Rapid Fire
SEBI Expands Promoter Definition for IPO Companies
- 20 Jun 2024
- 2 min read
The Securities and Exchange Board of India(SEBI) has expanded the promoter definition for companies tapping the market for an initial public offering.
- Under the new guidelines, founders with a combined 10% stake who are also key managerial personnel (KMP) or directors will all be considered promoters.
- Immediate relatives of the promoter on the company board or as KMP, or holding 10%+ in the company, directly or indirectly, will also be classified as promoters.
- However, once someone is part of the promoter group, it's not easy to be declassified as a public shareholder due to rule 31A of Listing Obligations and Disclosure Requirements (LODR) Regulations.
- Declassification means officially removing the status or label of being a promoter or a specific classification.
- According to current SEBI regulations, a promoter is someone who controls the affairs of the company or can appoint the majority of directors or is named as such in an offer document.
- An IPO is an initial public offering, in which shares of a private company are made available to the public for the first time.
- An IPO allows a company to raise equity capital from public investors.
Read more: Proposal for Changing Promoters to Person in Control: SEBI, SEBI
