Relaxations from certain provisions of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 in respect of Further Public Offer (FPO’s)

Overview 

Securities and Exchange Board of India (SEBI) in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992, vide notification / Circular No. SEBI/HO/CFD/CIR/CFD/DIL/85/2020 issued and publish dated 09th June, 2020, has published “Relaxations from certain provisions of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 in respect of Further Public Offer”.

The Circular is issued to :

  • All Recognized Stock Exchanges and
  • All Registered Merchant Bankers

Previous Relaxations: (vide circular dated 21st April, 2020)

SEBI vide Circular no. SEBI/HO/CFD/CIR/CFD/DIL/67/2020 dated April 21, 2020 introduced temporary relaxation in eligibility conditions related to Fast Track Rights Issue.

Link: https://taxguru.in/sebi/sebi-relaxes-icdr-regulations-right-issues-opened-till-31-03-2020.html

Further Relaxations: (vide circular dated 09th June, 2020)

In view of the situation arising due to COVID-19 pandemic and extended lockdown period, it has been decided to provide similar relaxations in the eligibility conditions related to Fast Track Further Public Offer (FPO) as contained in the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations) as follows:

1. Following Regulations shall not apply if the issuer satisfies the conditions mentioned under Regulation 155 of ICDR Regulations for making a further public offer through the fast track route:

> Regulation 123 of SEBI (ICDR) Regulations: Filing of the draft offer document and offer documents

123. (1) Prior to making a further public offer, the issuer shall file three copies of the draft offer document with the concerned regional office of the Board under the jurisdiction of which the registered office of the issuer company is located, in accordance with Schedule IV, along with fees as specified in Schedule III, through the lead manager(s).

(2) The lead manager(s) shall submit the following to the Board along with the draft offer document:

a) a certificate, confirming that an agreement has been entered into between the issuer and the lead manager(s)

b) a due diligence certificate as per Form A of Schedule V;

c) in case of an issue of convertible debt instruments, a due diligence certificate from the debenture trustee as per Form B of Schedule V;

d) a certificate confirming compliance of the conditions specified in Part C of Schedule VI.

(3) The issuer shall also file the draft offer document with the stock exchange(s) where the specified securities are proposed to be listed, and shall submit to the stock exchange(s), the Permanent Account Number, bank account number and passport number of its promoters where they are individuals, and Permanent Account Number, bank account number, company registration number or equivalent and the address of the Registrar of Companies with which the promoter is registered, where the promoter is a body corporate.

(4) The Board may specify changes or issue observations on the draft offer document within a period of thirty days from the later of the following dates:

a) the date of receipt of the draft offer document under sub-regulation (1); or

b) the date of receipt of satisfactory reply from the lead manager(s), where the Board has sought any clarification or additional information from them; or

c) the date of receipt of clarification or information from any regulator or agency, where the Board has sought any clarification or information from such regulator or agency; or

d) the date of receipt of a copy of in-principle approval letter issued by the stock exchange(s).

(5) If the Board specifies changes or issues observations on the draft offer document, the issuer and the lead manager(s) shall carry out such changes in the draft offer document and shall submit to the Board an updated draft offer document complying with the observations issued by the Board and highlighting all changes made in the draft offer document before registering or filing the offer documents with the Registrar of Companies or the appropriate authority, as applicable.

(9) The lead manager(s) shall submit the following documents to the Board after issuance of observations by the Board or after expiry of the period stipulated in sub-regulation (4) of regulation 123 if the Board has not issued observations:

a) a statement certifying that all changes, suggestions and observations made by the Board have been incorporated in the offer document;

b) a due diligence certificate as per Form C of Schedule V, at the time of registering of the offer document;

c) a copy of the resolution passed by the board of directors of the issuer for allotting specified securities to promoters towards amount received against promoters’ contribution, before opening of the issue;

d) a certificate from a Chartered Accountant, before opening of the issue, certifying that

promoters’ contribution has been received in accordance with these regulations, accompanying therewith the names and addresses of the promoters who have contributed to the promoters’ contribution and the amount paid and credited to the bank account of the issuer by each of them towards such contribution;

e) a due diligence certificate as per Form D of Schedule V, in the event the issuer has made a disclosure of any material development by issuing a public notice.

> Relaxations with respect to Regulation 155 of ICDR Regulations

Existing  Regulations Revised as per this new circular
Regulation 155(c)

average market capitalisation of public shareholding of the issuer is at least One Thousand crore rupees in case of public issue

In regulation 155(c) the words ‘one thousand crore’ shall be read as ‘five hundred crore’
Existing Text:

Regulation 155(h) shall be read as under:

no show-cause notices have been issued or prosecution proceedings have been initiated by the Board and pending against the issuer or its promoters or whole-time directors as on the reference date;

SEBI has notified more provisions under this clause vide new Amendments.

Regulation 155(h) shall be read as under:

“no show-cause notices, excluding under adjudication proceedings, have been issued by the Board and pending against the issuer or its promoters or whole-time directors as on the reference date;

In cases where against the issuer or its promoters/ directors/ group companies,

i) a show cause notice(s) has been issued by the Board in an adjudication proceeding or

ii) prosecution proceedings have been initiated by the Board;

necessary disclosures in respect of such action (s) along-with its potential adverse impact on the issuer shall be made in the offer document

Existing Regulation:

Regulation 155(i)

issuer or promoter or promoter group or director of the issuer has not settled any alleged violation of securities laws through the consent or settlement mechanism with the Board during three years immediately preceding the reference date;

Regulation 155(i) shall be read as “the issuer or promoter or promoter group or director of the issuer has fulfilled the settlement terms or adhered to directions of the settlement order(s) in cases where it has settled any alleged violation of securities laws through the consent or settlement mechanism with the Board”
Existing Regulation:

Regulation 155 (l)

impact of audit qualifications, if any and where quantifiable, on the audited accounts of the issuer in respect of those financial years for which such accounts are disclosed in the letter of offer does not exceed five per cent. of the net profit or loss after tax of the issuer for the respective years

Regulation 155 (l) shall be read as “impact of audit qualifications, if any and where quantifiable, on the audited accounts of the issuer in respect of those financial years for which such accounts are disclosed, shall be appropriately disclosed and accounts accordingly restated, in the offer documents. Further, that for the qualifications wherein impact on the financials cannot be ascertained the same shall be disclosed appropriately in the offer documents.”

Key Points about this Circular:

1. Time Period: These temporary relaxations are applicable for FPOs that open on or before March 31, 2021.

2. Applicability of this circular: This circular shall come into force with immediate effect.

3. Non – Applicability of this Circular: The relaxations mentioned in this circular are not applicable for issuance of warrants.

Source:

https://www.sebi.gov.in/legal/circulars/jun-2020/relaxations-from-certain-provisions-of-the-sebi-issue-of-capital-and-disclosure-requirements-regulations-2018-in-respect-of-further-public-offer_46791.html

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