“Immediate relatives” and not “relatives” for determining promoter group

Limiting the ever expanding scope of PG by excluding children-in-law

Nitu Poddar, Partner | Nitu@vinodkothari.com

The definition of “promoter-group” in ICDR Regulations, though longstanding, has been into the highlights lately post the SEBI FAQ dated April 25, 2025 which have reiterated the provisions of Reg 31(4) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’) requiring the listed companies to provide the list of all promoter / promoter group (‘P/ PGs’) in the shareholding pattern (‘SHP’) irrespective the shareholding in the company. 

While India Inc is still struggling with the practicality of collating the list of PGs arising from spouse-side immediate relatives and entities controlled by them, another practical issue to be fixed in the definition is the use of the term “relative” in the context of HUFs and firms

Issue – Overreach of the definition of “relatives” 

Item A and C of Reg 2(1)(pp)(iv) of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (‘ICDR Regulations’) pulls in the following entities in the PG list:

• Body corporates in which HUFs and Firms – in which the “relatives” of promoters are members – hold ≥ 20% of equity share capital. 
• Any body corporate in which such body corporate (as described above) holds  ≥ 20% of equity share capital.
• HUFs and Firms where the “relatives” of promoters are holding ≥ 20% of total capital.

The key concern arises from the definition of “relatives” as per section 2(77) of Companies Act, 2013 which is wider than the definition of “immediate relatives” as per reg 2(1)(pp)(ii) of ICDR Regulations. 

• The former includes spouses of the children (bahu and damad) who are not included in the definition of immediate relatives. 
• Also, all the co-parcerners of an HUF are relatives u/s section 2(77) of Companies Act, 2013.

Consequence – Looping in non-PG entities as PG

This results in the inclusion of HUFs or firms where children-in-law or extended relatives are  holding ≥  20% of total capital as PG – even though these individuals (children-in-law) are not themselves promoters or immediate relatives under the ICDR framework.

Such interpretations expand the promoter group to cover entities indirectly connected through individuals not formally recognized as part of the promoter group, creating ambiguity in the definition.

Sensible interpretation – aligning with immediate relatives

To make sense of each clause of the definition of PG, in our view, the word “relative” in clause Item A and C of Reg 2(1)(pp)(iv) should be limited to “immediate relatives” as defined in sub-clause (ii) of reg. 2(1)(pp) of ICDR Regulations.

May refer to our related resource on the subject matter below:

• Yeh Rishta kya kahlaata hai! – the strange case of “promoters-in-law”
• No shares, no say, yet a promoter: How marital ties create fictional “promoter groups”
• 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