No shares, no say, yet a promoter: How marital ties create fictional “promoter groups”

Definition in SEBI regulations entangles spouse’s family and its associated entities

– Nitu Poddar, Partner | corplaw@vinodkothari.com

What is the issue?

A seemingly benign, innocuous and long standing definition of “promoter group” in SEBI (ICDR) Regulations, 2018 (‘ICDR Regulations’) is suddenly seeming to put to trial family relationships, by forcing spouse-side relations to share the details of entities owned by the spouse’s family – even when they have no stake or involvement in the listed company. Those entities will now have to be disclosed as a part of the “promoter group” entities of either family.

This definition has been there ever since in the ICDR Regulations, but the instant focus on the definition springs from SEBI FAQs dated April 23, 2025, on the disclosure of the entity forming part of the promoter group in terms of regulation 31(4) of LODR Regulations. This FAQ, being no. 19, assumes effect for the shareholding pattern due to be filed for the quarter ending June 2025 and onwards, and requires listed companies to disclose the names of all “promoter group” entities, irrespective of whether such persons or entities have any say or shares in the host company’s business.

Definition of Promoter Group

At the root of the issue lies in Regulation 2(1)(pp) of the ICDR Regulations, which defines “promoter group” to include “immediate relatives.” The term “immediate relatives” is further defined to include any spouse of that person, or any parent, brother, sister, or child of the person or of the spouse.

Spouse-side relations

The interpretational dilemma stems from the phrase “or of the spouse.” Does this qualify only the child of the spouse (the last relation mentioned), or extend to all relations of the spouse—i.e., the spouse’s parents, siblings, and children?

Spouse-side entities

The concern becomes more acute considering that any body corporate in which an immediate relative holds 20% or more equity must also be disclosed as part of the promoter group. If “immediate relative” includes all spouse-side relations, this leads to impractical over-disclosure –  stretching the PG list way too far.

Is it sensible, or practical?

Consider the scenario where members of two distinct listed business families marry. Should both families – and their associated entities – be classified as part of each other’s promoter group, despite having no shareholding, control, or influence? This interpretation seems to stretch both logic and intent.

While reclassification under Regulation 31A of LODR may later be used, the very inclusion appears misplaced from the outset.

An interpretation of convenience: limit it to the child of the spouse

A more reasonable interpretation is to read “or of the spouse” as qualifying only the child of the spouse. This interpretation aligns with cases like a step-child, who is more likely to be financially dependent or influenced by the promoter / the spouse of the promoter.

Similar definition in other sebi regulations

Note that this phrase “or of the spouse” has been used in other sebi regulations as listed hereunder:

As per Regulation 2(1)(pp) of ICDR Regulations,

(pp) “promoter group” includes:

i) the promoter;

ii) an immediate relative of the promoter (i.e. any spouse of that person, or any parent, brother, sister or child of the person or of the spouse); and

As per Regulation 2(l) of the Takeover Regulations

(l) “immediate relative” means any spouse of a person, and includes parent, brother, sister or child of such person or of the spouse;

As per Regulation 2(f) of PIT Regulations

(f) “immediate relative” means a spouse of a person, and includes parent, sibling, and child of such person or of the spouse, any of whom is either dependent financially on such person, or consults such person in taking decisions relating to trading in securities;

Same phrase, different uses

While the same phrase “or of spouse” is used across various SEBI Regulations for defining “immediate relative”, the implications differ depending on the regulatory context.

Regulation reference	Immediate context	Consequent impact
ICDR	The definition of promoter group includes immediate relatives	Promoter Group:   The list of promoter group does not end at listing out the immediate relatives. As per reg 2(1)(pp)(iv), all such entities where such immediate relative holds 20% stake of the equity share capital, also becomes part of the promoter group. In short, the longer the list of immediate relatives, the longer is the list of promoter group.   Related Parties   As per reg 2(zb) of LODR, all promoter and promoter group of a listed entity is a related party. Accordingly, this additional list of promoter group arising from spouse -side relations also becomes related party of the listed entity.
PIT Regulations	Immediate relative of the designated person (DP):   The definition of immediate relative in PIT is coupled with specific conditions of such relative being financially  dependent or consulting the DP for trading decisions	Such immediate relative is covered by the Code of Conduct to prevent insider trading in the securities of the listed entity and is required to comply with it.
Takeover Regulations	Immediate relatives are deemed to be ‘Persons acting in concert’ (PAC) with the promoter unless proven otherwise.	Transactions between the immediate relatives are exempted under regulation 10 of the Takeover Regulations.

While the purpose for each of the above may be different, however, the underlying regulatory rationale remains the same, i.e persons who are closely knit, by blood, marriage, or association (where there is commonality of objective and / or commonality of interest with the promoter group) –  any action with respect to shareholding in the listed company among such person / by one of them, is to be treated as the action by the same PG.

Judicial precedents

In the informal guidance provided to Promoters of D B Corp Ltd, in relation to transfer of shares between ‘immediate relatives, SEBI provided that –

f) Further, as per the definition of ‘immediate relative’ stated above such term shall also mean any spouse of a person and shall include brother of the spouse. Therefore, the proposed transfers at para 4(b) also appears to be between entities who are ‘immediate relative.

This confirms SEBI’s intent to include spouse-side relatives – at least under certain contexts.

Conclusion

The expansive reading of “immediate relatives” to include all spouse-side relations is neither practical nor justified – especially when it results in the inclusion of entities with no business connection to the listed entity. An interpretation that restricts this to the child of the spouse would better align with regulatory objectives, avoid unnecessary disclosures and preserve the relevance of the PG list. However, as the laws currently is – the literal reading warrants the expansive reading.

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Read our related resources on the subject matter below:

• “Immediate relatives” and not “relatives” for determining promoter group
• Yeh Rishta kya kahlaata hai! – the strange case of “promoters-in-law”
• NAME THEM ALL: SEBI reiterates mandatory disclosure of all promoter group entities in shareholding pattern, regardless of shareholding
• The triumphs and tribulations of being a promoter in listed entities
• SEBI revisits the concept of Promoter and Promoter Group
• Making one’s way out – Promoter & Promoter Group
• RPT resource centre