In 2010, SEBI increased the minimum public shareholding (MPS) requirement from the then existing 10% to 25% for public listed companies. SEBI also obligated all non-compliant listed companies to increase their public shareholding to 25% by 3 June, 2013 and prescribed certain methods through which such companies could increase their public holding.

By an order dated 4 June 2013 (MPS Order), SEBI imposed several restrictions on companies that were not in compliance with the MPS requirements. Subsequent to the MPS Order, many noncompliant companies wished to comply with the MPS norms with alternate routes including option to delist themselves from the stock exchanges. However, SEBI has taken an unnecessarily rigid stance in not permitting various routes it previously allowed for divestment by control persons.
In the case of Gillette India, SEBI had earlier rejected the proposal to treat one of the promoters as a public shareholder but after various rounds of appeals and representations, SEBI by way of order dated 26 September 2013, agreed to the proposal of treating one of the promoters as a public shareholder subject to certain restrictions as an additional method for compliance with the MPS norms. Further, in the case of Fresenius Kabi Oncology, SEBI had earlier restricted the company from its delisting process by imposing onerous restrictions on the promoters by increasing the minimum number of shares required to be acquired by the promoters for a successful delisting under SEBI (Delisting of Equity Shares) Regulations, 2009. However, the Securities Appellate Tribunal held that imposing additional conditions to the delisting offer by SEBI is not justified as the delisting is being done in the ordinary course of business.
The above two cases are examples of rigid resistance from SEBI in allowing companies to deploy alternate routes to comply with the MPS norms. Although, the above companies were finally allowed to use alternative measures, it was not before a prolonged opposition from SEBI. In relation to the MPS Order, SEBI has been taking a counterproductive stand of blocking alternate routes for compliance with the MPS norms instead of facilitating such routes for an early compliance with the MPS norms by all listed companies.

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Date:September 29, 2015