From UPSC perspective, the following things are important :
Prelims level : Minimum Public Shareholding (MPS)
Mains level : Not Much
The Securities and Exchange Board of India (SEBI) has relaxed the 25 per cent minimum public shareholding norm and advised exchanges not to take penal action till August 2020 in case of non-compliance.
A statement based question can be asked about the SEBI in the prelim asking-
If it is a statutory or quasi-judicial body ; Scope of its regulation; Appointment of its chairman etc..
What is a Public Shareholding Company?
- A Public Shareholding Company is a company whose capital is divided into shares of equal value, which are transferable.
- Shareholders of a Public Shareholding Company are not liable for the company’s obligations except for the amount of the nominal value of the shares for which they subscribe.
What is MPS requirement?
- The 25 per cent MPS norms were introduced in 2013, whereby no listed company was permitted to have more than 75 per cent promoter stake.
- The rules were aimed at improving liquidity and better stock price discovery by making higher float available with public.
- The average promoter holding in India is among the highest globally.
- Last year, the government had proposed to increase the minimum public float from the current 25 per cent to 35 per cent. It had met with opposition, forcing the government to drop the plan.
Why ease MPS norms?
- The Sebi move is aimed at easing such compliance rules amid the disruptions caused by the coronavirus pandemic.
- The decision has been taken after receiving requests from listed entities and industry bodies as well as considering the prevailing business and market conditions.
- As per the norms, exchanges can impose a fine of up to Rs 10,000 on companies for each day of non-compliance with MPS requirements.
- Besides, exchanges can intimate depositories to freeze the entire shareholding of the promoter and promoter group. This circular will come into force with immediate effect.
Back2Basics: Securities and Exchange Board of India (SEBI)
- The SEBI is the regulator of the securities and commodity market in India.
- It was first established in 1988 as a non-statutory body for regulating the securities market.
- It became an autonomous body on 12 April 1992 and was accorded statutory powers with the passing of the SEBI Act 1992.
- SEBI has to be responsive to the needs of three groups, which constitute the market:
1) issuers of securities
3) market intermediaries