Sebi asks firms to make more disclosures about pledged shares

The Securities and Exchange Board of India (Sebi) on Wednesday asked listed companies and their promoters to make more disclosures about pledging of shares, including the purpose of the encumbrance, and also disclose name of the lender. So far, companies and their promoters were only disclosing the names of trustees holding the pledged shares, rather than making the disclosure about the real lender.

Under the revised disclosure requirements, which Sebi said are aimed at helping investors take "an informed decision" about the state of affairs at the concerned company, the listed firm and its promoters would need to specifically disclose “the purpose of collateral for loans taken by the company, personal borrowing, third party pledge, etc.”

Besides, the disclosures would be required to be made about the "name of both the lender and the trustee who may hold shares directly or on behalf of the lender."

These are the additional information a company needs to provide apart from disclosing about name of the promoter along with person acting in concert (PAC) with him, its holding in the target firm, stake already encumbered, date as well as type of creation, invocation release of encumbrance and holding of promoter after such event.

The disclosures would have to be made in a prescribed format.