Thursday, June 25, 2015

SEBI proposes to reduce listing time by half and relax listing norms for startups

The SEBI has taken a number of key policy decisions in its Board meeting held on June 23, 2015. This includes streamlining the process of public issues,simplifyingthe framework of raising capital bystart-ups and other companies, etc.Key decisions taken in board meeting are enumerated here under:

1)Reduction ofIPO timeline: SEBI has proposed to reduce the time as required between listing and closing of an initial public offering (IPO) by half, i.e., from T+12 days toT+6 days.

2)SEBI does away with requirement of issuing cheques for IPO: SEBI mandatesfiling of Application Supported by Blocked Amount (ASBA) applications. It does away with requirement of issuing cheques for IPO. All investors, including retail ones, will now have to come in through the ASBA route.

ASBA route enables the investors to give an authorization of payment of application money in the form itself.Application made through ASBA route also ensures hassle-free of refund, if any,payable by the issuer.

3)Simplified framework for raising of capital by start-ups: Now start-up companies would be able to raise capital through Institutional Trading Platform (ITP), the platform will be accessible to:

i.Companies which are intensive in their use of technology, information technology, intellectual property, data analytics, bio-technology andnano-technology. [If these companies provides products, services or business platforms with substantial value addition and with at least 25% of the pre-issue capital being held by QIBs] or;

ii.Any other company in which at least 50% of the pre-issue capital is held by QIBs.

4)Fast Track Issuances - Follow on Public Offerings and Rights Issues: In order to enable more number of listed companies to raise further capital using fast-rack route, SEBI approved the proposal to reduce the minimum public holding requirement from Rs 3,000 to Rs 1,000 crore in case of Follow on Public Offerings (FPOs) and Rs.250 crore in case of rights issue.

5)Re-classification of Promoters as Public: SEBI has decided to provide proper framework for addressing the issue relating to reclassification of promoters in listed companies under various circumstances. Now an existing promoter of a listed entity may cease to be a promoter and/or re-classify itself as public in the following circumstances, on compliance with conditions stated there under:

i.Pursuant to change in promoter:

a)When a new promoter replaces the previous promoter subsequent to an open offer or in any other manner, re-classification shall be permitted subject to approval of shareholders in the general meeting.

b)Shareholders need to specifically approve whether the outgoing promoter can hold any Key Management Personnel (“KMP”) position in the company. In any case, the outgoing promoter may not act as KMP for a period of more than 3 years from the date of shareholders’ approval.

c) The outgoing promoter cannot hold more than 10% shares of the company.

ii.In case of transmission/succession/inheritance, the inheritor shall be classified as promoter.

iii.Existing promoters may be re-classified as public in case the company becomes professionally managed and does not have any identifiable promoter