SEBI mandates listed company to comply with the Minimum Public Shareholding(‘MPS’) requirements as specified in rules 19(2) and 19A of the Securities Contracts (Regulation) Rules, 1957. MPS requirement has been mandated by Regulation 38 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Reg.’).
Further, Reg. 97 (1) of the Listing Reg. mandates recognized stock exchange to monitor the compliance of listed company with the provisions of the Listing Regulations. Thereafter, SEBI prescribes the procedures that have to be followed by the recognised stock exchange with respect to the non- compliant list entities, their promoters and director. SEBI directs stock exchanges to review whether listed company is in compliance with MPS requirement based on shareholding pattern/ other filings. In case of the non- compliance, the stock exchange is required to issue notice within 15 days from the date of observation thereafter intimates about all actions taken/ being taken as per the circular.
SEBI instructs stock exchanges to periodically disclose the name , amount of fine imposed, freezing of shares held by the promoters and promoter group, status of compliance including the details regarding fine paid by the entity and the other actions taken against the entity.
In addition, at the time of non- compliance, SEBI instructs stock exchange to do the following
(i)the listed company would be imposed with a fine of Rs. 5000 per day and such fine would continue to be imposed till the date of compliance,
(ii) directs stock exchange to intimate the depositories to freeze the entire shareholding of the promoter and promoter group till the date of compliance by such entity. Moreover, the restriction should not be an impediment for the entity for compliance with the minimum public shareholding norms through the methods specified/approved by SEBI.
(iii) The promoters, promoter group and directors of the listed entity not be allowed to hold any new position as director in any other listed entity until the date of compliance by such entity. An intimation to this effect would be provided to the listed entity by the recognized stock exchange and the listed entity would subsequently intimate the same to its promoters, promoter group and directors
In cases where the listed entity continues to be non-compliant for a period more than 1-year SEBI outlines the following action to be taken by the recognized stock exchange :
(a) Imposes an increased fine of ₹10,000/-per day of non-compliance on the listed entity and such fine would be imposed till the date of compliance
(b) Requires intimate the depositories to freeze all the securities held in the Demat account of the promoter and promoter group until the date of compliance by such entity. The following restriction would not be an impediment for the entity with respect to compliance with the minimum public shareholding norms through the methods specified/approved by SEBI
SEBI also states that the recognized stock exchange can consider delisting of the non-compliant listed entity.