December 1, 2015

SEBI: Give Exit Route to Dissenting Investors

 In a significant move to safeguard minority investors, the Securities and Exchange Board of India (Sebi) on Monday proposed making it mandatory for listed companies to provide an exit option to dissenting shareholders in case of changes to the objectives for which they had raised money from public.

The move would help the shareholders make an exit if they feel dissatisfied with any change in business plan of the concerned company after raising funds through IPOs, FPOs or any other capital-raising exercise involving public investors.

In a meeting held on Monday, capital market regulator Sebi's board approved a proposal to initiate public consultation process regarding exit opportunity to the dissenting shareholders "in case of change in objects or varying the terms of contracts referred to in the prospectus".

The move follows a provision in the Companies Act, 2013 in this regard, wherein it was said that such an exit option needs to be given as per the regulations to be specified by Sebi.

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