SEBI’s Thorough Classification of Public Shareholders

Pursuant to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations“), companies listed on the Indian stock exchanges are required to submit a statement which describes the shareholding pattern separately for each class of securities in the format prescribed by the Securities and Exchange Board of India (“SEBI“)¹.

Each listed entity is required to make the aforesaid disclosure to the stock exchange(s): (i) 1 (one) day prior to the listing of its securities on the stock exchange(s); (ii) on a quarterly basis, within 21 (twenty-one) days from the end of each quarter; and (iii) within 10 (ten) days of any capital restructuring of the listed entity, resulting in a change of over 2% (two per cent) of the total paid-up share capital. The aforesaid Regulations carve out an exception to the aforementioned timelines for entities which have their securities listed on the SME Exchange—such entities are required to submit the above statements on a half-yearly basis within 21 (twenty-one) days from the end of each half year².

The formats for such aforesaid disclosures are prescribed by the SEBI vide a circular dated November 30, 2015³ (“2015 Circular“), as amended from time to time. The 2015 Circular also stipulates the manner in which the holding of specified securities is required to be represented, the manner in which shareholding is to be calculated for such a purpose, etc.

The 2015 Circular requires that the shareholding pattern be disclosed under three broad categories, namely: (i) promoter and promoter group; (ii) public; and (iii) non promoter-non public. Annexure-I to the 2015 Circular contains separate tables for each of the above categories to tabulate their shareholding patterns; and the disclosure requirement extends to shareholders holding at least 1% (one per cent) of the shares of the listed entity.

By way of a circular dated June 30, 2022 (“New Circular“), the SEBI amended the 2015 Circular by incorporating changes to tables III and IV, corresponding to public shareholders and non promoter – non public shareholders respectively⁴, and by prescribing separate disclosures of shareholders that are “persons acting in concert” (as applicable). This New Circular comes into force from the quarter ending on September 30, 2022, after which the listed entities would be required to submit their shareholding pattern to the stock exchanges within 21 (twenty-one) days.

The amendments to Table III—the table prescribing the format for the statement showing the shareholding pattern of a public shareholder—are significant as the table now requires shareholding details of certain newer categories of shareholders, and includes shareholders that have the right to nominate a director on the board of directors of the listed entity or those that have entered into shareholders’ agreements with the listed entity.

The Note at the end of the amended Table III contained in Annexure A of the New Circular specifies that in the event a shareholder falls under more than one category, the shareholder would be classified in the category that appears first in the order prescribed in Table III; and that the shareholder under any of the categories mentioned therein would be unique and ought to not be duplicated under multiple categories⁵.

The amendment to Table III has accorded a more streamlined approach to the format prescribed under the 2015 Circular. The amended table now has the following categories of public shareholders, which are further sub-divided into more specific categories:

1. Institutions (Domestic)

These domestic institutions specifically include mutual funds, venture capital funds, alternate investment funds, banks, insurance companies, provident funds/pension funds, asset reconstruction companies, sovereign wealth funds, non-banking financial companies registered with the Reserve Bank of India, and other financial institutions.

2. Institutions (Foreign)

The foreign institutions mentioned in the amended Table III specifically include foreign direct investment, foreign venture capital investors, sovereign wealth funds, foreign portfolio investors category I, foreign portfolio investors category II, and overseas depositors.

3. Central Government / State Government(s)

This category specifically mentions Central Government/President of India, State Government/Governor, and companies/bodies corporate where Central/State Government is the promoter.

4. Non-Institutions

These non-institutions specifically include associate companies/subsidiaries, directors and their relatives (not including independent directors/nominee directors), Key Managerial Personnel, relatives of promoters, trusts where any person belonging to the “Promoter & Promoter Group” category is a trustee/beneficiary/author of the trust, Investor Education Protection Fund (IEPF), resident individuals holding nominal share capital above Rs. 2,00,000/- (Rupees Two Lakhs), Non-Resident Indians, foreign nationals, foreign companies and bodies corporate.

The detailed bifurcation of public shareholders introduced by the New Circular heralds a more nuanced approach to the regulation of listed entities by the SEBI. This falls in line with the need for regulators, governmental authorities and stock exchanges alike to pay greater attention to entities which trade publicly and receive investments from the common people.

¹ Regulation 31 of the Listing Regulations.

² Regulation 31 of the Listing Regulations.

³ Circular No. CIR/CFD/CMD/13/2015.

⁴ Annexure A of Circular No. SEBI/HO/CFD/PoD-1/P/CIR/2022/92.

⁵ https://www.sebi.gov.in/sebi_data/commondocs/jun-2022/Dematerialized_form_Annexure-A_update_p.pdf