SEBI Introduces Changes to Capital Issuance and Disclosure Standards On May 17, 2024, the Securities and Exchange Board of India (SEBI) announced amendments to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, through the SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2024. These amendments are designed to ease the Initial Public Offering (IPO) process for companies, offering more flexibility and accommodating unforeseen circumstances.
Overview of Key Amendments
- Simplified Criteria for Offer for Sale (OFS): The amendments simplify the criteria for changes in the size of the OFS. Companies now need to refile based on changes either in the issue size in rupees or the number of shares, but not both. This modification aims to reduce the administrative burden on issuers.
- Increased Flexibility in Minimum Promoter Contribution (MPC):
- Promoter group entities and non-individual shareholders holding more than 5% of post-offer equity are now allowed to contribute to the MPC shortfall without being categorized as promoters.
- Equity shares derived from the conversion of compulsorily convertible securities held for at least one year prior to the filing of the Draft Red Herring Prospectus (DRHP) are now recognized towards fulfilling the MPC.
- Adjustments for Force Majeure Events:
- In the case of force majeure events, such as banking strikes, the bid closing dates can now be extended by a minimum of one day, a reduction from the previously mandated three days. This change aims to provide issuers with the ability to manage their IPO timelines more effectively during disruptions.
Impact of the Regulatory Changes These amendments are part of a broader effort by SEBI to streamline the regulatory framework governing IPOs under the Issue of Capital and Disclosure Requirements (ICDR) rules. By simplifying the OFS criteria and offering more pragmatic approaches to meeting the MPC, SEBI is facilitating a smoother and more flexible IPO process for companies. Additionally, the adjustments for force majeure events ensure that companies are better equipped to handle unexpected disruptions during critical fundraising activities.
These regulatory enhancements reflect SEBI’s commitment to promoting an efficient capital market environment, thereby supporting the growth and dynamism of the Indian economy.
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