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Market regulator tightens merger norms
SEBI (Securities and exchange board of India) has tightened the norms for merger of an unlisted company with a listed entity.
Steps taken in this regard:
- Public shareholder holding in a company post-merger cannot be less than 25%.
- A similar threshold will apply in case of institutional investors of the unlisted firm.
- An unlisted firm can be merged with a listed firm only when the latter is listed on a stock exchange with nationwide trading terminals.
- The regulator has also reduced the broker fee to ensure reduction in the overall cost of transaction which will benefit the investors.
- E-voting is made mandatory in certain cases.
- To help investors take informed decisions, fund houses have been asked to include as part of their advertisements the performance of the scheme since its inception.
- Mutual funds are herewith allowed to invest in instruments like Real estate(REITs) and Infrastructure investment(InvITs) funds. This to ensure greater participation of retail investors.
- Merger is used as a route to get an unlisted company listed.
- Concerns related to electronic voting requirement.
- In another case of misuse shares were issued post-merger to promoters only.
The entire exercise is aimed to protect the rights of public shareholders in case of a merger: