Additional disclosure requirements mandated by SEBI for Promoters

The securities and exchange board of India in its circular dated 07.08.2019 directed the promotors of every listed company to specifically disclose reason for encumbrance if the combined encumbrance by the promotor along with persons acting in concert with him equals or exceeds:

  1. 50% of their shareholding in the company or
  2. 20% of the total share capital of the company

Recently on 27th June, SEBI tightened the share pledging norms and said that any direct, indirect lien on shares will also qualify as encumbered shares and promoters of the company will have to furnish reasons if combined encumbrance crosses 20% of the company’s equity capital.

The disclosure shall be in Annexure-II by the Promoters and shall be made within two working days from the creation of such encumbrance. Such disclosure will be warranted when the extent of encumbrance (having already breached the above threshold limits) increases further from the prevailing levels.

The disclosure on reasons for encumbrance has be made to every stock exchange where the shares of the company are listed and to the listed companies. The listed companies shall disclose the contents of the annexure-II on their website within 2 working days of receipt of such disclosure.

If the existing combined encumbrance by the promoter along with PACs with him is either 50% or more of their shareholding in the company or 20% or more of the total share capital of the company as on 30 September, 2019, he has to specifically make first disclosure on detailed reasons by 4 October, 2019.

The provisions of this circular shall come into effect from 1st October, 2019.

Click here to see notification.