies can achieve the minimum public shareholding.

Keywords: SCRA Rules