<div>To bolster corporate governance at listed companies, Sebi on Tuesday (23 June) cleared a new set of norms for re-classification of promoters, whereby an outgoing promoter would have to forego control and all special rights and dilute stake to 10 per cent to become a public investor.</div><div> </div><div>However, an outgoing promoter can continue to hold CEO or other such senior positions for up to three years, if approved by the board as well as shareholders of the company.</div><div> </div><div>While tightening the noose on defaulting promoters, the revised regulations would also help those who wish to move out of day-to-day running of the company while remaining invested in the company.</div><div> </div><div>Addressing reporters after conclusion of its board meeting here, Sebi Chairman U K Sinha said new regulations have been approved for re-classification of promoters.</div><div> </div><div>Under the new norms, the outgoing promoters cannot have more than 10 per cent shareholding. Besides, they cannot be in control of the company directly or indirectly, or special rights, Sinha said.</div><div> </div><div>Among others, such a person can remain in the position of managing director at the company only for up to three years.</div><div> </div><div>These norms would help put in place a stricter regime to prevent outgoing promoters from continuing to exercise their control on the company through direct or indirect means.</div><div> </div><div>In addition, the regulations would have a significant impact on cases involving corporate restructuring that take place due to disputes among members of business families or after settlements between rival corporates, among others.</div><div> </div><div>Earlier, the regulatory framework did not prescribe any specific criteria for such re-classification, which Sebi feels is required to lend objectivity to the process of reclassification of promoters of listed companies as public shareholders under various circumstances.</div><div> </div><div>Such erstwhile promoters would not exercise, directly or indirectly, any control over the affairs of the company or any of the group firm. However, they would not be debarred from accessing the capital market.</div><div> </div><div>The Securities and Exchange Board of India (Sebi), in its draft paper on re-classification of promoters released last December, had proposed that it would be carried out in three scenarios -- open offer, separation agreement and promoter group shareholding less than five per cent in a company.</div><div> </div><div>In the draft norms, Sebi had prescribed that such promoters would not be allowed to hold any key management positions. But it has now relaxed this provision by allowing them to hold such positions for up to three years on approval of the company's board.</div><div> </div><div>(PTI)</div>
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