Transfer of shareholdings among immediate relatives and transmission of shareholdings and their effect on change in control
On December 27th, 2024, SEBI via Circular provided clarification for certain intermediaries with respect to transfer of shareholding among immediate relatives and transmission of shareholding in respect of investment advisers (IAs), research analysts (RAs) and KYC (Know Your Client) registration agencies (KRAs):
In following scenarios, change in shareholding of the intermediary will not be construed as change in control.
1. Transfer /transmission of shareholding in case of unlisted body corporate intermediary:
In following scenarios, change in shareholding of the intermediary will not be construed as change in control:
a) A transfer of shareholding among immediate relatives does not constitute a change in control. “Immediate relatives” are as defined under Regulation 2(1)(l) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
b) This includes a person’s spouse, parents, siblings, children, or the spouse’s corresponding relations. Any transfer of shareholding through the process of transmission, whether to an immediate relative or otherwise, also does not result in a change in control.
2. Transfer / transmission of shareholding in case of a proprietary firm type intermediary: For proprietary intermediaries, transferring or transmitting business or capital to another person constitutes a change in control. Legal heirs or transferees must obtain prior approval and subsequently secure fresh registration in their name to comply with regulatory requirements and ensure the continuity and legitimacy of the intermediary’s operations.
3. Transfer / transmission of ownership interest in case of partnership firm type intermediary:
a) Transfer of ownership interest in case of partnership firm: For SEBI-registered partnership firms with more than two partners, inter-se transfers among partners do not constitute a change in control. However, for firms with only two partners, the firm dissolves upon one partner’s death. Induction of a new partner is treated as a change in control, requiring SEBI’s prior approval and fresh registration.
b) Transmission of ownership interest in case of partnership firm: If a partnership deed permits the admission of a deceased partner’s legal heirs, they may join the firm, leading to its reconstitution. In such cases, the transmission of partnership rights to legal heirs is not considered a change in control, ensuring continuity without requiring fresh registration or SEBI approval.
4. Incoming entities or shareholders gaining a controlling interest in an intermediary through share transfers or transmissions must meet the “fit and proper” criteria under SEBI (Intermediaries) Regulations, 2008. IAASB and RAASB must notify IAs and RAs, publish this on their websites, and update relevant regulations and procedures to ensure compliance.
Policy for Sharing Data for the Purpose of Research / Analysis
SEBI has mandated Stock Exchanges, Depositories, and Clearing Corporations (MIIs) to adopt a uniform data sharing policy for research by accredited academic institutions. Data is segregated into two baskets:
- Publicly Shareable Data: Includes aggregated, anonymized data and mandated reporting/disclosure data. Researchers can access up to 2GB free annually; larger requests may incur cost-based fees.
- Restricted Data: Includes sensitive, personal, or KYC information, and anonymized data that could indirectly identify individuals/entities.
MIIs must categorize data uniformly, seek SEBI’s approval within 60 days, and review annually. Stakeholder-friendly formats and data request forms are required for transparency.
Industry Standards on Reporting BRSR Core
To promote ease of doing business and standardize implementation, the Industry Standards Forum (ISF), comprising ASSOCHAM, CII, and FICCI, in collaboration with SEBI, has developed industry standards for disclosing the Business Responsibility and Sustainability Report (BRSR) Core under Regulation 34(2)(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations), as per SEBI’s master circular issued on November 11, 2024. The ISF and stock exchanges will publish these standards on their websites. Listed entities must follow these standards to comply with SEBI’s BRSR Core disclosure requirements for FY 2024-25 and onwards. Stock exchanges are advised to notify their listed entities and ensure compliance.
Disclaimer: The information published in the above newsletter is collected from various sources in electronic medium and analyzed by the firm. The reader is advised to consult the attorney qualified in their jurisdiction, before acting on any information contained in this newsletter. India Juris excepts no liability what so ever in this regard.
