{"id":4259,"date":"2021-04-21T06:54:16","date_gmt":"2021-04-21T06:54:16","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=4259"},"modified":"2021-04-21T06:54:19","modified_gmt":"2021-04-21T06:54:19","slug":"sebi-directs-prior-approval-for-change-in-control-by-transfer-transmission","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/sebi-directs-prior-approval-for-change-in-control-by-transfer-transmission\/","title":{"rendered":"SEBI Directs Prior Approval for Change in Control by Transfer &#038; Transmission"},"content":{"rendered":"\n<p>On 25.03.2021, the\nApex Market Regulator, i.e., SEBI has directed all the intermediaries to seek\nprior approval for Change in Control by Transfer &amp; Transmission. The same\nhas been by way of SEBI Circular No SEBI\/HO\/MIRSD\/DOR\/CIR\/P\/2021\/42.<\/p>\n\n\n\n<p>Also, it shall\nbe noted that the said circular is in furtherance to Circular No CIR\/MIRSD\/14\/2011,\nissued on 02.08.2011.<\/p>\n\n\n\n<p>Moreover, the\nSEBI has passed this circular under the ambit of the powers given by section 11\n(1) of the SEBI Act 1992 to protect the investor\u2019s interest and to promote\ndevelopment and regulation of the securities market.<\/p>\n\n\n\n<p>In this learning\nblog, the keep point of focus will be the different types of prior approval for\nchanges in control by transfer &amp; transmission. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3acf384f1cb\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3acf384f1cb\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-directs-prior-approval-for-change-in-control-by-transfer-transmission\/#Concept_of_Transfer_of_Shareholding\" title=\"Concept of Transfer of Shareholding\">Concept of Transfer of Shareholding<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-directs-prior-approval-for-change-in-control-by-transfer-transmission\/#Concept_of_Transmission_of_Shareholding\" title=\"Concept of Transmission of Shareholding\">Concept of Transmission of Shareholding<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-directs-prior-approval-for-change-in-control-by-transfer-transmission\/#Different_types_of_Prior_Approval_for_Changes_in_Control_by_Transfer_Transmission\" title=\"Different types of Prior Approval for Changes in Control by Transfer &amp; Transmission\">Different types of Prior Approval for Changes in Control by Transfer &amp; Transmission<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-directs-prior-approval-for-change-in-control-by-transfer-transmission\/#In_the_case_of_%E2%80%9CUnlisted_Body_Corporate_Intermediary%E2%80%9D\" title=\"In the case of \u201cUnlisted Body Corporate Intermediary\u201d\">In the case of \u201cUnlisted Body Corporate Intermediary\u201d<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-directs-prior-approval-for-change-in-control-by-transfer-transmission\/#In_the_case_of_%E2%80%9CProprietary_Firm_Type_Intermediary%E2%80%9D\" title=\"In the case of \u201cProprietary Firm Type Intermediary\u201d\">In the case of \u201cProprietary Firm Type Intermediary\u201d<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-directs-prior-approval-for-change-in-control-by-transfer-transmission\/#In_the_case_of_%E2%80%9CPartnership_Firm_Type_Intermediary%E2%80%9D\" title=\"In the case of \u201cPartnership Firm Type Intermediary\u201d\">In the case of \u201cPartnership Firm Type Intermediary\u201d<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-directs-prior-approval-for-change-in-control-by-transfer-transmission\/#Transfer_of_Ownership\" title=\"Transfer of Ownership\">Transfer of Ownership<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-directs-prior-approval-for-change-in-control-by-transfer-transmission\/#Transmission_of_Ownership\" title=\"Transmission of Ownership\">Transmission of Ownership<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-directs-prior-approval-for-change-in-control-by-transfer-transmission\/#In_the_case_of_%E2%80%9CIncoming_Entities%E2%80%9D\" title=\"In the case of \u201cIncoming Entities\u201d\">In the case of \u201cIncoming Entities\u201d<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-directs-prior-approval-for-change-in-control-by-transfer-transmission\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-directs-prior-approval-for-change-in-control-by-transfer-transmission\/#Official_Copy_of_the_SEBI_Circular\" title=\"Official Copy of the SEBI Circular \">Official Copy of the SEBI Circular <\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concept_of_Transfer_of_Shareholding\"><\/span>Concept of Transfer of Shareholding<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The term\ntransfer of shareholding means the process of transferring the already existing\nshares, their associated rights, and liabilities from one person to another.<\/p>\n\n\n\n<p>Further, a transfer of\nshare can only be initiated against the existing shares and existing\nshareholders. However, it shall be noted thatthe transferee can either bethe existing\nshareholder or not of the company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concept_of_Transmission_of_Shareholding\"><\/span>Concept of Transmission of Shareholding<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The term\nTransmission of Shareholding denotes a process by operation of law wherein the\nshares are allotted in a company in the name of the deceased person or an\ninsolvent person or are registered in the name of his\/ her legal heirs by the company,\non the proof of insolvency or death as the case may be.<\/p>\n\n\n\n<p>Further, it\nshall be noted that the transmission of shares shall take place only when a registered\nmember dies or is adjudicated lunatic or insolvent by a competent court.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Different_types_of_Prior_Approval_for_Changes_in_Control_by_Transfer_Transmission\"><\/span>Different types of Prior Approval for Changes in Control by Transfer &amp; Transmission<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The different types of prior approval for changes in\ncontrol by transfer &amp; transmission are as follows:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"In_the_case_of_%E2%80%9CUnlisted_Body_Corporate_Intermediary%E2%80%9D\"><\/span>In the case of \u201cUnlisted Body Corporate Intermediary\u201d<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In the following scenarios, change in\nthe shareholding of the intermediary shall not be construed as a change in\ncontrol:<\/p>\n\n\n\n<ol><li>Transfer of Shareholding among the immediate relatives will not result in the change in control. However, it shall be noted that an Immediate relative will be construed as explained under Regulation 2(l) of the <strong>SEBI SAST Regulations<\/strong><sup><a href=\"https:\/\/www.sebi.gov.in\/legal\/regulations\/apr-2017\/sebi-substantial-acquisition-of-shares-and-takeovers-regulations-2011-last-amended-on-march-6-2017-_34693.html\"><strong>[1]<\/strong><\/a><\/sup>, which inter-alia comprises any spouse of that person, or any brother, sister, parent, or child of that person or of spouse;<\/li><li>Transfer of shareholding through the transmission to the immediate relative or not, will not result in the change in control;<\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"In_the_case_of_%E2%80%9CProprietary_Firm_Type_Intermediary%E2%80%9D\"><\/span>In the case of \u201cProprietary Firm Type Intermediary\u201d<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In the case of an intermediary being a\nproprietary firm, the transfer or the bequeathing of the business or capital,\nby way of the transmission to another person, is the change in the legal\nformation or the ownership. Therefore, by the definition of the change in\ncontrol, such a transfer or transmission will be considered as the change in\ncontrol. <\/p>\n\n\n\n<p>Also, it shall be noted that the legal\nheir or transferee in such cases is needed to obtain prior approval, and\nthereafter a fresh registration will be obtained in the name of such legal heir\nor transferee.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"In_the_case_of_%E2%80%9CPartnership_Firm_Type_Intermediary%E2%80%9D\"><\/span>In the case of \u201cPartnership Firm Type Intermediary\u201d<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It shall be noted that the change in\npartners and the ownership interest of a partnership firm type intermediary\nwill be dealt with in the manner as follows: <\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Transfer_of_Ownership\"><\/span>Transfer of Ownership<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>In the case, where a SEBI registered\nentity is incorporated as a partnership firm with two or more than two\npartners, then, in that case, inter-se transfer among the partners will not be\ntermed to be a change in control. <\/p>\n\n\n\n<p>Also, it shall be noted that where the\npartnership firm comprises of only two partners, then, in that case, the same\nwill considered as dissolved upon the death of either of the partners. <\/p>\n\n\n\n<p>However, if in case a new partner has\nbeen inducted into the firm, then, in that case, the same will be termed as a\nchange in control, needing fresh registration and the prior approval of SEBI.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Transmission_of_Ownership\"><\/span>Transmission of Ownership<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Wherein the partnership deed comprises\nof a clause that in the case of death of a partner, the LRs (legal heir) of the\ndeceased partner can be admitted, then, in that case, the legal heirs may also\nbecome the partners of the said partnership firm. <\/p>\n\n\n\n<p>Also, it shall be noted that in such a scenario,\nthe partnership firm is reconstituted. <\/p>\n\n\n\n<p>However, it shall again be noted that\nthe bequeathing of partnership right to legal heirs, by way of the process of\ntransmission, will not be termed as a change in control.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"In_the_case_of_%E2%80%9CIncoming_Entities%E2%80%9D\"><\/span>In the case of \u201cIncoming Entities\u201d<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>All the Incoming entities or\nshareholders becoming a part of the controlling interest in the intermediary,\nin consequence, to transfer of shares from the immediate relative or\ntransmission of shares (immediate relative or not), requires to fulfil the fit\nand proper person criteria prescribed in the Schedule II of the SEBI\n(Intermediaries) Regulations 2008.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In a nutshell, SEBI has directed all the intermediaries to seek prior approval for Change in Control by Transfer &amp; Transmission. The same has been effected through a SEBI Circular No SEBI\/ HO\/ MIRSD\/ DOR\/ CIR\/ P\/ 2021\/ 42, issued on 25.03.2021.<\/p>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/sebi-advises-registered-entities-to-follow-trais-tcccp-regulations-2018\/\">SEBI Advises Registered Entities to Follow TRAI\u2019s TCCCP Regulations 2018<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Official_Copy_of_the_SEBI_Circular\"><\/span>Official Copy of the SEBI Circular <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<a href=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/04\/1616685668546.pdf\" class=\"pdfemb-viewer\" style=\"\" data-width=\"max\" data-height=\"max\"  data-toolbar=\"bottom\" data-toolbar-fixed=\"off\">1616685668546<br\/><\/a>\n<p class=\"wp-block-pdfemb-pdf-embedder-viewer\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>On 25.03.2021, the Apex Market Regulator, i.e., SEBI has directed all the intermediaries to seek prior approval for Change in Control by Transfer &amp; Transmission. The same has been by way of SEBI Circular No SEBI\/HO\/MIRSD\/DOR\/CIR\/P\/2021\/42. Also, it shall be noted that the said circular is in furtherance to Circular No CIR\/MIRSD\/14\/2011, issued on 02.08.2011. [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":4260,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[64],"tags":[590],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/4259"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=4259"}],"version-history":[{"count":5,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/4259\/revisions"}],"predecessor-version":[{"id":4266,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/4259\/revisions\/4266"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/4260"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=4259"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=4259"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=4259"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}