SEBI prescribes 100 per cent demat mode for promoter stake in listed companies

The Securities and Exchange Board of India (SEBI) has asked listed companies to ensure 100 per cent dematerialiastion of promoter holdings, instead of the 50 per cent prescribed earlier, to be eligible to be traded in the normal segment of stock exchanges.

Companies have to ensure that the shareholding of promoter or promoter group is in fully (100 per cent) dematerialised form to be eligible to trade in the normal segment, SEBI said in a circular issued today.

SEBI had, in September 2010, issued a circular on "trading rules and shareholding in dematerialised mode", which mandated that securities of companies could be traded in normal segment of stock exchanges, if and only if, the company has achieved at least 50 per cent non-promoter shareholding in dematerialised form and maintained the same on a continuous basis.

That circular was issued "in order to moderate sharp and destabilising price movements in shares of companies, to encourage better price discovery and to increase transparency in securities market," SEBI said.

The latest circular, the SEBI said, is aimed at further promoting dematerialisation of securities, encouraging orderly development of the securities market and improving transparency in the dealings of shares by promoters, including pledging or usage as collateral.

Companies have to achieve 100 per cent dematerialisation of promoter and promoter group shareholding latest by the quarter ending September 2011, SEBI said in its circular.