News on Ministry of Corporate Affairs

In order to bring greater transparency regarding reasons for encumbrance, particularly when significant shareholding by promoter along with persons acting in concert (PACs)with him is encumbered, it has been decided to prescribe additional disclosure requirements under Regulation 31(1) read with Regulation 28(3) of Takeover Regulations

• i. The promoter of every listed company shall specifically disclose detailed reasons for encumbrance if the combined encumbrance by the promoter along with PACs with him equals or exceeds: a) 50% of their shareholding in the Page 5 of 11 company; or b) 20% of the total share capital of the company, in the format provided at Annexure –II of this circular, within two working days from the creation of such encumbrance. Such disclosures will be warranted on every occasion, when the extent of encumbrance (having already breached the above threshold limits) increases further from the prevailing levels.

• ii. The disclosure in Annexure –II shall be in addition to the disclosure of Annexure -I provided vide circular dated August 05, 2015

• iii. If the existing combined encumbrance by the promoter along with PACs with him is either 50% or more of their shareholding in the company or 20% or more of the total share capital of the company as on September 30, 2019, he shall specifically make first disclosure on detailed reasons for encumbrance in the format provided at Annexure -II, by October 04, 2019;

• iv. The disclosure on reasons for encumbrance Page 6 of 11 in the format provided at Annexure-A shall be made to, – a) every stock exchange where the shares of the company are listed; and b) the listed company;

• v. The recognised stock exchanges shall maintain and separately disseminate the list of such companies along with details of encumbrance and reasons for encumbrance, on their websites promptly;

• vi. The listed companies shall disclose the contents of Annexure –II on their websites within two working days of receipt of such disclosure.)

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The provisions of this circular shall come into effect from October 01, 2019.