Exemption to the minimum public shareholding requirement by Listed Companies | Move to make strategic dis-investments by Government more attractive

1.     

Amendment to the definition of “government company”

The definition of a “government company” under the SCR Rules has been amended and now has the meaning as ascribed to the term under the Companies Act, 2013 (Companies Act). Prior to the Amendment, “government company” was defined under the SCR Rules as a company in which not less than 51% of the share capital was held by the Central Government or by any State Government or Governments or partly by the Central Government and partly by one or more State Governments.

In-line with the Companies Act, a ‘government company’ under the SCR Rules now also includes subsidiaries of a government company within the ambit of “government company” and brings further clarity in construing the shareholding of the government, which will have to be basis the “total voting power” as opposed to “the share capital”, to take care of instances of shares having been issued by the company with differential voting rights. This essentially resolves any conflict that could have arisen due to differing definitions given under the Companies Act and SCR Rules.

2.     

Amendment to sub-rule (6) of Rule 19A

Rule 19A of the SCR Rules requires listed companies to maintain minimum public shareholding of at least 25%.

Prior to the Amendment, sub-rule (6) of Rule 19A provided that the Central Government may, in the public interest, exempt any listed public sector company from provisions of Rule 19A.

Now, the Central Government may, in public interest, exempt any listed entity in which the Central Government or State Government or public sector company, either individually or in any combination with other, holds directly or indirectly, majority of the shares or voting rights or control of such listed entity, from provisions of Rule 19A.

Further, a new explanation has been added where it clarifies that such exemption by the Central Government will continue to be valid for the period specified therein, irrespective of any change in control of such listed entity subsequent to issuance of such exemption.