COVID-19 Update – Further Measures Taken by SEBI in Light of the COVID-19 Outbreak

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May 16, 2020

COVID-19 Update – Further Measures Taken by SEBI in Light of the COVID-19 Outbreak

Since our Client Alert dated May 11, 2020 (accessible here), the Securities and Exchange Board of India (‘SEBI’) has taken further measures in light of the COVID-19 outbreak, as set out below.

Minimum Public Shareholding Requirements

1. Through its Circular dated October 10, 2017, SEBI has laid down the procedure (which includes levy of monetary fines and freezing of promoter shareholding) required to be followed by the stock exchanges with respect to listed entities (including their promoters and promoter group and directors) which are not in compliance with minimum public shareholding (‘MPS’) requirements as prescribed under SEBI rules and regulations. As per the existing SEBI norms, a listed company has a period of 1 year to comply with the MPS requirements.

2. In this regard, SEBI, through its Circular dated May 14, 2020, has provided relaxations from the applicability of the aforementioned Circular. Accordingly, SEBI has advised recognised stock exchanges to not take penal actions as envisaged in the Circular (such as levy of fines, freezing of promoter holding, etc.) against listed entities which were required to comply with the MPS requirements between the period from March 1, 2020 to August 31, 2020. Further, penal actions, if any, initiated by the stock exchanges from March 1, 2020 till date for such MPS non-compliant listed entities may be withdrawn.

Takeovers and Buy-Backs

1. SEBI, through its Circular dated May 14, 2020, has provided a one-time relaxation from the strict enforcement of certain provisions for open offers and buy-back offers opening up to July 31, 2020.

2. Service of the letter of offer and/or tender form and other offer related material to shareholders may be undertaken by electronic transmission subject to: (i) the acquirer / company publishing the letter of offer and tender form on the websites of the company, registrar, stock exchange(s) and the manager(s) to the offer; (ii) the acquirer and company reaching out to the shareholders through SMS or audio-visual advertisements on television or digital advertisement; and (iii) release of newspaper advertisements about the details of the electronic dispatch of the letter of offer in the same newspapers where detailed public statement (in case of open offers) and public announcement (in case of buy-backs) were published. SEBI has also allowed use of advertisements in televisions channels, radio, internet etc. to disseminate information regarding the tendering process. SEBI has directed the acquirer / company and the manager to offer to provide procedure for the inspection of material documents electronically.

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