SEBI circular on achieving min public shareholding

Q1. What is the background for reduction of promoter shareholding to 75% or ensuring min. 25% public shareholding?

Regulation 38 of SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015 read with Rule 19(2)(b) and Rule 19A of Securities Contract Regulation Rules 1957 makes it mandatory for entities who have listed their equity shares on stock exchange to maintain a min. public shareholding of 25%. This will ensure market balance of promoter and public shareholding and reduce volatility in market.

Q2. How many circular have been passed by SEBI specifying methods of achieving min. public shareholding?


Q3. What are the conditions that are prescribed for two methods viz. issue pursuant to ESOP and Transfer of shares to exchange traded fund, brought in by SEBI to achieving min. public shareholding?

If any entity is proposing to utilize route of issue of employee stock option plan for increase in public shareholding, then it is stated by SEBI that maximum of 2% paid-up equity share capital of the listed entity can be diluted and ESOP scheme framed in this regard shall be in compliance with the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. Further, it is also stated the promoter(s) / promoter group shall not be allotted any shares under these schemes.

Q4. If promoter or promoter group wants to utilise method of transfer of shares to ETF to achieve min. public shareholding then what are the various compliances that needs to be done?

The listed entity shall, at least one trading day prior to such proposed transfer, announce the following details to the stock exchange(s) where its shares are listed:

  1. the intention of the promoter(s) /promoter group to transfer shares and the purpose of such transfer;
  2. the details of promoter(s)/promoter group who propose to transfer their shares in the listed entity;
  3. total number of shares and percentage of shareholding proposed to be transferred; and
  4. Details of the ETF to which shares are proposed to be transferred by the promoter / promoter group. The listed entity shall also give an undertaking to the recognized stock exchange(s) obtained from the persons belonging to the promoter and promoter group that they shall not subscribe to the units of such ETF to which shares have been transferred by promoter(s) / promoter group entities for the purpose of MPS compliance.

Q5. Can a company utilize a mix of above methods to achieve min. public shareholding?

What has been gathered till now from market practice till now is that most of the companies have achieved min. public shareholding by utilizing one of the above methods. There is no case where a mix of above methods was utilized to reduce shareholding. So ideally only of the above methods could be utilized for achieving min. public shareholding. Also, it needs to be remembered that reduction in shareholding needs to be done in compliance with other applicable provisions of SEBI viz. SEBI LODR, SEBI PIT and SEBI SAST.

Q6. Can a company suggest any other method of achieving min. public shareholding other than those stated above?

SEBI has by its circular dt: February 3, 2023 and all its earlier circulars has stated that SEBI may consider any other method of achieving min. public shareholding on a case specific basis. It has further stated that listed entity shall approach the Board with an application containing relevant details to obtain prior permission. SEBI in this regard would try to communicate its decision within 30 days from the date of receipt of the proposal or the date of receipt of additional information as sought from the listed entity. So entities who do not want to avail the above referred method may apply for any suitable method to SEBI for reduction of shareholding. But that method as guided by SEBI would be relevant for a particular entity only and cannot be applied by other entities. 

Click here to Download PDF

Disclaimer: This article provides general information existing at the time of preparation and we take no responsibility to update it with the subsequent changes in the law. The article is intended as a news update and Affluence Advisory neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this article. It is recommended that professional advice be taken based on specific facts and circumstances. This article does not substitute the need to refer to the original pronouncement



Affluence Advisory Pvt. Ltd. is established with the vision to provide one stop solutions to clients needs in ever changing environment. Affluence is managed by specialized team of Chartered Accountants, Company Secretaries, Corporate Lawyers and Other Professionals committed to provide quality experience to our clients in the widest spectrum of business needs.

Recent Posts

April 1st, 2023
SEBI has approved following amendments in its Board Meeting
March 27th, 2023
Common and simplified norms for processing investor’s service requests by RTA’s and norms for furnishing PAN, KYC details and Nomination
March 23rd, 2023
Additional affirmations by Practicing Company Secretaries (PCS) in Annual Secretarial Compliance Report
March 20th, 2023
Peer to Peer (P2P) Lending in India
March 17th, 2023
Regulatory Framework – Liability of Independent Director
March 15th, 2023
Social Stock Exchange (SSE) – Fund Raising Platform for “Not for Profit Organizations” (NPO)
March 13th, 2023
MSME Registration Benefits – Tax and Others
March 10th, 2023
Link PAN with Aadhaar by March 31: SEBI direction to Investors
March 8th, 2023
Importance of Credit Score
March 6th, 2023
Closure Of The Company – Various Exit Modes Of Voluntary Winding Up
March 2nd, 2023
FAQ’s on Social Stock Exchange
March 2nd, 2023
Latest Key Amendments Effective from April 01, 2023
February 25th, 2023
Consultation Paper On Strengthening Corporate Governance At Listed Entities By Empowering Shareholders – Amendments To The SEBI (LODR) Regulations, 2015
February 24th, 2023
National Pension System (NPS) – Additional Tax Saving Option
February 20th, 2023
Tax Deduction and Documentation for Salary – AY 2023-24
February 13th, 2023
SEBI Consultation paper on review of Corporate Governance norms for a High-Value Debt Listed Entity dated February 08, 2023
February 9th, 2023
SEBI revamps buyback methods and provisions relating to buybacks
February 7th, 2023
SEBI circular on achieving min public shareholding
February 3rd, 2023
Off Market transfer of shares without consideration is not allowed – SEBI
February 2nd, 2023
Informal Guidance to proposed to be listed company – Extending share based employee benefits to employees of a subsidiary company
February 1st, 2023
Generating Awareness on the availability of Disputes Resolution Mechanisms at Stock Exchanges against Listed Companies / Registrar to an Issue and Share Transfer Agent
January 30th, 2023
Remuneration paid to Directors of the Listed Entity – Series 3
January 25th, 2023
Upgradation of E- Forms in tune with V3 portal
January 23rd, 2023
SEBI Notification dated 17/01/23 | Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2023
January 19th, 2023
Remuneration paid to Non-Executive Directors of Public Company – Series 2
January 16th, 2023
Remuneration paid to Whole Time Directors of Public unlisted Companies
January 11th, 2023
Relaxation from compliance with certain provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
January 9th, 2023
Online registration of units through MCA portal for ESI registration and inspection of units in this regard
January 6th, 2023
Guidance given by Securities and Exchange Board of India (‘SEBI’) on creation of ‘Suspense Escrow Demat Account’
January 5th, 2023
Change in Single Master Form (SMF) on FIRMS Portal
January 3rd, 2023
Relaxation with respect to conducting of Extra Ordinary General Meetings and Postal Ballots
December 30th, 2022
MCA extension for conducting Annual General Meetings through Video Conferencing or other Audio Visual Means (‘OAVM’)
December 23rd, 2022
Web-based Form DPT-3 as per New Rules
December 13th, 2022
Input Tax Credit (‘ITC’) on Corporate Social Responsibility (‘CSR’) expenses
December 7th, 2022
GSTR 9 and 9C – Optional to Mandatory reporting in FY 2021-22
September 27th, 2022
CSR Compliances as per New Rules 2022
September 20th, 2022
Mandatory appointment of Company Secretary
September 17th, 2022
Amendment To The Definition Of Small Company And Benefits
September 16th, 2022
Obligation to Indicate Director Identification Number (DIN)
September 7th, 2022
RBI issues Digital Lending Guidelines: Banks / NBFC