The deadline for compliance by non-government entities of the public shareholding norms went by on June 3, 2013. Immediately thereafter, SEBI yesterday issued an order against 108 companies that have failed to comply with these norms. SEBI’s press release summarizing its order is available here.
A couple of points are noteworthy. The first relates to the rapidity with which SEBI has acted. This is consistent with its strict stance of not delaying the date of compliance and also its intention to enforce this rule very strictly. It is almost as if SEBI had been preparing for this eventuality where some companies would be non-compliant. The second, and more important, aspect of the order (which is interim in nature) is that it seeks to proceed against the promoters and controlling shareholders. The orders passed against them include freezing their corporate rights (such as voting and other corporate benefits such as dividends, rights entitlements, etc.), prohibitions on the promoters from buying and selling shares in those companies and also restraining the promoters from holding any further positions on the board. By proceeding against the promoters rather than the company itself, SEBI has sought to impose greater pressure to ensure compliance. As we had earlier noted, proceeding against the company would adversely affect the minority shareholders and ought not to be pursued.