Consider the following statements:
Statement I: Listed companies in India are required to ensure a minimum public shareholding of 25% of their total issued and paid-up equity capital.
Statement II: The objective of this requirement is to safeguard promoters by ensuring they hold at least 75% of the company’s equity at all times.
Statement III: The Minimum Public Shareholding rule aims to enhance market liquidity and promote better corporate governance.

Which one of the following is correct in respect of the above statements?
(a) Both Statement II and Statement III are correct and both of them explain Statement I
(b) Both Statement II and Statement III are correct but only one of them explains Statement I
(c) Only one of the Statements II and III is correct and that explains Statement I
(d) Neither Statement II nor Statement III is correct

Question

Consider the following statements:
Statement I: Listed companies in India are required to ensure a minimum public shareholding of 25% of their total issued and paid-up equity capital.
Statement II: The objective of this requirement is to safeguard promoters by ensuring they hold at least 75% of the company&rsquo;s equity at all times.
Statement III: The Minimum Public Shareholding rule aims to enhance market liquidity and promote better corporate governance.

Which one of the following is correct in respect of the above statements?
(a) Both Statement II and Statement III are correct and both of them explain Statement I
(b) Both Statement II and Statement III are correct but only one of them explains Statement I
(c) Only one of the Statements II and III is correct and that explains Statement I
(d) Neither Statement II nor Statement III is correct

TutorArc · Accepted Answer

SEBI has recently suggested enhancing the flexibility of rules governing Minimum Public Shareholding (MPS) and Minimum Public Offer (MPO) requirements for companies.
As per SEBI regulations and Securities Contracts (Regulation) Rules (SCRR), all listed companies are required to maintain a minimum public shareholding (MPS) of 25%. This rule aims to ensure liquidity and wider ownership among public investors.

Statement II is not correct: The MPS rule's objective is not to safeguard promoters or guarantee them a minimum shareholding. Instead, it promotes broader shareholding and market liquidity by mandating a minimum percentage of equity to be held by the public (non-promoters). Promoters often hold significant stakes but there is no such rule protecting a fixed promoter stake of 75%.

Statement III is correct: The rationale behind the MPS rule is to improve the stock market's functioning by ensuring enough equity float and encouraging transparency, accountability, and governance through diversified ownership.
Statement III correctly describes the underlying objective and rationale behind Statement I. So, only one of the Statements II and III is correct and that explains Statement I.

Stock Market Regulations

Minimum Public Shareholding Rule in India

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M Question 1	⏱ 0
Consider the following statements: Statement I: Listed companies in India are required to ensure a minimum public shareholding of 25% of their total issued and paid-up equity capital. Statement II: The objective of this requirement is to safeguard promoters by ensuring they hold at least 75% of the company’s equity at all times. Statement III: The Minimum Public Shareholding rule aims to enhance market liquidity and promote better corporate governance. Which one of the following is correct in respect of the above statements? (a) Both Statement II and Statement III are correct and both of them explain Statement I (b) Both Statement II and Statement III are correct but only one of them explains Statement I (c) Only one of the Statements II and III is correct and that explains Statement I (d) Neither Statement II nor Statement III is correct

Stock Market Regulations

Minimum Public Shareholding Rule in India

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