Informal Guidance request of Mirza International Limited relating to reclassification of promoters under SEBI (LODR) Regulations, 2015

Last updated: 13 June 2020

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Mirza International Limited sought informal guidance from SEBI regarding the reclassification of the Managing Director's married daughters from the 'Promoter & Promoter Group' to the 'Public' category. The daughters would receive shares as a gift and do not participate in the company's management. However, SEBI's guidance indicates that due to their relationship as immediate relatives and the potential shareholding exceeding 10% after the gift, they would remain classified as part of the promoter group under the SEBI (LODR) Regulations, 2015.

Securities and ExchangeBoard of India General Manager Corporation Finance Department Compliance and MonitoringDivision SEBI/HO/CFD/CMD1/OW/2020 June 10, 2020 Mirza International Limited 14/6, Civil Lines, Kanpur- 208001 Kind attention: Ankit Mishra, Company Secretary Dear Sir, Sub:Request for Informal Guidance by way of Interpretive Letter. under the SEBI(Informal Guidance) Scheme, 2003 in the matter of Mirza International Limited 1. This has reference to your letter

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FAQ :

Mirza International Limited requested informal guidance on whether the Managing Director's married daughters, who would receive gifted shares and are not involved in management, could be reclassified from the 'Promoter & Promoter Group' to the 'Public' category.

The daughters wished to be reclassified as they do not have involvement in the company's management, live separate lives, and did not want to be subject to trading window restrictions applicable to the 'Promoter & Promoter Group'.

SEBI's guidance states that by virtue of the definition of 'promoter group' under ICDR regulations, the daughters are immediate relatives and thus part of the promoter group, irrespective of their involvement in management.

No, SEBI's guidance indicates they are not eligible for reclassification to the 'Public' category because Regulation 31A(3)(b)(i) of the SEBI (LODR) Regulations, 2015, states that promoters and related persons seeking reclassification must not together hold more than 10% of the total voting rights. The daughters would hold more than 10% after the gift.

Regulation 31A(6) states that immediately upon the gift of shares by a promoter or person belonging to the promoter group, the recipient of the shares shall be classified as a promoter or person belonging to the promoter group, as applicable.

Notification No : SEBI/HO/CFD/CMD1/OW/2020
Source : https://www.sebi.gov.in/sebi_data/commondocs/jun-2020/SEBI%20Informal%20guidance%20Mirza_p.pdf

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