Promoters are required to reveal familial pacts: Sebi

Promoters will no longer be able to conduct such transactions legally after July 15 if they fail to declare to exchanges any family settlement agreements or other arrangements that affect the management control of listed firms.

As per the Securities and Exchange Board of India’s (SEBI) stated guidelines, stock exchanges must be informed of any agreements that are in effect as of the notification date. It was previously agreed that only future agreements, not past ones, needed to be revealed.

By disclosing all secret agreements between significant shareholders through a gazette announcement on June 14, 2023, Sebi has announced regulations aimed at increasing openness. The regulator stated that the revisions would take effect thirty days after their publication in the official gazette, making July 15 the effective date.

The amendments state that all shareholders, promoters, promoter group companies, and key managerial personnel of a listed entity who are parties to agreements that directly or indirectly or potentially have an impact on the management or control of the listed entity, place any restrictions on it, or make it liable for anything, should disclose their identities to the stock exchanges. Lawyers claim that because the modifications are currently written so broadly, they will likely apply to all contracts, even those that weren’t intended to fall under their purview.

India has a large number of family-owned enterprises and many of these encounter family conflicts. A report in the Economic Times has cited examples such as the conflict between the Kirloskar brothers of Pune: Baba Kalyani and his sister Sugandha Hiremath over the chemical company Hikal; Prakash and Deepak Chhabria over Finolex Cables; Kailas Chandra Nuwal and Satyanarayan Nuwal over Solar Industries.