SAT asks Sebi to look into promoter reclassification
The Securities and Exchange Board of India (Sebi) may have to look into specific instances of companies wherein promoter entities were simply reclassified as public shareholders to become compliant with the minimum public shareholding norms. While hearing Gillettes appeal,the Securities Appellate Tribunal (SAT) told Sebi to look into such instances after it was highlighted that a some companies just removed certain entities from the promoter group to public by either changing the shareholding agreement or the articles of association. Article 14 does not allow discriminating between us and other companies where shareholding is exceeding the prescribed limit, argued Somasekhar Sundaresan partner,J Sagar Associates,representing Gillette India. He cited the cases of Gokaldas Exports and Balmer Lawrie. Jog Singh,presiding officer of SAT,while directing Sebi to look into such instances,added that the regulator should not contemplate action but think of a solution. Senior advocate JJ Bhatt,appearing for Sebi,said that the regulator will investigate specific cases where entities were reclassified as public shareholders. Gillette is trying to reduce its promoter holding by doing a similar exercise but has been denied permission by Sebi and so the company has filed an appeal at the tribunal. Promoters currently hold 88.76%. The company has proposed a three-stage plan to bring down the promoter holding to 75%. First,the Indian promoters would transfer a 4% stake to Pand G at a 25% premium for giving up control and certain statutory rights. Thereafter,it will terminate the shareholder agreement to be termed public shareholders. In the final stage,Pand G will sell 4.9% through OFS,which will bring down the total promoter holding to 75%. The regulator,however,is of the view that the manner isnot in line with the spirit of the norms. The intent seems to be to go around the guidelines... This is an arrangement where public will not have access to 25% shares... This is Sebis apprehension, said Bhatt. SAT is expected to come out with its ruling soon.