The Securities and Exchange Board of India has announced new rules for re-classification of a promoter as a public investor, whereas an outgoing promoter will have to hand over their special rights as well as control over the affairs of the listed firm.

In the new set of rules, the promoter wouldn’t be allowed to have any representation on the board of directors or act as a key managerial person in the listed entity. The promoter will also be restricted to hold over 10 per cent stake in the listed entity.

The market regulator also said in a notification released on November 16 that, the promoter seeking re-classification mustn’t be a wilful defaulter or a fugitive economic offender.

These norms are introduced in order to prevent the outgoing promoters from continuing to exercise their control over the company directly or indirectly. These norms will simplify, streamline and bring greater clarity to existing regulations, as per SEBI.

The regulator said that if the entity does not have any promoter due to re-classification, then in that situation the listed entity will be considered as a ‘listed entity with no promoter’. Earlier, the term used for such firms were ‘professionally managed’. The SEBI’s board has approved the changes in regulation in September.

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