News:- Sebi’s reading of ‘control’ issue confounds experts Market regulator Sebis informal guidance on the issue of control of a company in case of R System International and Bhavook Tripathi has baffled corporate lawyers. In its interpretative letter, Sebi has said that unless the shareholder actually acquires control of the company, he would be considered a public shareholder. A Delhi-based software company R System International has requested Sebi not to classify Bhavook Tripathi, who holds 34.82% in the company, as a public shareholder since by virtue of his holding, Tripathi can influence the company in a significant way. R System pleaded that one of the ways in which Tripathi can exercise such influence is by his ability to block matters requiring shareholders nod by way of a special resolution under the Companys Act 1956. Sebi, while informally terming the acquirer as a non-promoter, seems to have given credence to the fact that theres still no clarity on the control of the company. I dont think Sebis informal guidance in case of R System International is correct, said Huzzefa Nasikwala, founder, Nasikwala Law Chambers. In India, theres no yardstick to define promoters in terms of their stake, as persons with as low as 25% can control a company. On the other hand, a person who can influence the company in a significant way with over one-third stake, has been treated as a public shareholder, he added. In R System, Tripathi made an open offer and his stake rose to 34.82%. While the promoters held 50.17%, thereby leaving the public shareholding at 15%, which is less than the required minimum of 25%. According to the Sebi takeover regulations, the acquirer was required to cut stake to ensure the target company complies with the minimum public holding norm of 25%. But if the acquirer is treated as public shareholder, he is not required to reduce his shareholding in the company. Read more at: articles.economictimes.indiatimes/2014-01-21/news/46411265_1_informal-guidance-minimum-public-holding-norm-target-company
Posted on: Wed, 22 Jan 2014 07:16:32 +0000