Promoter Reclassification Under SEBI LODR Regulation 31A: The 2026 Guide for Listed and IPO-Bound Companies
By CS Sapna Malpani, Practising Company Secretary, Bangalore | Last updated: 16 June 2026
On 11 May 2026, the stock exchanges signed off on a quiet but telling event: Infosys moved two of its founding-family members, Shreyas Shibulal and Bhairavi Madhusudhan Shibulal, out of the promoter group and into the public category. The board had cleared it on 30 April, the application went to BSE and NSE on 1 May, and the no-objection landed eleven days later. The whole thing turned on one regulation that very few founders read until they need it: promoter reclassification under SEBI LODR Regulation 31A. Get the conditions wrong and the application bounces. Get them right and a founder who has stepped away finally stops carrying promoter obligations that should have ended years ago.
Quick Summary
What it is: Moving a promoter or promoter group shareholder to the public category under Regulation 31A of SEBI LODR.
Who it serves: Listed companies, IPO-bound companies cleaning up their cap table, and exiting or estranged founders.
The hard limit: Outgoing promoter plus related persons must hold not more than 10% of voting rights.
Key approvals: Board view, shareholder ordinary resolution, and stock exchange no-objection within 30 days.
Why act: Until reclassification clears, the founder stays bound by promoter disclosures, lock-in, and control attribution.
Why Promoter Reclassification Matters More Than Founders Think
The word “promoter” follows a person long after the working relationship ends. Under the SEBI framework, a promoter carries a bundle of obligations that an ordinary shareholder does not: continuous disclosures under the Substantial Acquisition of Shares and Takeovers (SAST) Regulations, restrictions and reporting under the Prohibition of Insider Trading (PIT) Regulations, minimum promoter contribution lock-in, and attribution of control over the company. For a co-founder who has sold down, retired, or fallen out with the remaining team, that classification becomes a liability with no upside.
This is where Regulation 31A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 comes in. It is the only clean, regulator-sanctioned exit door from promoter status. For IPO-bound companies the relevance is sharper still. Merchant bankers and due-diligence teams want a tidy promoter list before a Draft Red Herring Prospectus goes in. A dormant co-founder who is still tagged as promoter, still subject to lock-in, and still listed in every offer document complicates the story. Sorting that out through Regulation 31A before listing, or soon after, removes a recurring question mark from the governance file.
The cost of getting it wrong is real. An exchange that is not satisfied that the outgoing promoter has genuinely relinquished control will reject the application, and the company is back to square one after months of board and shareholder process. Worse, a reclassification that hides continuing control invites SEBI scrutiny later. So the detail in this regulation deserves close reading.
The Procedure at a Glance
Step 1 — Promoter’s request
The promoter sends a reasoned written request to the company seeking reclassification to public.
Step 2 — Board records its view
The board tests the request against every Regulation 31A condition and minutes its view.
Step 3 — Shareholders approve
An ordinary resolution passes in a general meeting, with the outgoing promoter and related persons not voting.
Step 4 — Apply to the exchanges
The company files for a no-objection with BSE and NSE, disclosing the move within 24 hours under Regulation 31A(8)(c).
Step 5 — Exchange decides in 30 days
The recognised stock exchange disposes of the application within thirty days and the shareholder becomes public.
The Conditions: Where Most Applications Fail
Regulation 31A(3) sets out the substantive bar. The outgoing promoter has to satisfy every one of these, not most of them. If a single condition fails, the reclassification fails. This is the heart of promoter reclassification under SEBI LODR Regulation 31A, and it is worth memorising.
| Condition under Regulation 31A(3) | What it means in practice |
|---|---|
| 10% voting cap | The promoter and related persons together must not hold more than 10% of total voting rights. |
| No control | The person must not exercise control over the listed entity in any form. |
| No special rights | No special rights through shareholder agreements, articles, or any other arrangement. |
| No board seat | The person must not be a director, nor have a representative on the board. |
| No KMP role | The person must not act as a key managerial personnel of the company. |
| Clean record | Not a wilful defaulter and not a fugitive economic offender. |
Two of these trip people up repeatedly. The first is the 10% voting cap, because founders often forget to add up holdings across family members, trusts, and related entities. The cap is a combined figure, not a per-person one. The second is the “no control” test. Giving up a board seat is visible and easy to evidence. Giving up control is a question of substance, and an exchange will probe a shareholder agreement, an affirmative voting matrix, or a casting-vote arrangement that quietly keeps the outgoing promoter in the driving seat. If any thread of control remains, the application is not honest, and it should not be filed.
Regulation 31A(4) adds a forward-looking layer. After a person is reclassified to public, the conditions continue: the reclassified person and related persons must keep their holding below the thresholds and must not regain control or a board seat for the specified period. Reclassification is not a one-day event you can reverse the next morning.
What the Infosys Reclassification Tells Founders
The Infosys move in May 2026 is a clean worked example. The board approved the reclassification of Shreyas Shibulal and Bhairavi Madhusudhan Shibulal on 30 April 2026. The company applied to BSE and NSE on 1 May 2026. Both exchanges issued their no-objection letters on 11 May 2026. The members concerned had long stepped away from any operating or board role, and their combined holding sat well within the public-category thresholds, so the file was straightforward and moved quickly.
Infosys is not an outlier. Through the first half of 2026, several companies ran the same play. Swojas Foods Limited filed its application on 31 January 2026 and received the BSE no-objection on 23 February 2026. IIRM Holdings India and Hypersoft Technologies both took their reclassifications to the exchanges in the same window. The pattern is consistent: where the outgoing promoter has genuinely cut the cord, the process is mechanical and fast. Where control lingers, the file stalls.
By The Numbers
Maximum combined voting rights for the outgoing promoter and related persons
Time the stock exchange has to decide a reclassification application
Window to disclose the application to the exchanges under Regulation 31A(8)(c)
From Infosys board approval to exchange no-objection in May 2026
The Exemption Routes: When the Standard Procedure Bends
SEBI recognises that some reclassifications happen not because a promoter chooses to exit but because the law forces a change. In those cases the regulator relaxes parts of the standard procedure. The relief from the conditions in Regulation 31A(3) and (4) and the disclosure steps in 31A(8)(a) and (b) is extended where the reclassification follows a resolution plan approved under Section 31 of the Insolvency and Bankruptcy Code, 2016. SEBI has indicated the same relief can apply where reclassification flows from an order or direction of the government or a regulator, or as a consequence of operation of law.
The logic is sound. When a resolution professional takes over a company under the IBC and a new investor steps in, the old promoter loses control by force of the approved plan. Demanding a fresh shareholder vote in that situation would be circular. The same applies to a transmission of shares on death, where the change is automatic rather than negotiated. So the standard board-and-shareholder route is the default, but it is not the only route, and identifying the correct path early saves weeks.
Step-by-Step: Running a Regulation 31A Reclassification
Here is the practical sequence a company secretary follows once a founder decides to exit promoter status.
1. Collect the written request. The promoter must send a reasoned request to the company. Vague intent is not enough; the letter should state the basis on which the conditions are met.
2. Map every related person and holding. Add up the shares held by the promoter, family members, trusts, and entities that count as related persons. Confirm the combined figure is at or below 10% of voting rights before anything else moves. This single check prevents most rejections.
3. Test control and rights. Examine the articles, any shareholder agreement, board nomination rights, affirmative-vote matrices, and casting votes. Anything that keeps the outgoing promoter in a position of control must be surrendered and the surrender documented.
4. Place it before the board. The board considers the request, records its reasoned view in the minutes, and recommends the reclassification to shareholders. The board’s analysis becomes part of the exchange file.
5. Take shareholder approval. Pass an ordinary resolution in a general meeting. The outgoing promoter and related persons do not vote. Keep the notice, explanatory statement, and voting results ready for the exchange.
6. File with the exchanges and disclose in 24 hours. Submit the no-objection application to BSE and NSE with all supporting documents, and make the disclosure to the exchanges within 24 hours of the application under Regulation 31A(8)(c).
7. Track the 30-day clock and update records. The exchange decides within thirty days. On approval, update the shareholding pattern, intimate the depositories, and reflect the change in the next disclosure cycle.
The Deeper Implication for Governance
According to CS Sapna Malpani, the rise in reclassification filings through 2026 reflects a maturing market where founding families are comfortable separating ownership from control. A promoter tag once carried prestige; today, for a co-founder who has moved on, it mostly carries reporting burden and personal exposure. Boards that treat Regulation 31A as a routine governance tool, rather than a defensive measure pulled out only in a dispute, end up with cleaner cap tables and fewer awkward questions during fundraising or listing.
The trend is easy to read. As more 2010s-era startups approach listing and their early co-founders drift away from day-to-day roles, reclassification volumes will keep climbing. The companies that handle it well audit their promoter list every year, the same way they audit their statutory registers, instead of waiting for a transaction to force the issue.
Regulation 31A Compared With the Reverse Move
Founders often confuse the two directions of reclassification. They are not symmetrical.
| Promoter → Public | Public → Promoter | |
|---|---|---|
| Trigger | Promoter’s own request | Shareholder seeks promoter status |
| Open offer | Not required | Required under SAST 2011 |
| Voting cap | Must be at or below 10% | Acquires control, not capped |
| Approvals | Board, shareholders, exchange | Board, shareholders, exchange + open offer |
The asymmetry exists to protect minority shareholders. Exiting promoter status is allowed once control is genuinely gone. Acquiring it triggers the takeover code, because a back-door change of control without an open offer would deny public shareholders their exit.
Key Takeaways
- ✅ The outgoing promoter and related persons must together hold not more than 10% of voting rights.
- ✅ Every Regulation 31A(3) condition must be met; one failure sinks the application.
- ✅ The standard route needs a board view, a shareholder ordinary resolution, and an exchange no-objection.
- ✅ Disclose the application to the exchanges within 24 hours under Regulation 31A(8)(c).
- ✅ The stock exchange decides within 30 days; Infosys cleared the exchange stage in 11 days.
- ✅ IBC resolution plans, government orders, and operation of law can relax parts of the procedure.
- ✅ Until reclassification clears, the founder keeps promoter disclosures, lock-in, and control attribution.
Sources and References
- SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Regulation 31A — sebi.gov.in
- BSE Checklist for Reclassification under Regulation 31A — bseindia.com
- LODR Regulation 31A integrated reckoner — ca2013.com
- Reclassification of Promoters by SEBI, Cyril Amarchand Mangaldas — corporate.cyrilamarchandblogs.com
- Re-classification of Promoters & Promoter Group under ICDR, TaxGuru — taxguru.in
- Infosys exchange filings on reclassification of Shibulal family members, May 2026
Planning a Promoter Reclassification?
Map your promoter group, test the 10% cap, and build a clean exchange file before you file. Review the full SEBI LODR compliance guide and the secretarial audit checklist.
For a confidential review of your promoter classification: Contact CS Sapna Malpani | WhatsApp
Frequently Asked Questions
What is promoter reclassification under SEBI LODR Regulation 31A?
Promoter reclassification under SEBI LODR Regulation 31A is the formal process by which a person classified as promoter or promoter group of a listed company moves to the public shareholder category. It needs a written request from the promoter, a board view, shareholder approval by ordinary resolution, and a no-objection from the stock exchanges. The outgoing promoter and related persons must together hold not more than 10% of voting rights and must give up control, board seats, special rights, and key managerial positions.
What is the 10% voting rights limit in promoter reclassification?
Under Regulation 31A, the promoters seeking reclassification, together with their related persons, must not hold more than 10% of the total voting rights in the listed entity. If the combined holding crosses 10%, the application fails. This is the single most common reason reclassification requests are rejected by stock exchanges, because founders forget to add up holdings across family members, trusts, and related entities.
Does promoter reclassification need shareholder approval?
Yes. The standard route under Regulation 31A requires approval of shareholders by an ordinary resolution in a general meeting, with the outgoing promoter and related persons excluded from voting. SEBI has carved out limited situations, such as reclassification following an IBC resolution plan, a government or regulator order, or operation of law, where some procedural conditions including shareholder approval may be relaxed.
How long does promoter reclassification take under Regulation 31A?
The board records its view on the promoter’s request within the prescribed period, the company applies to the exchanges after the board and shareholder approvals, and the recognised stock exchange decides the application within thirty days. The Infosys reclassification of the Shibulal family members moved from board approval on 30 April 2026 to exchange no-objection on 11 May 2026, about eleven days at the exchange stage.
What happens if a promoter is not reclassified to public?
An exiting founder who stays classified as promoter continues to carry promoter obligations: disclosures under the SAST Regulations and the PIT Regulations, lock-in on shares, and attribution of control. The person also stays answerable for promoter-level compliance even after stepping away from the business. Reclassification cleanly ends these obligations once the exchange approves it.
Can a public shareholder be reclassified as a promoter?
Yes, but the reverse direction is stricter. If a public shareholder seeks to be reclassified as a promoter, it must make an open offer under the SEBI Takeover Regulations, 2011, and meet the disclosure conditions. This protects minority shareholders from a quiet change of control through the back door.
Disclaimer: This article is for general information and does not constitute legal advice. Verify every requirement against the current SEBI LODR Regulations and consult a qualified professional before filing. Authored by CS Sapna Malpani, Practising Company Secretary, Bangalore.