SEBI Mandates Demat Holding for Promoters and Key Shareholders of IPO-Bound Companies.
SEBI IPO: The Securities and Exchange Board of India (SEBI) has recently announced a significant change impacting companies planning Initial Public Offerings (IPOs). SEBI mandates that directors, promoters, and substantial shareholders of companies intending to launch an IPO must hold their shares in dematerialized (demat) form. This new measure aims to enhance transparency and security in share transfers.
What's Changing?
Companies planning an IPO will now require their directors, promoter groups, senior management, key managerial personnel (KMPs), employees, and other significant shareholders to hold their shares in demat form. This regulation extends beyond promoters to encompass other key stakeholders. Reports indicate SEBI has released a proposal on this matter, open for public consultation until May 20, 2025, after which a final decision will be made.
SEBI's Objective:
SEBI aims to mitigate risks associated with physical share certificates, such as delays in share transfers, potential fraud, and settlement discrepancies. SEBI acknowledges a significant number of pre-IPO shareholders still hold physical shares, leading to various post-listing complications.
Current Regulations:
Previously, only promoters were required to hold their shares in demat form when filing IPO draft papers. However, the new proposal extends this requirement to directors, senior management, employees, and other substantial shareholders.
Why is SEBI Taking This Step?
SEBI states this move aims to enhance transparency and security in the company's IPO and listing process. It will reduce risks associated with physical shares, eliminating delays in share transfers and ensuring post-listing transparency for investor benefit.
