Sebi Proposes Framework To Protect Public Equity Shareholders' Interest During CIRP According to the proposed framework, the public equity shareholders be given the opportunity to acquire a minimum of 5 per cent and up to 25 per cent in the new entity

By Teena Jose

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

SEBI Twitter handle

The Securities and Exchange Board of India (SEBI), on Thursday, has proposed a framework to protect the interest of public equity shareholders in case of listed companies undergoing insolvency resolution process. According to a discussion paper by Sebi, the capital market regulator has proposed that public equity shareholders should get an opportunity to acquire shares of the entity created and to participate in the corporate insolvency resolution process (CIRP) on the same pricing terms as available to the resolution applicant.

As per reports, under the current process, the existing shareholders get squeezed out as the CIRP results in huge equity dilution and even delisting. According to the proposed framework, the public equity shareholders will be given the opportunity to acquire a minimum of 5 per cent and up to 25 per cent in the new entity. The offer will depend on the shareholding the new acquirer gets as a result of the resolution plan.

According to the consultation paper, the mechanism should be an integral part of the resolution plan submitted by the resolution applicant for all listed entities undergoing CIRP.

There are 28 listed companies that have ended in liquidation pursuant to CIRP, 52 firms have been delisted following the approval of the resolution plans and 23 companies continued to remain listed pursuant to clearance, and about 70 listed companies are undergoing CIRP so far, as per reports.

The reports also stated that, the entire process of offering to the existing public shareholders to acquire the shares of the new resultant entity would be tech-enabled at exchanges in a manner to make sure that the pace of the resolution process is not adversely impacted or compromised.

Teena Jose

News Desk Reporter with Entrepreneur India

Teena is a post graduate in financial journalism. She has an avid interest in content creation, digital media and fashion.

Related Topics

Business Models

A Company With a Conscience — How to Make High-Priced Products Accessible to Working-Class Families

Some products are inherently expensive. Companies can offer leasing programs, financing options and other marketing approaches to make them accessible to working families.

Growing a Business

How to Get Your Business Noticed (and How to Brag About It)

Knowing how to go after important recognition awards and then leverage them can have a long-term impact on your business.

Money & Finance

5 Ways to Build a Business Budget for Maximum Success

Whether you're launching a startup or planning for growth, having a smart budgeting process is essential.

Leadership

7 Reasons Why CEOs Need to Develop a Personal Brand — and How to Build One.

Here's why crafting a captivating personal brand and origin story is pivotal in today's landscape and how these seven tangible advantages can redefine your success as a business leader.

Marketing

How to Market to the Increasingly Socially Conscious Customer

Brands must remain adaptable as consumer preferences evolve, influenced by global events, cultural shifts and generational differences

Starting a Business

4 Reasons Why Pricing Is the Key to Startup Success

What your product costs will be central to its story.