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Sebi frames new rules for re-classification of promoter as public investor

Press Trust of India

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Mumbai : Markets regulator Sebi has announced new rules for re-classification of a promoter as a public investor, wherein an outgoing promoter will have to relinquish special rights as well as control over the affairs of the listed firm and will not be allowed to hold over 10% stake.

The promoter would not be allowed to have any representation on the board of directors or act as a key managerial person in the listed entity.

The promoter seeking re-classification must not be a wilful defaulter or a fugitive economic offender, the Securities and Exchange Board of India (Sebi) said in a notification dated November 16.

 

These norms will prevent the outgoing promoters from continuing to exercise their control on the company directly or indirectly.

The norms, aimed at simplifying, streamlining and bringing greater clarity in existing regulations, come after Sebi’s board in September approved a proposal in this regard.

The Kotak panel on corporate governance had suggested that there should be a mechanism to enable such re-classification to ensure persons who may have been promoters but are no longer in the day-to-day control of management and have a low shareholding should have the option to be re-classified.

Under the new rules, in the case of a promoter seeking re-classification as a public shareholder, Sebi said the promoter group and persons acting in concert will not hold over 10% of the total voting power in the listed entity and exercise control over the affairs of the entity directly or indirectly and will not have “any special rights with respect to the listed entity through formal or informal arrangements”.

In order to ensure that only compliant listed entities are eligible to apply for re-classification, Sebi said such listed firms need to be compliant with 25% minimum public shareholding requirement; their shares should not have been suspended from trading and they must not have any outstanding dues to the regulator, exchanges and depositories.

In all cases of re-classification of promoters, including the recommendation of the board, the proposal would be required to be placed by the listed entity before the shareholders in a general meeting and approved through an ordinary resolution.

With an aim to avoid conflict of interest, Sebi said that the specific promoter who has requested such reclassification, its promoter group and persons acting in concert would not be permitted to vote on such resolution.

If any public shareholder seeks to re-classify itself as promoter, an open offer will have to be made.

In order to have greater clarity in case of transmission, succession, inheritance and gift of shares held by a promoter, Sebi said the recipient of such shares will be classified as a promoter immediately on occurrence of such event.

The regulator said that a listed entity will be considered as a ‘listed entity with no promoter’ if due to re-classification, the entity does not have any promoter.

Earlier, such firms were termed as ‘professionally managed’.

In July, the regulator had come out with a draft proposal for re-classification of promoters and had sought public comments on it.


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Business

RBI asks banks to grout ATMs to wall, floor for security by September-end

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Mumbai: The Reserve Bank asked banks to ensure their ATMs are grouted to a wall, pillar, or floor by September-end, except those installed in high secured premises such as airports, to enhance security of the cash vending machines.

In 2016, the RBI had st up a Committee on Currency Movement (CCM) to review the entire gamut of security of treasure in transit.

Based on the recommendations of the panel, the central bank has now issued instructions aimed at mitigating risks in ATM operations and enhancing security.

 

As part of the security measures, all “ATMs shall be operated for cash replenishment only with digital One Time Combination (OTC) locks”.

Also, “All ATMs shall be grouted to a structure (wall, pillar, floor, etc.) by September 30, 2019, except for ATMs installed in highly secured premises such as airports, etc. which have adequate CCTV coverage and are guarded by state/central security personnel”.

Further, banks may also consider rolling out a comprehensive e-surveillance mechanism at the ATMs to ensure timely alerts and quick response, it said.

The new measures to be adopted by banks are in addition to the existing instructions, practices and guidance issued by the RBI and law enforcement agencies.

The RBI also warned the banks that non-adherence of timelines or non-observance of the instructions would attract regulatory action including levy of penalty.

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SBI refuses to disclose communication from RBI, govt on electoral bonds

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New Delhi: The State Bank of India has refused to disclose any communication it received from the government or the Reserve Bank of India on electoral bonds, terming it “personal information” and held in “fiduciary capacity”.

Responding to an RTI filed by Pune-based activist Vihar Durve who had demanded copies of all letters, correspondence, directions, notifications or e-mails received from the RBI or any government department between 2017 and 2019, the SBI said it cannot be provided by it.

The bank cited two exemption clauses under the RTI Act to deny information — Section 8(1)(e) which pertains to information held in fiduciary capacity and Section 8(1)(J) which pertains to personal information of a person which has no link to any public activity.

 

“Information sought by the applicant cannot be disclosed as it is in fiduciary capacity, disclosure of which is exempted under Section 8(1)(e) and 8(1)(j) of the RTI Act, 2005,” the Central Public Information Officer of the bank said in his reply.

The bank also refused to give any details of action taken by it on such communications from the RBI and the government.

The electoral bonds, for giving donations to political parties, are being sold through SBI only. The sale opens in SBI branches when the Finance Ministry issues a notification of their sale for a given period.

The scheme of electoral bonds notified by the Centre in 2018 has been challenged in the Supreme Court.

Only the political parties registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and which secured not less than one per cent of the votes polled in the last general election to the House of the People or the Legislative Assembly of the State, shall be eligible to receive the bonds.

The bonds may be purchased by a person who is a citizen of India “or incorporated or established in India,” the government had said in a statement last year.

The bonds remain valid for 15 days and can be encashed by an eligible political party only through an account with the authorised bank within that period only.

A voluntary group working in the field of electoral reforms, Association for Democratic Reforms (ADR), has demanded a stay on the sale while the CPI(M) has challenged it before the Supreme Court in separate petitions.

ADR recently filed an application in the Supreme Court seeking a stay on the Electoral Bond Scheme, 2018 which was notified by the Centre in January last year.

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Walmart’s Flipkart, Indian startup GOQii settle dispute over sharp discounting

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New Delhi: Walmart unit Flipkart has settled a legal dispute with an Indian startup that alleged it suffered losses because its products were sharply discounted on the global retailer’s website.

GOQii, a seller of smartwatch-type health devices, sued Flipkart last month in a Mumbai court, alleging its devices were discounted by around 70 per cent to the retail price, much more than the two sides had agreed. The court had, as an interim measure, ordered device sales to be halted on Flipkart.

In a joint statement , the companies said the dispute had been resolved and GOQii health devices would again be available on Flipkart. They didn’t say how the settlement was reached.

 

Vishal Gondal, CEO of GOQii, told Reuters the company would withdraw the case against Flipkart. The e-commerce retailer’s “team worked on a resolution benefitting the brand and the customers”, Gondal said in the statement.

The legal spat was seen as a test case of the giant retailer’s operating strategy in the country.

Small traders and a right-wing group close to Prime Minister Narendra Modi’s ruling party have raised concerns about large e-commerce companies, saying they burn billions of dollars deeply discounting some products to lure customers onto their sites, in the expectation that they will also buy other goods.

GOQii said it signed an agreement last year with a Flipkart unit to sell two of its devices at a price not below 1,999 rupees (USD 28.63) and 1,499 rupees. It later found the devices were being sold for 999 rupees and 699 rupees, calling it “unauthorized” discounting.

In response, Flipkart said it reserved “the right to institute actions for defamation, both civil and criminal”, arguing it wasn’t responsible for any discounts which are determined by third-party firms which sell via its website.

The two companies struck a friendlier tone in their joint-statement on Friday as they brought the legal battle to an end.

“We have ensured constant engagement with GOQii to resolve any differences,” Flipkart said in the statement.

With a 19 per cent market share, GOQii was the second-biggest player in India’s so-called wearables market last year, data from industry tracker IDC showed. The market is dominated by China’s Xiaomi, with Samsung a small player.

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