Gist of decisions taken at the SEBI board meeting held on 6th August, 2021
- The Board decided to relax the lock-in requirements as follows:
i. The lock-in of promoters shareholding to the extent of minimum promoters contribution (i.e. 20% of post issue capital) shall be for a period of eighteen months from the date of allotment in initial public offering (IPO)/further public offering (FPO) instead of existing three years, in the following cases:
a) If the object of the issue involves only offer for sale
b) If the object of the issue involves only raising of funds for other than for capital expenditure for a project (more than 50% of the fresh issue size)
c) In case of combined offering (Fresh Issue + offer for sale), the object of the issue involves financing for other than capital expenditure for a project (more than 50% of the issue size excluding OFS portion)
Further, in all the above mentioned cases, the promoter shareholding in excess of minimum promoter contribution shall be locked-in for a period of six months instead of existing one year.
ii. The lock-in of pre-IPO securities held by persons other than promoters shall be locked-in for a period of 6 months from the date of allotment in IPO instead of existing 1 year. The period of holding of equity shares for Venture Capital Fund or Alternative Investment Fund (AIF) of category I or Category II or a Foreign Venture Capital Investor shall be reduced to 6 months from the date of their acquisition of such equity shares instead of existing 1 year.
A SEBI consultation paper dated May 11, 2021 had provided detailed rationale for the reduction in lock-in period such as demonstration of skin in the game by promoters, existence of private equity firms and AIFs several years before proposing listing, much less greenfield financing through IPOs, etc.
- The Board further decided to approve the following measures to reduce the disclosure requirements at the time of IPO:
i. The definition of promoter group shall be rationalized, in case where the promoter of the issuer company is corporate body, to exclude companies having common financial investors.
ii. The disclosure requirements in the offer documents, in respect of Group Companies of the issuer company, shall be rationalized to, inter-alia, exclude disclosure of financials of top 5 listed/unlisted group companies. These disclosures will continue to be made available on the website of the group companies.
- The Board also agreed in-principle to the proposal for shifting from the concept of promoter to ‘person in control’ or ‘controlling shareholders’ in a smooth, progressive and holistic manner. To this effect, the Board, advised SEBI to:
a) engage with other regulators to ascertain and resolve regulatory hurdles, if any.
b) prepare draft amendments to securities market regulations and analyse impact of the same.
c) further deliberate at the PMAC and develop a roadmap for implementation of the proposed transition.
The Board noted that investor landscape is now changing, with private equity and institutional investors holding significant shareholding in listed companies. In recent years, number of businesses and new age companies with diversified shareholding and professional management that are coming into the listed space are non-family owned and/or do not have a distinctly identifiable promoter group. Further, there is increasing focus on better corporate governance with responsibilities and liabilities shifting to the board of directors and management.
The SEBI consultation paper dated May 11, 2021 captures in detail the drivers for revisiting the concept of promoter