The Securities and Exchange Board of India (SEBI) has issued new guidelines to clarify what constitutes a change in ownership or management control for listed companies.
According to the guidelines, transferring shares to close relatives will not be considered a change in ownership or management control.
SEBI has also defined “close relatives” specifically as a spouse, parents, siblings, and children.
Any transfer of shares or inheritance to these individuals does not require separate notification to SEBI.
Why SEBI Issued These Guidelines
The guidelines were introduced to address confusion regarding the transfer of shares through intermediaries or middleman firms.
There was uncertainty about whether transferring shares to relatives might be classified as a change in management control. SEBI clarified that only the specified close relatives fall under this category.
However, transferring shares to investment advisors, research analysts, or companies offering related services will be considered a management change
and must be reported to SEBI. This step aims to protect investors’ interests and provide transparency.
No Management Change When Family Members Take Over
Experts point out that SEBI’s guidelines establish a clear distinction between family and professional relationships in ownership transfers.
For instance, if a son assumes management of a company after his father’s death, it will not be classified as a change in ownership or management.
This applies to all forms of businesses, including proprietary, partnership, and corporate firms.
By issuing these guidelines, SEBI ensures clarity on ownership transitions and safeguards investor confidence in listed companies.
