Infosys founders will not lose “promoter” tag

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Infosys founders will continue to remain as “promoters” of the company under the law and will not lose this status unless they sell down their stake in the company from the approximate 12.8% to 1%.

Infosys founders still maintain “promoter” status

N R Narayana Murthy, co-founder of Infosys, in 2014, had written to the Infosys Board regarding the declassification of his status along with other promoters who had decided to leave the company. They sought for a reclassification of their new status. However, this matter regarding their classification has since remained unresolved.

This is because, at the time, SEBI (Securities Exchange Board of India) had not yet laid down the rules for reclassification of promoters as public shareholders. However, in 2015, SEBI framed the relevant rules for reclassification, but, Murthy and others have not yet sought to relinquish their status in the company as “promoters”.

According to the newly laid down SEBI rules, promoters can only be reclassified as public shareholders under the condition that the company is professionally managed without having an identifiable promoter. Furthermore, to be classified as a public shareholder, a person or a group of persons acting in concert cannot collectively hold more than 1% stake in the company’s shares.

Nevertheless, the market has discounted to view the founders as promoters as they have given up their executive positions in the company. However, the spat between the founders and the board became public this month, Murthy publicly addressed the founders’ concerns regarding the increase in current CEO Vishal Sikka’s compensation of $11 million (from the earlier $7.08 million).

The aforementioned concern was an addition to their existing grievances that included poor governance practices and others’ severance packages. In response, a spokesperson for Infosys has said that all company decisions were bona fide and have been backed by appropriate disclosures.

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