SEBI in its Circular dated August 2, 2011 addressed to stock exchanges / depositories and intermediaries had specified the procedure for seeking prior approval of SEBI for change in control of certain SEBI intermediaries such as stock brokers, merchant bankers, debenture trustees, registrar to an issue and share transfer agents, underwriters, depository participants, bankers to an issue and credit rating agencies. SEBI has pursuant to its Circular dated March 25, 2021, clarified the following in respect of transfer of shareholding among immediate relatives and transmission of shareholding:

i.     Transfer of shareholding to “immediate relatives” as defined under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 or by way of transmission to any person will not be construed as change of control;

ii.    Transfer or bequeathing of the business/ capital by way of transmission by a proprietary firm type intermediary to any other person would amount to change of control requiring the transferee to obtain prior approval of SEBI along with fresh registration in the name of such legal heir/ transferee; and

iii.   Inter–se transfer of ownership interest in an intermediary which is a partnership firm with more than two partners will not be construed as a change in control. However, induction of a new partner would be considered as a change of control requiring fresh registration and prior approval of SEBI. Further, bequeathing of partnership to legal heir(s) by way of transmission will not be considered as change in control.

The Circular also clarifies that incoming entities/ shareholder becoming part of controlling interest in the intermediary pursuant to transfer of shares from immediate relative/ transmission of shares (immediate relative or not) are not required to satisfy the ‘fit and proper person’ criteria stipulated in Schedule II of the SEBI (Intermediaries) Regulations, 2008.