Aside from the challenging times, India’s major markets are hitting on a daily basis and are flooded with huge sums of money. This has seen the emergence of equitable donations over the past 12 months including the inclusion of written record records over the past few months. In their ongoing efforts to make the Indian trade more competitive, the Securities and Exchange Board of India (“SEBI”) has notified the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2021 (“ICDR Amendment”) . Following the ICDR Amendment, SEBI also reviewed some of the requirements for post-IPO (one of the oldest requirements of SEBI), as well as the concept of a group of promoters and group companies under the Securities and Exchange Board of India (Demands. Finance and Disclosure) Regulations, 2018, as amended ("ICDR Regulations").
Some of the key highlights of the ICDR amendment are as follows:
Reduction of lock time for organizers and people other than organizers
In the past, in the event of a first public offering (“IPO”), 20% of the shares offered after the offer (“low donor offer”) had to be held authorized by the promoters (alternatively) and had to be closed for three years from the date of commencement of production or from on the date of IPO allocation, whichever followed. In addition, stocks held by promoters, in addition to low incentives and all other shareholders prior to the Company's IPO (with the exception of employees with shares in the acquisition of ESOPS) were required to be detained for a period of one year from the date of IPO allocation. The requirement was to ensure a ‘skin in the game’, especially for fundraising companies that raise public funds to fund a project or greenfield projects; and has been a staple in major Indian markets for more than 20 years.
However, SEBI sees no need (and should) continue with this difficult requirement, especially given the generation and evidence of companies reaching large markets through the IPO in recent times, the presence of institutional investors before the listing of these companies, promoters have shown 'skin in the game'. several years prior to the listing, the type of expenditure incurred on the IPO and various other checks and balances (such as the involvement of the monitoring agency in case the size of the new issuance exceeds Rs. 100 crore, take the opportunity to challenge the shareholders of the issuing company in the event of differences, etc.). Therefore, the closing time for lower promoter contributions and shares in excess of the lower incentive contribution held by promoters has now been reduced to 18 months and six months from the date of IPO allocation, respectively. In that case, when the IPO involves new issuance of shares and most of the proceeds from the new issue are intended to be used for public purposes (including public works, mixed commodities, land acquisition, construction and investment and equipment, etc.).
Apart from the above, former people other than promoters were required to close their pre-IPO for one year from the date of IPO allocation, and start-up funds / other Phase I or Phase II investments / foreign investors (“Identified Investors”) they are exempt from this requirement as long as the financial shares are held by them for a period of one year from the date of purchase. SEBI has now reduced the detention period for non-promoters and the detention period for Identified Investors to six months.
Reduced closure times will make the Indian capital market more attractive to companies led by institutional investors, who may have had some concerns about hitting public markets and closures long afterwards. This will not only allow for faster access to finance, post listings, but also greater flexibility in line with other authorities. Therefore, this amendment is timely and effective.
Modification of the Promotion Group Description
Previously, in the case of a promoter of a corporate fundraising company, then any body corporation (say 'A') in which a group of people or companies or its affiliates operating a concert (“Investment Group”) held 20% or more of Equal Share Stock in A, and such investors also hold 20% or more of the company's share capital and work in concert, A himself will be part of the 'encouraging group' of the issuing company. For example, if there is a group of financial investors (i.e. A, BC), who work jointly and severally own 20% or more of the (i) investment company (ie X), and (ii) the issuing company to make an IPO, then- then X will be identified as a promotional group in the issuance document of the issuing company. This often leads to companies not affiliated with regular financial investors being identified as one of the ‘facilitators’ of each other. SEBI also feels that capturing investor capture information can be a daunting task and may not provide meaningful information to investors. It has also been reported that once the issuer company is registered, it can be very effective to identify and disclose organizations related to group transactions related. Therefore, SEBI has now abolished this requirement in order to balance the disclosure burden and comply with the disclosure requirements for listing.
This amendment will remove the pain point in companies with regular financial investors and f
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