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Clause 40A of the Listing Agreement for Equity Shares

Clause 40A of the Listing Agreement for Equity Shares prescribes provisions for Minimum level of public shareholding by a Listed company in India.

Compliance of clause 40A is a worrying factor for most of the listed companies, nevertheless it is a must, from the good governance angle.  


Conditions / requirements prescribed under the clause 40A:


(i) The company agrees to comply with the requirements specified in Rule 19(2) and Rule 19A of the Securities Contracts (Regulation) Rules, 1957.
(ii) Where the company is required to achieve the minimum level of public shareholding specified in Rule 19(2)(b) and/or Rule 19A of the Securities Contracts (Regulation) Rules, 1957, it shall adopt any of the following methods to raise the public shareholding to the required level:-
  (a) issuance of shares to public through prospectus; or
  (b) offer for sale of shares held by promoters to public through prospectus; or
 (c) sale of shares held by promoters through the secondary market in terms of SEBI circular CIR/MRD/DP/05/2012 dated February 1, 2012; or
 (d) Institutional Placement Programme (IPP) in terms of Chapter VIIIA of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended.
 (e) Rights Issues to public shareholders, with promoter/promoter group shareholders forgoing their entitlement to equity shares, whether present or future, that may arise from such issue.
 (f) Bonus Issues to public shareholders, with promoter/promoter group shareholders forgoing their entitlement to equity shares, whether present or future, that may arise from such issue.
 (g) any other method as may be approved by SEBI on a case to case basis.


Source: BSE Stock Exchange, Listing Agreement
Post Last Updated On: 28th August 2015
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