Promoters holding and transaction thereon - SEBI Regulations
Trading disclosures by Promoters for Listed Companies
The real question to be asked , who is a promoter? In common understanding, a promoter is a person who promotes a company or we can say who found a company. But this is only a general meaning of that and as per the SEBI guidelines, a promoter is a person who holds 20% or more voting right in a company.
The next question is once you become a shareholder, can he dispose his shares? The question got common relevance during the time of Paytm public issue. There was a news article that the the founder of the company Shri Vijay Shekhar Sharma declassified himself as a non promoter. The question was why he has done ? and what he has done?. As I said earlier as per SEBI regulations a promoter is a person who holds 20 percent or more voting rights in a company. He was holding 20 percent stake and the promoter tag comes with many legal compliances. So at the time of publish he decided to declassify himself as a non promoter by divesting 4 percent of shares and become a non promoter.
On the shares held by promoters, SEBI(ICDR) Regulations and related other regulations, every promoter need to have minimum shareholding and lock in period as well when they do any transactions on his shareholding, he need to make proper and timely disclosures. On failure to make proper disclosuers, there prescribes various penalties.
SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, Regulations 31 says that - the listed entity shall submit to the Stock Exchange a statement showing the holding of securities and shareholding pattern separately fo reach class of securities, in the format specified by the Board from time to time within the followign timelines -- on a quarterly basis, within 21 days from the end of quarter, and 21days from the end of halfyear in the case of SME listed securities. Also says that promoter and promoter group shall be disclosed separately in the shareholding pattern appearning on the website of all stock exchange having nation wide trading terminals where the specified securities of the entity are listed, in accordance with the formats specified by SEBI.
As per Regulation 7 (2) (a) of SEBI ( Prohibition of insider Trading) Regulation 2015, for continual disclosures, every promoter, member of the promoter group, designated person and director of every company shall disclose to the company the number of such securities acquired or disposed of within two trading days of such transaction if the value of the securities traded, whether in one transacton or a series of transactions over any calendar quarter, aggregates to a traded vaue in excess of ten lakh rupees or such other value as may be specified.
This is applicable to promoters, members of the promoter group, desigated person and director. The disclosure is made to the company within two trading days counted from the date of the transaction on which the value of securities traded in a calendar quarter exceed the specified amount. The trade can be single or series of trades.
As per Regulation 7 (2) (b) of SEBI ( Prohibition of insider Trading) Regulation 2015, the responsibilty of the compnay, to disclose to the stock exchange within two days from the date of receipt of information or disclosure received or become aware of such information.
Now if we look up on another regulation with regard to SEBI ( Substantial Acquisition or shares and takeovers) Regulation 2011, we can find that Regulation 29 says - any person together with persons acting in concert with him, holds shares or voting rights entitling them to five percent or more of the shares or voting rights in a target company, shall disclose the numebr of shares or voting rights held and change in shareholding or voting rights, if such change exceeds two per cent of total shareholding or voting rights, of the target company, in such form as may be specified. The intimation of allotment of shares within two working days, or acquisition or disposal of shares or voting rights in the target company to every stock exchange where it is listed and also to the registered office of target company. So the disclosures will be once when they acquire 5 percent of shares ( cumulative) and every change of 2 percent in one transaction or number of transactions.
Consequences of non disclosure:
Section 15A of the SEBI Act , says, if any person who is required under the act or any rules or regulations made thereunder failes to file any return or furnish any information, books or other documents within the time specified therefor in the regulations, fails to file the return or furnish the same within the time specified therefor in the regulations, he shall be liable to penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for every day for continuance offence subject maximum of once crore rupees.
Conclusion
From the above discussion it is clear that the promoter or promoters or persons in their group or any designated persons, can hold or dispose their holding subject the provisions regarding disclosures made in the act.
