Markets regulator SEBI on Wednesday proposed requiring select shareholders—such as directors, key managerial personnel, and current employees—to hold shares in demat form before submitting an IPO document.
If implemented, this measure aims to eliminate inefficiencies and risks tied to physical share certificates, including loss, theft, forgery, and delays in transfer and settlement.
Currently, ICDR regulations mandate that all specified securities owned by promoters must be dematerialised before filing the offer document.
Despite existing mandates and facilitation mechanisms, a significant number of physical shares are still held by crucial pre-IPO shareholders, including directors, key managerial personnel, senior management, selling shareholders, and qualified institutional buyers, SEBI stated in its consultation paper. This creates a regulatory gap allowing physical shares to persist after listing.
To address these issues, SEBI has proposed broadening the scope of the current regulatory requirement.
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