Market regulators SEBI is looking at a way to protect millions of public shareholders of listed companies that undergo the Corporate Insolvency Resolution Process (CIRP). So far the CIRP served only the interest of banks and large creditors, with shareholders losing their rights over a company moment it got admitted into the debt restructuring process, and the new owner, post-restructuring, gains 100 percent control.
In a consultation paper issued on Thursday, SEBI now proposes that the existing public shareholders of a company undergoing CIRP should also become shareholders in the company post its restructuring, and they should get a right to participate in the process in proportion to their share holding.
According to SEBI, if a company has to remain listed post-restructuring, then the existing shareholders should have the right to hold at least 5 percent of the equity at the cost or value at which 95 percent of the holding was acquired by the new owner.
CURRENT DISTRIBUTION OF CIRP FIRMS
- Transport - 2%
- Hotels - 3%
- Electricity - 5%
- Retail Trade - 6%
- Construction - 10%
- Real Estate - 14%
- Manufacturing - 51%
- Others - 9%