The Securities and exchange board of India (SEBI) has come up with informal guidance on June 10,2020 whereby it has clarified that the daughter’s of Managing Director cannot be re-classified their names from the Promoter and Promoter’s Group to Public Categories irrespective of their involvement of in the management of the company or not.
The clarifications have been given as part of an informal guidance sought by Mirza International Limited regarding re-classification of promoters shareholding. Rashid mirza, MD of Mirza International limited had sought guidance on whether the married daughters, who hold more than 10 % voting rights in the listed company, but living separate & independent lives and are not involved in the company’s affairs, can be reclassified from promoter group to the public category.
Market regulator has said by virtue of definition of promoter group under ICDR (Issue of Capital and Disclosure Requirement), 2015 the daughters of the promoters are immediate relative and are part of the promoters group irrespective of the fact that they are married and living separate lives or that they do not have any involvement in the management of the company.
“In case of gift of shares held by the promoter or person belonging to the promoter group, immediately on such event, the recipient of such shares shall be classified as promoter or person belonging to the promoter group under the LODR (Listing Obligations and Disclosure Requirement) norms.”, SEBI further said.
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SEBI has also said that the promoter or persons related to the promoter (s) seeking reclassification shall not together hold more than 10% of the total voting rights in the listed entity.
Noting this position is based on the information furnished, SEBI said, “different facts or conditions might lead to a different interpretation”.
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