INDIA Law and Practice Contributed by: Kunal Chandra, Kabeer Mathur, Chinmay Bilgi, Sharnam Vaswani and Rajdeep Mukherjee, Trilegal
SEBI LODR – Shareholding Pattern Under the SEBI LODR, listed companies are required to disclose their shareholding pattern within 21 days from the end of each quarter, detailing shareholding by categories – Indian, foreign, promoter, public and institutional shareholding. In addition, listed entities are required to make annual disclosures, including disclosure of material events and information that may Reporting thresholds under the Takeover Regulations and SEBI LODR cannot be modified by a company’s constitutional documents. Similarly, listed companies may not introduce transfer restrictions or bespoke reporting thresholds through their articles that differ from or are inconsistent with the regulatory framework – any such provision would be unenforceable to the extent of its inconsistency with applicable securities laws. Several other regulatory and structural factors impact the ability of investors to accumulate signifi - cant stakes in Indian listed companies. Regulatory Hurdles The principal statutory hurdle is the mandatory open offer trigger on acquiring 25% of voting rights or con - trol under the Takeover Regulations. Once this thresh - old is crossed, the acquirer must make an open offer to acquire at least a further 26% of the aggregate share capital from public shareholders for a price determined in accordance with the prescribed pric - ing formulas. Additionally, any further acquisition of more than 5% additional shares in a financial year can trigger another open offer under the creeping acquisi - tion mechanism. This requirement significantly affects the structuring of acquisitions and often necessitates careful planning of stake-building strategies. (Refer to 4.1 Principal Stakebuilding Strategies .) impact shareholding or control. 4.3 Hurdles to Stakebuilding In addition, the SEBI LODR require listed companies to maintain at least 25% public float, which limits the quantum of shares available for acquisition in the public market and constrains large-scale stake accu - mulation through open market purchases. Failure to meet this minimum public float requirement within prescribed timelines may result in regulatory action, including compulsory delisting.
limits applicable to foreign investments (refer to ‘Entry Routes’ in 2.3 Restrictions on Foreign Investments ) and sector-specific ownership restrictions (refer to ‘Sector-Specific Conditions and Foreign Ownership Thresholds’ in 2.3 Restrictions on Foreign Invest- ments ) under India’s foreign investment policy. 4.2 Material Shareholding Disclosure Threshold Disclosure obligations relating to shareholdings in list - ed companies arise primarily under the Takeover Reg - ulations and the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”), with additional disclosure obligations imposed on listed companies under the SEBI LODR. Takeover Regulations – Acquirer and Continual Disclosures Under the Takeover Regulations, any acquirer whose shareholding or voting rights in a listed company reach or exceed 5% must disclose such acquisition to the company and the relevant stock exchanges within two working days of acquisition. Thereafter, any sub - sequent acquisition or disposal resulting in a change of 2% or more in the acquirer’s shareholding must also be disclosed within the same timeframe. Hold - ers of 25% or more of the shares or voting rights in a listed company – including promoters and promoter group entities – must annually disclose their aggregate shareholding and voting rights as of 31 March to the company and the stock exchanges within seven work - ing days. Promoters and promoter group entities are additionally required to make continual disclosures of their shareholding on an ongoing basis in accordance with the Takeover Regulations. PIT Regulations – Insider Trading Disclosures Under the PIT Regulations, promoters, any person in possession of unpublished price-sensitive informa - tion and other designated persons are also required to disclose trades in listed company securities where the cumulative value of such trades within a calendar quarter exceeds INR10,00,000. The company is then required to notify the stock exchanges of such disclo - sures within two trading days.
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