Promoters Must To Provide Reasons for Pledging of Share – SEBI

Capital markets regulator SEBI has directed promoters of companies to give reasons for pledging their shares when they disclose creation of a pledge/ encumbrance to stock exchanges.

This, SEBI said, would ensure that adequate disclosures are made to help investors take informed decisions. Modifying the format of the disclosure of encumbrances (pledged shares) with immediate effect, SEBI said promoters have to provide reasons, such as collateral for loans taken by the company, personal borrowing, and third-party pledge, among others. Earlier promoters were not required to provide reasons for pledging their shares.

Promoters also have to include the name of the lender and the trustee who may hold shares directly or on behalf of the lender. Earlier only the name of the entity in whose favour the shares had been encumbered was to be disclosed.


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