In a latest development, Sebi’s board has approved a series of measures, which make it easier for startups to go public, introduced new norms that make delisting of shares more transparent apart from host of other benefits. Please read the article to know about the new initiative about start-ups.
New measures of SEBI board
The Securities and Exchange Board of India (Sebi) has approved a series of measures including more transparent and efficient delisting of shares, reporting of sustainability issues by companies and provisions to make it easier for startups to go public.
The market regulator also mandated public disclosure of analyst calls, quick reporting of earnings, and expanded the requirement of setting up a Risk Management Committee to the top 1,000 listed companies by market capitalisation from the existing to 500 listed entities on a meeting held on March 25.
Under the new norms, a promoter or acquirer will have to disclose the intention to delist by making an initial public announcement. A committee of Independent Directors will have to give “reasoned recommendations” on the proposal for delisting.
It has also introduced/revised timelines for various activities involved in delisting, and said a promoter/acquirer can specify an indicative delisting price, which should not be less than the floor price.
The promoter will be bound to accept the price discovered through reverse book building if it is the equal to the floor price/indicative price. Promoters don’t need to specify an indicative price under current regulations.
Perfect Growth Platform
The amendments have been made as per stakeholders recommendations for Innovators Growth Platform. It made amendments after analysing comments on the discussion paper it issued in November last year. It cut down time period for issuers to have 25 percent of pre-issue capital held by eligible investors from 2 years to one year for eligibility requirements which was major demand from startups.
Other measured taken by regulator include renaming Accredited Investor for the purpose of IGP is renamed as ‘Innovators Growth Platform Investors’. Currently, pre-issue shareholding of such investors for meeting eligibility norms, is considered for only 10%, which is now increased and shall be considered for the entire 25% required for meeting eligibility norms.
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Current IGP provisions do not allow discretionary allotment by the issuer company. “It has been decided to allow Issuer Company to allocate up to 60% of the issue size on a discretionary basis, prior to issue opening, to eligible investors with a lock in of 30 days on such shares,” Sebi said.
Founders can do listing under IGP
Moreover, Sebi board has made provision of startups similar to main board companies. “Issuer companies which have issued Superior Voting Rights (SR) equity shares to promoters / founders shall be allowed to do listing under IGP framework.”
For IGP companies, Regulator has changed triggered point of open offer from 25 percent to 49 percent. However, irrespective of acquisition or holding of shares or voting rights in a target company, any change in control directly or indirectly over target company will trigger open offer.
Regulator has made soft regulations for startups. Currently, for a company not satisfying the conditions of profitability, net assets, net worth, etc., migration from IGP to Main Board requires a company to have 75% of its capital held by QIBs as on date of application for migration. This requirement is now reduced to 50%.
Business Responsibility and Sustainability Report
The Board has also decided to introduce new requirements for sustainability reporting by listed entities. This new report shall be called the Business Responsibility and Sustainability Report (BRSR) and shall replace the existing Business Responsibility Report (BRR).
The BRSR shall be applicable to the top 1000 listed entities (by market capitalization), for reporting on a voluntary basis for FY 2021 – 22 and on a mandatory basis from FY 2022 – 23.
The market regulator has addressed the asymmetry in information that arises after analyst meetings and conference calls conducted by listed companies.
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Sebi board has decided that companies to make audio/video recordings of such meetings available on their website and on stock exchanges within 24 hours of the occurrence of the event. Companies have to provide written transcripts of such meetings within five working days.
Review of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) In case of board meetings held for more than one day, the financial results shall be disclosed by listed entities within 30 minutes of end of the board meeting for the day on which the financial results are considered.
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