Promoter reclassification: SEBI LODR Reg 31A
Promoter reclassification is the process by which a person or entity in the promoter or promoter group of a listed Indian company is moved into the public shareholder category. It runs under Regulation 31A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, or LODR. Once it happens, that holding stops being reported as promoter holding and starts being reported as public in the shareholding pattern. It is not investment advice.
Definition
Promoter reclassification
is the SEBI LODR Regulation 31A process that moves a promoter or promoter group person into the public shareholder category. The person must hold no more than 10% of voting rights, not be in control, and the change needs board, shareholder, and stock exchange approval. Source: SEBI LODR.
Why does promoter reclassification happen?
A founder may step back, an entity may exit day-to-day control, or a family branch may separate its stake. Reclassification lets that holder be recognised as an ordinary public shareholder rather than a promoter, which changes the disclosure duties that attach to the holding. It is a category change on the register, not a sale of shares.
What conditions must be met?
Regulation 31A sets thresholds before a holder can be reclassified as public.
| Condition | Requirement |
|---|---|
| Voting rights | Promoters seeking reclassification hold no more than 10% together |
| Control | The person must not be in control of the company |
| Special rights | No special rights through shareholder agreements |
| Board and management | Not on the board or acting as a key managerial person |
10%
Maximum voting rights a reclassifying promoter group can hold together under LODR Reg 31A
Source: SEBI LODR Regulation 31A
How is it approved?
The change moves through three gates: the company's board of directors approves it, the shareholders approve it, and the stock exchanges approve it. The exchange allows the reclassification only after it is satisfied the Regulation 31A conditions are met. The reclassified person must keep meeting the conditions for at least three years, or face automatic reclassification back to promoter.
Where it fits
Reclassification changes the promoter side of the register, so it connects to what is a promoter group and to minimum public shareholding, which sets the floor for the public category the holder moves into. The effect shows up in the shareholding pattern the company files each quarter.
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Frequently asked questions
What is promoter reclassification?
Promoter reclassification is the process under SEBI LODR Regulation 31A by which a person or entity in the promoter or promoter group of a listed company is moved to the public shareholder category. It changes how that holding is reported in the shareholding pattern. Source: SEBI LODR.
How much can a reclassified promoter hold?
The promoters or promoter group persons seeking reclassification must together not hold more than 10% of the total voting rights in the listed company. They must also not be in control and must not hold special rights over the company. Source: SEBI LODR Regulation 31A.
What approvals does reclassification need?
Regulation 31A requires approval by the company's board of directors, approval by the shareholders, and approval by the stock exchanges. The exchange allows the change only once it is satisfied the conditions in the regulation are met. Source: SEBI LODR.
Can a reclassified promoter sit on the board?
No. For at least three years from reclassification, the person must not be on the board of directors or act as a key managerial person of the company, among other conditions. Breaching a condition can trigger automatic reclassification back to promoter. Source: SEBI LODR.
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Disclosures shown are public regulatory filings. Data may be delayed or incomplete. Smart-money entities may no longer hold positions shown. Not investment advice.