Sebi Proposes Framework To Protect Public Equity Shareholders' Interest During CIRP According to the proposed framework, the public equity shareholders be given the opportunity to acquire a minimum of 5 per cent and up to 25 per cent in the new entity

The Securities and Exchange Board of India (SEBI), on Thursday, has proposed a framework to protect the interest of public equity shareholders in case of listed companies undergoing insolvency resolution process. According to a discussion paper by Sebi, the capital market regulator has proposed that public equity shareholders should get an opportunity to acquire shares of the entity created and to participate in the corporate insolvency resolution process (CIRP) on the same pricing terms as available to the resolution applicant.

As per reports, under the current process, the existing shareholders get squeezed out as the CIRP results in huge equity dilution and even delisting. According to the proposed framework, the public equity shareholders will be given the opportunity to acquire a minimum of 5 per cent and up to 25 per cent in the new entity. The offer will depend on the shareholding the new acquirer gets as a result of the resolution plan.

According to the consultation paper, the mechanism should be an integral part of the resolution plan submitted by the resolution applicant for all listed entities undergoing CIRP.

There are 28 listed companies that have ended in liquidation pursuant to CIRP, 52 firms have been delisted following the approval of the resolution plans and 23 companies continued to remain listed pursuant to clearance, and about 70 listed companies are undergoing CIRP so far, as per reports.

The reports also stated that, the entire process of offering to the existing public shareholders to acquire the shares of the new resultant entity would be tech-enabled at exchanges in a manner to make sure that the pace of the resolution process is not adversely impacted or compromised.