Sebi, India’s markets regulator has issued show-cause notices to Paytm founder Vijay Shekhar Sharma and other board members who held roles during the firm’s November 2021 IPO. According to a Reuters report quoting Moneycontrol, the notices allege misrepresentation of facts and non-compliance with shareholder classification norms.
Both Paytm and the Securities and Exchange Board of India (SEBI) did not respond to Reuters’ requests for comment. Following the report, Paytm shares fell by up to 8.9%.
The issue centers around whether Sharma should have been classified as a large shareholder instead of an employee when Paytm filed its IPO papers. SEBI has questioned directors at the time for supporting Sharma’s view of not being a large shareholder.
The regulator is planning to change its rules to address concerns around founders and family members of tech or app-based startups owning shares under the employee stock ownership plan (ESOP).
Sharma’s alleged non-compliance allowed him to receive shares through ESOPs. However, SEBI is not in favour of founders owning stock options if they have rights similar to big shareholders, also called promoters.
A year before filing to go public in 2021, Sharma owned a 14.7% stake but reduced his shareholding to 9.1% by transferring 30.97 million shares to Axis Trustee Services, acting on behalf of the Sharma family trust in 2021. This made him eligible to receive shares under ESOP, as a shareholder with more than a 10% stake in any publicly-listed company is not eligible to receive stock options.
Republished. Link to Original Article: https://timesofindia.indiatimes.com/business/india-business/paytm-founder-vijay-shekhar-sharma-other-board-members-issued-notice-by-sebi-report/articleshow/112804185.cms