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The Securities and Exchange Board of India (SEBI), in its board meeting dated 25 November 2023 discussed the following key matters:

SEBI approved the proposal regarding flexibility in the framework for SSE. Some of the key provisions introduced to provide impetus to fund raising by Not for Profit Organisations (NPOs) on the SSE include:

  • Reduction in the minimum issue size in case of public issuance of Zero Coupon Zero Principal Instruments (ZCZP) by NPOs from INR1 crore to INR50 lakh
  • Reduction in minimum application size in case of public issuance of ZCZP by NPOs from INR2 lakh to INR10,000, thereby enabling wider participation of the subscribers (including retail investors)
  • Changing the nomenclature of ‘social auditor’ to ‘social impact assessor’, in order to provide comfort to NPOs and convey a positive approach towards the social sector
  • Permitting NPOs to disclose past social impact report in the fund raising document as per their existing practice (subject to disclosure of key parameters such as number of beneficiaries, cost per beneficiary and administrative overhead)
  • More entities (NPOs) to be made eligible for registration and fund raising through issuance and listing of ZCZP on SSE by permitting entities registered under Section 10(23C) and 10(46) of the Income Tax Act, 1961.

Action Points for Auditors

With the relaxations in the issue size and application size of ZCZP bonds, NPOs may consider tapping the capital market to fund their projects. Auditors of NPOs may discuss the updates with the management of the NPOs to understand their plans and further actions required thereon.

SEBI in its board meeting has approved amendments to SEBI (Real Estate Investment Trusts (REITs)) Regulations, 2014 in order to create a regulatory framework for facilitation of small and medium REITs. The small and medium REITs would have an asset value of at least INR50 crore vis-à-vis minimum asset value of INR500 crore for existing REITs.

Small and medium REITs would have the ability to create separate scheme(s) for owning real estate assets through special purpose vehicles constituted as companies.

In order to facilitate ease of compliance and to strengthen investor protection in AIFs, SEBI approved the following proposals pertaining to AIFs:

  • Any fresh investment made by an AIF, beyond September 2024, would be held in dematerialised form. The existing investments made by AIFs have been exempted from the said requirement, except in certain cases
  • The mandate for appointment of custodian would be extended to all AIFs. Currently, it is applicable to certain schemes of AIFs5 Currently, schemes of Category III AIFs and schemes of Category I and Category II AIFs with a corpus of more than INR500 crore are required to appoint a custodian. .

To access the text of minutes of the SEBI board meeting, please click here

Regulation 61A(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) provides that where interest/dividend/redemption amount has not been claimed within 30 days from the due date, a listed entity should within seven days from the date of expiry of the said period of 30 days, transfer the amount to an escrow account to be opened by the listed entity with a scheduled bank.

Further, Regulation 61A(3) of the LODR Regulations provides that any amount transferred to the escrow account and remaining unclaimed for a period of seven years should be transferred to:

  • In case of listed entities which are companies: To the Investor Education and Protection Fund (IEPF), and
  • In case of listed entities which are not companies: To the Investor Protection and Education Fund (IPEF).

In this regard, SEBI vide a circular dated 8 November 2023 has prescribed a framework for standardising the process of transfer of such unclaimed amounts and claim thereof by an investor. The circular provides the following:

  • Framework for transfer of unclaimed amounts by listed entities to escrow accounts and claim thereof by investors (Annex-A), and
  • Framework for transfer of unclaimed amounts from the escrow account of listed entity which is not a company to IPEF and claim thereof by the investors (Annex-B).

Effective Date: The circular would come into effect from 1 March 2024.

Interest on unclaimed amounts: Listed entities having unclaimed amounts in the escrow account for less than seven years, as on 29 February 2024 should start computing interest, as per the stipulated regulations from 1 March 2024.

Transfer to IPEF: For listed entities which are not companies and have unclaimed amounts in the escrow account for more than seven years, as on 29 February 2024, should transfer the same to IPEF, on or before 31 March 2024.

To access the text of the circular, please click here

Action Points for Auditors

In addition to the above circular, which is applicable to issuers of non-convertible securities, SEBI has also issued corresponding circulars for dealing with unclaimed amounts lying with Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). Auditors of such companies should bring these frameworks to the notice of the management.

To access the text of framework for REITs, please click here

To access the text of framework for InvITs, please click here

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