SEBI Clarifies Shareholder Nod Needed for Promoter Reclassification Over 1%

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  • Last Updated on 11 July, 2025

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Promoter Reclassification SEBI

Informal Guidance No. SEBI/HO/CFD/PoD2/OW/P/2025/18347/1, Dated: 09.07.2025

A listed company approached the Securities and Exchange Board of India (SEBI) seeking informal guidance on whether shareholder approval is necessary for reclassifying a promoter when the combined shareholding of the promoter and related persons is not more than 1% of the total voting rights.

1. Regulation 31A of SEBI (LODR) Regulations – Key Provision

SEBI examined the query in light of Regulation 31A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR), which governs the process for promoter reclassification.

Under Regulation 31A, a promoter may be reclassified as a public shareholder subject to the fulfillment of certain conditions, including:

  • No control over the listed entity,
  • No influence over key decisions,
  • Not being a key managerial person, and
  • Adherence to shareholding thresholds.

2. Clarification – Threshold for Shareholder Approval

SEBI clarified that:

  • If the combined holding of the promoter and persons related to the promoter is 1% or less, shareholder approval is not required.
  • However, if the combined holding exceeds 1%, then an ordinary resolution by shareholders is mandatory for the reclassification to be approved.

3. Application to the Case at Hand

In the present case, SEBI observed that:

  • The combined holding of the promoter and related persons exceeded 1%,
  • Therefore, the company must obtain shareholder approval through an ordinary resolution for the proposed reclassification.

4. Conclusion

This clarification reinforces the regulatory requirement under Regulation 31A of LODR, ensuring that reclassification of promoters is not automatic and must follow proper shareholder scrutiny when shareholding thresholds are breached.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied