Latest News | Sebi Provides Clarity on Change in Control Criteria for Mkt Intermediaries

New Delhi, Mar 25 (PTI) Sebi on Thursday provided clarity on change in control criteria for market intermediaries and requirement for seeking its prior approval.

With regard to unlisted body corporate intermediary, transfer of shareholding among immediate relatives would not be construed as change in control.

"Transfer of shareholding by way of transmission to immediate relative or not, shall not result into change in control," Sebi said in a circular.

Immediate relatives include any spouse of that person, or any parent, brother, sister or child of the person or of the spouse.

In a circular in 2011 addressed to stock exchanges/ depositories and intermediaries, Sebi had specified the procedure for seeking prior approval for change in control from it. Now, the regulator has provided some clarifications.

The latest circular is addressed to all stock brokers through exchanges, depository participants through depositories, merchant bankers, registrar to an issue and share transfer agent, debenture trustee, credit rating agencies and bankers to an issue.

In case of an intermediary being a proprietary concern, the transfer or bequeathing of the business/capital by way of transmission to another person is a change in the legal formation or ownership and is hence a change in control, Sebi said.

"The legal heir or transferee in such cases is required to obtain prior approval and thereafter fresh registration needs to be obtained in the name legal heir/ transferee," it noted.

For transfer of ownership interest in case of partnership firm with more than two partners, inter-se transfer amongst the partners would not be construed to be change in control.

Where the partnership firm consists of two partners only, the same would stand as dissolved upon the death of one of the partners, it added.

However, if a new partner is inducted in the firm, it would be considered as a change in control, requiring fresh registration and prior approval of Sebi.

Besides, where the partnership deed contains a clause that in case of death of a partner, the legal heir of deceased partner be admitted, then the legal heir may become the partner of the partnership firm.

In such a scenario, the partnership firm will continue to exist and bequeathing of partnership right to legal heir by way of transmission will not be considered as change in control, the regulator said.

According to the circular, incoming entities or shareholders becoming part of controlling interest in the intermediary pursuant to transfer of shares from immediate relative or transmission of shares, whether immediate relative or not, need to satisfy the fit and proper person criteria.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)