Section 93 requires every listed company to file return in MGT 10 with respect to change in number of shares of promoters and top ten shareholders. Rule 13 of the Companies (Management and Administration) Rules, 2014 requires the reporting to be done in case there is 2% or more increase or decrease in the number of shares. However, this 2% is of 2% of what? Whether 2% of the holding of individual or 2% of the company’s capital- The Act and the Rule both are silent on the same.
The help kit for the form MGT 10 however, seems to suggest that the change of 2% is to be calculated on the shareholding of the shareholder himself and not on the paid up capital of the company. The change to be reported is the change is 2% or more – this should logically mean 2% of the total share capital of the company. More logical interpretation would have been 2% of the company’s capital, because it is then only that the change is significant and requires abrupt reporting.
We are of the view that the intent of section 93 could not be to report 2% change relative to the shareholding of the shareholder himself. The idea is to report material movements in shareholdings. That is to say, a shareholder in promoter category may be holding just 100 shares. So 2% change computed on his shareholding does not make sense at all. The change makes sense only if it is relative to the capital of the company.
Further, since such clarification by means of help kit came into the knowledge of all only on introduction of the form in October 2014, so prior to such introduction companies were filing the information keeping the paid up share capital as the denominator. There have been instances where the limit of 2% did not get triggered until the introduction of MGT 10, wherein due to the formula being calculated by MGT 10 the 2% limit is triggered. Now, under such circumstances companies are facing problem in reporting since they are unable to ascertain which date to take as base date for reporting post introduction of MGT 10 or whether such companies should do revised filing since April 01, 2014. In any event, this is surely not the correct approach to reporting.
