The Securities and Exchange Commission (SEC) of Sri Lanka recently put forward, for public comment by August 8, 2011, a set of draft rules for the minimum public stake in a public listed company (PLC) which stipulated 20% for PLCs on the main board of the Colombo Stock Exchange and 10% for those on the Diri Savi board. Allowing up to 12 months for compliance, and highlighting a number of possible scenarios where companies, if unable to comply, could elicit more time with the CSE's prior permission, the rules also identified the ultimate penalty for infringers as being delegated to the CSE's default board.
Additionally, the draft rules also indicated transitional requirements for public shareholdings of already existing PLCs as being at least 5% per year.
Further indicated, all PLCs will be required to make an announcement, within one month of the effective date of these rules, outlining the method by which the PLC planned to reach the stipulated 20%, 10% or 5% public shareholdings, with the announcement also including details such as the existing percentage and number of shares in the hands of public, the proposed means of the placement and its time period, etc. At the same time, a similar, public announcement, with the same details, will also be required from all public shareholding, at any time, should the minimum public shareholdings fall, at any time, below the stipulated pecentages.
The draft rules also highlighted specific groups which could not be considered public in relation to a PLC, including "a) its parent, subsidiary or associate companies or any subsidiaries or associates of its parent company; b) its directors who are holding office as directors of the entity and their close family members; c) Chief Executive Officer, his/her close family members; d) any single individual or a company holding 10% or more of the shares of the listed entity except where such shareholder is either: i. a statutory institution who is managing funds belonging to contributors or investors who are members of the public; or ii. an entity established as a unit trust or any other investment fund approved by the SEC."
Also highlighted was what fell under the purview of the term “close family members,” which was said to encompass spouses, parents, grandparents, children (including adopted children and step-children), siblings, spouse of children and siblings, grandchildren, and any financial dependents. |
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