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Special privileges for PE investors in listed firms to require shareholder's nod

Rediff  

The special privileges granted to private equity (PE) investors by listed companies will require shareholders' nod by way of special resolutions under new rules introduced by the Securities and Exchange Board of India (Sebi). Amending the Listing Obligations and Disclosure Requirement (LODR) regulations, the capital markets regulator stated that any special right granted to the shareholders of a listed entity will be subject to the approval by the shareholders in a general meeting by way of a special resolution once in every five years. All existing arrangements will also require shareholder approval once every 5 years starting from the date of such special right. Special rights granted to PE firms in investee companies - when they are privately held - typically include right to appoint nominee directors, first right of refusal to share subscription in case of new issuance (veto rights) and right to restrict any change in capital structure. Given the new SEBI rules, all such arrangements will need to be expired before such companies go public. Agreements by promoters, promoter group entities, family arrangements, related parties and key managerial personnel (KMPs) which may impact the management of control of the listed company or create any liability will also have to be disclosed to the stock exchanges within two days of entering into such agreements, irrespective of whether the company is a party to such agreements.