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Amendments to SEBI SBEB Regulations

Finsec Law Advisors

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SEBI in its recent boarding meeting approved certain amendments to the SEBI (Share Based Employee Benefits) Regulations, 2014.

The SBEB Regulations mandate that the shareholding of employee benefit trusts must be disclosed in the category of ‘non-promoter and non-public’ and that shares held by such trusts will not be considered to be public shareholding for the purpose of MPS requirements under the SCRA. However, the effective date of this provision was deferred for five years from the date the regulations came into force. In light of a recent amendment to the SCRR specifically reducing this period to three years, SEBI approved the amendment to the regulations to align the same with the SCRR. Further, the ban for such employee benefit trusts from exercising voting rights in relation to shares held by them, which was scheduled to begin from one year from the date the SBEB Regulations came into place, has now been extended to three years from the date on which the regulations were notified.

Further, the board has also approved an amendment that will now exclude employees of associate companies from the definition of ‘employee’, thereby rendering them ineligible to receive benefits from employee benefit trusts. This is in light of the amendment to the Companies (Share Capital and Debentures) Rules, 2014, on March 18, 2015, which also excludes employees of associate companies from receiving stock options. However, employees of holding companies and subsidiaries will continue to receive the benefit. Lastly, the regulations have been amended to allow employee benefit schemes to take part in open offers, buy-backs and delisting offers, through the stock exchange mechanism, without having to comply with the minimum holding period requirement of six months imposed therein.