Analysis of Amendments to SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 [ICDR Regulation]
SEBI has, 12 November 2010, amended ICDR Regulation. The salient features of the amendments are inter alia as under:
Definition of ‘Qualified institutional buyer’ and ‘Retail individual investor’
• Insurance funds set up and managed by the Department of Posts, India have been given the status of Qualified Institutional Buyers [QIBs]. Accordingly, Postal Life Insurance Fund and Rural Postal Life Insurance Fund would now be recognized as QIB.
• Monetary limit on bid / application money has been increased from Rs. 100,000 to Rs. 200,000 as under for recognition as:
- “retail individual investor” – in case of new listing and
- “retail individual shareholder” i.e. a shareholder of a listed issuer irrespective of value of equity shares already held in the listed issuer
Public announcement with regard to filing Draft Offer Document [DOD] with SEBI
Issuer shall either on the date of filing the DOD with SEBI or on the next day, make a public announcement in the newspapers that it has filed DOD with SEBI and invite public to give their comments to SEBI in respect of disclosures made in the DOD.
SEBI has extended the exemption from making arrangements for the monitoring of the use of proceeds of the issue by the monitoring agency to an offer for sale or an issue of securities made by an insurance company.
Conditions for initial public offer [IPO]
SEBI has modified the condition of making IPO. No Issuer company can make an IPO if it has any outstanding convertible securities or other rights which entitles any person with an option to receive equity shares. Earlier issuer company was required to convert convertible securities before the date of registering the prospectus with ROC. Now such conversion has to be done on or before the date of filing of Red Herring Prospectus (in case of book-built issues) or the Prospectus (in case of fixed price issues) with SEBI.
Payment options for all investors
Issuer shall give only one payment option out of the following to all the investors –
a) part payment on application with balance money to be paid in calls (after taking necessary regulatory approvals); or
b) full payment on application.
Submission of Compliance certificate by the Merchant Banker
Merchant banker shall submit a compliance certificate in the prescribed format for the period between the date of filing the DOD with SEBI and the date of closure of the issue, in respect of news reports appearing in any of the following media:
b) major business magazines;
c) print and electronic media controlled by a media group where the media group has a private treaty / shareholders’ agreement with the issuer or promoters of the issuer.
Eligibility criteria for allotment of securities under Preferential issue to promoter and promoter group
• It is clarified that promoter and promoter group will not be eligible for allotment of specified securities under preferential issue if any person belonging to promoter or promoter group has sold the equity shares of the issuer company during 6 months preceding the relevant date.
• Where any person belonging to promoter or promoter group has previously subscribed to warrants of the issuer company but has failed to exercise the warrants, the promoter will not be eligible for allotment of specified securities under preferential issue for a period of 1 year from (i) the date of expiry of the tenure of the warrants due to non exercise of the option to convert; or (ii) the date of cancellation of the warrants as the case may be.
SEBI has made following amendments to ICDR regulations in relation to insurance companies:
• Exemption from appointment of monitoring agency for issue size above Rs. 5 billion
• Disclosure of disclaimer clause of Insurance Regulatory and Development Authority [IRDA] in the offer documents.
Amendment in disclosure requirements
SEBI has made prescribed additional disclosures in red herring prospectus, shelf prospectus and prospectus and formats of advertisements for public issue, which inter alia include following:
• Details of current and past directorship in listed companies whose shares have been / were suspended from being traded on the BSE / NSE or delisted from any stock exchange(s).
Above details shall be given with respect to a period of 5 years prior to date of filing of DOD and should be updated at the time of filing the Red Herring Prospectus. In case of offer documents for fast track issues, the period of 5 years shall be prior to the date of filing of prospectus with the ROC.
• Proforma Financial Statements containing prescribed information certified by the statutory auditor.