Applicant: Mirza International Ltd. Date of the guidance: 10.06.2020

Factual Background

(i) The Managing Director of the Company who individually holds 11.27% shares in the company is desirous of gifting his shares to his daughters. The daughters are married and leading a separate life, away from the father.

(ii) The daughters who are prospective recipients of the shares do not want themselves to be falling within the ‘Promoter/Promoter Group’ definition of SEBI (LODR) Regulations, 2015 since it would attract Trading Window restrictions.

Guidance sought

The daughters are seeking reclassification of their status from ‘Promoter/Promoter Group’ to ‘Public’.

Provisions Involved

Regulations 31A of SEBI (LODR) Regulations, 2015.

1. Analysis of Definition: As per the definition of ‘Promoter Group’ [Reg.2(1)(pp) of SEBI (ICDR) Regulations, 2018][i] the daughters of the promoter are immediate relatives and they already fall under the ‘Promoter Group’ irrespective of the fact they are married an leading a separate life or not.

2. Effect of Gift: As per Regulation 31A (6) of SEBI (LODR) Regulations, 2015[ii] in case of gift of shares by the Promoter, immediately on such event, the recipient of such gift shall also be classified as ‘Promoter/Person belonging to the Promoter Group’. Hence, upon gift the daughters will still be under the ambit of ‘Promoter Group’.

3. Satisfaction of the Conditions relating to Reclassification: As per Regulation 31A (3)(b)(i) of SEBI (LODR) Regulations, 2015[iii] upon reclassification the promoter who is seeking reclassification along with the persons related to such promoter shall not together hold more than 10% of the total voting rights of the company. Since, the total voting rights would be greater than 10% (i.e., 11.27 %) they cannot reclassify themselves to the ‘public’ category.

The letter of SEBI can be read at https://www.sebi.gov.in/sebi_data/commondocs/jun-2020/SEBI%20Informal%20guidance%20Mirza_p.pdf.

As per the Informal Guidance [Scheme] 2003 of SEBI, the guidance provided is applicable only to the Applicant, and is should not be construed as a conclusive decision or determination of any question of law or fact by SEBI, and is also not an Order u/S 15T of SEBI Act, 1992