SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018

Promoter reclassification - Family feud An area of concern

The Indian business landscape mainly comprises of family run businesses. Keeping in mind the close-knit joint family culture in the country, Indian regulators have been particularly cautious of family members owning and controlling a business together. The Securities and Exchange Board of India (SEBI) has, in Regulation 2(1)(pp) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, given a broad definition of “promoter group”, which includes any immediate relatives of the promoter and entities where such relatives have more than 20% stake. Being a member of the promoter group of a listed company entails rigorous disclosure and compliance obligations under various SEBI regulations. In fact, SEBI has in its Consultative Paper dated November 23, 2020, made a noting that there is a need for further clarification under Regulation 31 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR), with regard to disclosing names of persons in promoter/ promoter group who hold even ‘Nil’ shareholding in the listed company.
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