Promoter-driven companies have forthwith offered resistance to the SEBI plan. The opposition is not just ignorable but too stiff for SEBI’s plan. The Securities and Exchange Board of India’s plan to replace the existing concept of promoters with controlling shareholders is being faced opposition. SEBI’s proposal is aimed at creating more professionally managed companies. The proposal also seeks to check the excessive interference of promoters that hold a minority stake. Feedback compelling the regulator to not go ahead with this proposal is presented by several companies. Floated in September, the proposal had been referred to its Primary Market Advisory Committee. Intending to seek their views, the regulator has reached out to some industry participants.
SEBI has to keep in mind the changing realities of the global and Indian markets and have to examine the relevance of the concept of the ‘promoter’ in today’s times. According to people participating in consultations, SEBI is sharp on revamping the governance rules. They also state that the regulator does not want to take any decision unilaterally. SEBI plans to bring down promoter interference in companies where they enjoy less than 50%. They have instances where promoters’ interferences have obstructed several business reforms put forward by the boards. Another disclosure from SEBI is that money of public shareholders was at risk due to the whims of some promoters, and thereby negatively impacting SEBI’s interest.
The current SEBI rules have it that promoters are considered to be the real control of the company. Then by definition, the promoters will enjoy a say in the day to day affairs, which is well and good. In case of any fraud or mismanagement happening in the company, they also cannot get away from liabilities. Incidentally moving towards the concept of controlling shareholders will reduce whatever prominence is attached to the promoters. The other benefit is that of a reduced liability on promoters if anything goes wrong. Companies pose prominent importance to promoters whom they regard as anchors who are in the good books of shareholders, disregarding promoters is not feasible practically. The promoters should keep on in the driver’s seat by which act the image of the company will be intact. For the companies’ survival promoters with essential connections are so inevitable. Earlier this year several promoter-driven companies lobbied against the requirement to split the chairman and managing director post.
