InvestorQ : Has SEBI made any changes to the Pledging of Shares regulations after the recent NBFC pledge problems? What are the implications?
Debbie Mascarenhas made post

Has SEBI made any changes to the Pledging of Shares regulations after the recent NBFC pledge problems? What are the implications?

Answer
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Crowny Pinto answered.
1 year ago


The last SEBI board meeting has made some significant changes to protect the rights and interests of the small shareholders in the event of pledge of shares. Here are some of the key decisions taken by SEBI.

· Firstly, SEBI has expanded the definition of Pledge to mean encumbrance of any kind. This could be an encumbrance in the form of pledge, lien, negative lien, non-disposal undertaking or any other restriction of any sort on the free sale of shares. Thus now pledges will not be able to play on words to escape the clause.

· Secondly, the promoters of the company will have to give detailed reasons for the pledge wherever, the pledged number of shares exceeds 20% of the total share capital of the company or 50% of the promoter holding. Such detailed explanations with the details of encumbrances will be maintained on the websites of the stock exchanges.

· In addition, the promoters will also have to furnish an undertaking to the Audit Committee and to the stock exchanges that there have been no other direct or indirect encumbrances on their shareholdings other than specified in the detailed disclosure.