“For a company to be listed and continue to be listed, it must have a public stake of 25 per cent,” the Finance Ministry said while releasing a discussion paper on ‘Public Holdings for Listing’.

If for any reason, the public holding falls below 25 per cent, the paper said, promoters, management and the company will have to ensure that it is increased to the mandatory level within three months in the manner prescribed by Securities & Exchange Board of India failing which appropriate enforcement action, including delisting, may be taken. Making a case for defining the word “Public”, the discussion paper said, “If ‘public’ means ‘non-promoters’ and includes FIs, FIIs, MFs, employees, NRIs/OCBs, private corporate bodies, etc, the floating stock would be insignificant.”

 To provide liquidity

The ministry also wants the discrimination between a government and non-government company to be done away with at least for the purposes of listing requirements.

These proposals, the ministry said, should be incorporated in the Securities Contract (Regulations) Rules 1957  for both initial and continuous listing requirements of companies in stock exchanges. A large number of shares distributed among a large number of shareholders is essential for the sustenance of a continuous market for listed securities to provide liquidity to the investors and to discover fair prices.

The larger the number of shares and the number of shareholders, or the larger the public float, the less is the scope for price manipulation. In order to ensure this, the securities laws prescribe initial and continuous listing requirements.

“The powers of the stock exchange to relax any of the conditions of listing with the prior approval of Sebi in respect of a government company needs to be withdrawn,’’ MoF statement said. Similarly, the powers of Sebi to relax listing requirements may be also withdrawn.