Convenience to Curse: Pledging of Promoter Shareholding in India Under Scanner

Abstract

This article deals with the issue of the pledging of promoter shareholding in India and the transformation of the concept from “convenience” to a “curse” in the Indian capital market. It brings out ambiguities surrounding Regulation 8A of the Substantial Acquisition of Shares and Takeovers (Amendment) Regulations 2009 inserted by the Securities and Exchange Board of India (SEBI) to monitor the pledging of shares by promoters of listed companies. The article explains an empirical study of the shares pledged by promoters of companies listed in major indices of the Indian capital market and throws light on the development of a firstever streamlining mechanism model in view of the absence of a mechanism to monitor the shares pledged by promoters for stock exchanges and regulatory bodies, and to safeguard the interests of Indian investors.

TOPICS: Security analysis and valuation, emerging, legal/regulatory/public policy