The Securities and Exchange Board of India (Sebi) has issued show-cause notices to Vijay Shekhar Sharma, the founder of One 97 Communications Ltd (Paytm’s parent company), and several board members who were part of the company during its initial public offering (IPO) in November 2021. The notices are related to allegations of misrepresentation of facts and non-compliance with promoter classification norms.
The present action has its genesis in an investigation that Sebi had launched after getting inputs from the Reserve Bank of India, which had inspected Paytm Payments Bank earlier this year. The key issue under examination is whether Sharma should have been classified as a promoter at the time of the IPO when his position was such that he controlled the management vis-à-vis the situation in which he was merely an employee.
Sebi’s notice has also sought answers from directors of the company then and made them responsible for verification and certification of Sharma’s classification. If Sharma had been considered a promoter, he would have become ineligible for ESOPs post-IPO as per Sebi rules.
While no response was elicited for comments on emails sent to Sebi, One 97 Communications, and the concerned directors. This is one of the rare cases in which Sebi is holding the directors of a company responsible for any compliance lapses not brought to the notice of the bankers or auditors, unlike a financial fraud. Usually, listed firms are presumed strength-driven unless classified as ‘professionally managed,’ wherein no shareholder is required to hold more than 10% stake. Before the IPO, Sharma off-loaded 5% of his shareholding to a family trust, VSS Holdings Trust, reducing his stake to 9.6%, just below the threshold that would classify him as a promoter. But now, the continuance of his influence is under question.
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Source: Moneycontrol
News Desk
