Informal Guidance No. SEBI/HO/CFD/PoD2/OW/P/2025/18347/1, Dated: 09.07.2025
A listed company approached the Securities and Exchange Board of India (SEBI) seeking informal guidance on whether shareholder approval is necessary for reclassifying a promoter when the combined shareholding of the promoter and related persons is not more than 1% of the total voting rights.
1. Regulation 31A of SEBI (LODR) Regulations – Key Provision
SEBI examined the query in light of Regulation 31A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR), which governs the process for promoter reclassification.
Under Regulation 31A, a promoter may be reclassified as a public shareholder subject to the fulfillment of certain conditions, including:
- No control over the listed entity,
- No influence over key decisions,
- Not being a key managerial person, and
- Adherence to shareholding thresholds.
2. Clarification – Threshold for Shareholder Approval
SEBI clarified that:
- If the combined holding of the promoter and persons related to the promoter is 1% or less, shareholder approval is not required.
- However, if the combined holding exceeds 1%, then an ordinary resolution by shareholders is mandatory for the reclassification to be approved.
3. Application to the Case at Hand
In the present case, SEBI observed that:
- The combined holding of the promoter and related persons exceeded 1%,
- Therefore, the company must obtain shareholder approval through an ordinary resolution for the proposed reclassification.
4. Conclusion
This clarification reinforces the regulatory requirement under Regulation 31A of LODR, ensuring that reclassification of promoters is not automatic and must follow proper shareholder scrutiny when shareholding thresholds are breached.
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