Regulatory updates

SEBI held its Board Meeting on 15 March 2024. Some of the key proposals which got approved are discussed below:

• Facilitating ease of doing business for companies desirous of raising funds/IPO: SEBI approved following amendments to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (the ICDR Regulations):

• Doing away with the requirement of one per cent security deposit in public/rights issue of equity shares
• Promoter group entities and non-individual shareholders holding more than five per cent of the post-offer equity share capital to be permitted to contribute towards Minimum Promoters’ Contribution (MPC), without being identified as a promoter
• Equity shares from the conversion of compulsorily convertible securities held for a year before filing the Draft Red Herring Prospectus (DRHP), to be considered for meeting the MPC requirement
• The increase or decrease in the size of Offer For Sale (OFS) requiring fresh filing should be based on only one of the criteria, i.e., either issue size in rupees or number of shares, as disclosed in the draft offer document
• Flexibility in extending the bid/offer closing date on account of force majeure events by minimum one day instead of the present requirement of minimum three days.

• Proposals for on-going compliance requirements for listed companies: SEBI approved certain amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the LODR Regulations) with respect to:

• Market capitalisation-based compliance requirements for listed entities should be determined on the basis of average market capitalisation of six months ending 31 December, instead of single day’s (31 March) market capitalisation. Further, a sunset clause of three years for cessation of applicability of market capitalisation-based provisions has also been approved
• The timeline for filing up vacancies of Key Managerial Personnel (KMP) (requiring approval of statutory authorities) to be extended from three months to six months.
• Timeline for prior intimation of Board Meetings to be reduced to two working days.
• The maximum permitted time gap between two consecutive meetings of the Risk Management Committee to be increased from 180 days to 210 days, so as to provide flexibility to listed entities to schedule the meetings.

• Uniform approach to verification of market rumours by equity listed entities: SEBI approved the following approach for verification of market rumours by equity listed entities:

• Specifying an objective and uniformly assessed criteria for rumour verification in terms of material price movement of equity shares of the listed entity
• Considering unaffected price for transactions, wherever pricing norms have been prescribed under the SEBI Regulations (provided that the rumour pertaining to such transaction has been confirmed within 24 hours from the trigger of material price movement)
• Promoters, directors, KMP and senior management to provide timely response to the listed entity for verifying market rumour
• Unverified event or information reported in print or electronic media not to be considered as ‘generally available information’ under the SEBI (Prohibition of Insider Trading) Regulations, 2015.

• Extension of timeline for mandatory applicability of listing norms for High Value Debt Listed Entities (HVDLEs): SEBI approved the proposal to extend the timeline for mandatory applicability of listing norms (i.e., Regulation 16 to 27 of the LODR Regulations) for HVDLEs till 31 March 2025.

• Ease of business for Foreign Portfolio Investors (FPIs): The following proposals have been approved by SEBI for ease of business for FPIs:

• Additional disclosure requirements exempted for certain FPIs: In August 2023, SEBI vide a circular had mandated FPIs fulfilling certain criteria to disclose on a granular basis details of all entities holding any ownership, economic interest, or exercising control in the FPI, on a full look through basis, up to the level of all natural persons, without any threshold. However, for ease of doing business, SEBI in its board meeting has now approved a proposal to exempt additional disclosure requirements for FPIs having:

• More than 50 per cent of their India equity Asset Under Management (AUM) in a single corporate group, after excluding its holding in the parent company with no identified promoter, and
• The composite holding of all such FPIs (that hold greater than the 50 per cent concentration criteria and are not exempted) in the company with no identified promoter, is less than three per cent of its total equity share capital.

• Relaxed timelines for disclosures of material changes: Earlier (prior to this change), FPIs were required to disclose any material change in its structure or ownership or control or investor group within seven working days . However, SEBI, in its board meeting now requires FPIs to notify changes in two buckets:

• Flexibility in dealing with securities post expiry of registration: SEBI has approved flexibility measures for FPIs in dealing with the securities post expiry of their registration, which includes providing timeline for reactivating registration within 30 days of expiry if it is due to non-payment of registration fee and providing for additional time period for disposal of securities.

• Amendments for ease of doing business for Alternative Investment Funds (AIFs): SEBI has accepted the following proposals for ease of doing business for AIFs:

• Encumbrance on equity of investee companies in the infrastructure sector: SEBI approved the proposal to allow Category I and Category II AIFs to create an encumbrance on the equity of its investee companies in the infrastructure sector³ Companies in the infrastructure sector are such companies which are engaged in the business of development, operation or management of projects in any of the infrastructure sub-sectors listed in the Harmonised Master List of Infrastructure sub-sectors, as issued by the Government of India., in order to facilitate raising of debt/loan by such investee companies.
• Due diligence process: SEBI also approved a proposal to require AIFs, their managers and KMPs, carry out specific due diligence of their investors and investments. This has been done to ensure that the verifiable compliance with such due-diligence requirements provide the regulatory comfort necessary for the introduction of other ease of doing business proposals relating to AIFs.
• Guidelines for unliquidated investments: AIFs have now been allowed to deal with unliquidated investments (which are not sold due to lack of liquidity during the winding up process), by continuing to hold such investments in the same scheme of the AIF and entering into a dissolution period The new facility of entering into dissolution period has been introduced in place of the existing option of launching a new scheme, i.e., the liquidation scheme.

---

To access the text of the proposals approved, please click here