Securities and Exchange Board of India
CIRCULAR
SEBI/CFD/DI L/DIP/34/2009/24/09
February 24, 2009
To All Registered Merchant Bankers / Stock Exchanges
Dear Sirs,
Sub.: Amendments to SEBI (Disclosure and Investor Protection) Guidelines, 2000
1. In exercise of the powers conferred under sub-section (1) of Section 11 of the Securities and Exchange Board of India Act, 1992, SEBI has amended the SEBI (Disclosure and Investor Protection) Guidelines, 2000 (hereinafter referred to as “the SEBI (DIP) Guidelines”).The full text of amendments is given in Annexure I.
2. The salient features of the amendments are given in brief as under:
2.1 Enhancing the validity period of observations.
(a) The validity period of the observations issued by SEBI has been enhanced from the existing period of three months to twelve months. The benefit of extended validity period would be available in respect of all the observation letters whose validity period has not expired on December 4, 2008.
(b) Before opening of the issue, every issuer shall be required to file an updated offer document with SEBI, highlighting all changes made in the document.
(c) Where updation include significant changes in the offer document, such an updated Red herring prospectus/ prospectus or letter of offer shall be filed with SEBI at least one month before filing the same with Registrar of Companies or with Designated Stock Exchange as the case may be. The procedure for submitting such updated documents including what will constitute “significant changes”, “additional fees” etc will be specified by SEBI shortly.
2.2 Reduction in timelines for completion of bonus issues.
(a) At present, in terms of the SEBI (DIP) Guidelines, a listed company is required to complete a bonus issue within a maximum period of six months from the date of approval of the issue by the board of directors of the company.
(b) The DIP Guidelines have been amended to reduce the timeline for completion of bonus issues. Accordingly, where no shareholders’ approval is required as per the Articles of Association of the issuer, the bonus issue shall be completed within fifteen days from the date of the approval by the board of directors of the issuer in this regard. However, where shareholders’ approval is required for capitalisation of profits or reserves as per the Articles of Association of the issuer, the bonus issue shall be completed within sixty days from the date of the meeting of board of directors where-in bonus was announced subject to shareholders’ approval.
2.3 Announcement of price band.
(a) At present, the floor price or price band in an initial public offer through the book building process is required to be disclosed in the Red Herring Prospectus registered with the Registrar of Companies, before the issue opening date.
(b) The amended DIP Guidelines permit the issuer making an initial public offer to announce the floor price or price band after the date of registration of the Red Herring Prospectus with the Registrar of Companies, atleast two working days before the issue opening date.
(c) Further, where the floor price or price band is announced after the date of registration of the Red Herring Prospectus with the Registrar of Companies, every issuer making a public issue, whether initial public offer or further public offer, shall ensure wide dissemination of the floor price or price band through various means, including newspaper advertisement. While announcing the floor price or price band, the issuer shall also disclose details of the relevant financial ratios used for justification of the floor price or price band. In case of a price band, such financial ratios shall be calculated for both upper and lower end of the price band.
2.4 Amendments in provisions pertaining to Preferential Allotment.
2.4.1 Preferential allotment of warrants.
(a) At present, the SEBI (DIP) Guidelines provide that warrants can be allotted on preferential basis, subject to the allottees paying upfront, an amount equivalent to at least 10% of the price fixed, at the time of allotment of warrants. It has now been decided to enhance the upfront amount payable from 10% to 25%.
(b) Certain clarifications regarding lock-in requirements of instruments allotted on preferential basis have been made in clause 13.3.1(c) and (d) of the DIP Guidelines.
2.4.2 Non-applicability of certain provisions of Chapter XIII of the SEBI (DIP) Guidelines.
(a) It has been decided that an issuer, which has been granted relaxation by the Board in terms of regulation 29A of the SEBI (Substantial Acquisitions of Shares and Takeovers) Regulations, 1997, shall be exempted from certain provisions of Chapter XIII of DIP Guidelines, subject to the condition that in the explanatory statement to the notice for the general meeting of the shareholders, the issuer gives adequate disclosures about the details of the plan including the process proposed to be followed by it for identification of the allottees in addition to the disclosures required in other applicable laws.
2.5 Policy on relaxation from strict enforcement of rule 19(2)(b) of the Securities Contracts (Regulation) Rules, 1957 (SCRR).
(a) At present the SEBI (DIP) Guidelines provides for the policy regarding considering the requests for relaxation of the strict enforcement of requirements of rule 19(2)(b) of the SCRR where an unlisted company intends to list its shares issued to the shareholders of a listed company pursuant to a scheme of arrangement approved by a High Court, without making an initial public offer.
(b)The DIP Guidelines have now been amended to provide for the policy for considering relaxation from strict enforcement of requirements of rule 19(2)(b) of SCRR in case of proposal for listing of following securities by a listed issuer :-
(i) Equity shares with differential rights as to dividend, voting or otherwise, offered through rights or bonus issue.
(ii) Warrants issued along with Non Convertible Debentures through Qualified Institutions Placement.
3. Applicability.
3.1 The amendment made vide this circular shall be applicable as under:
a. Amendments to clause 15.1.7 shall be applicable to all those cases in which the resolution for approval of bonus issue is passed by the board of directors after date of the circular.
b. Amendments to clause 13.1.2.3 shall be applicable to all the cases where shareholders’ approval is obtained after the date of this circular.
c. The other amendments made vide this circular shall come into force with immediate effect.
4. All registered merchant bankers are advised to ensure compliance with the amendments contained in Annexure –I of this circular.
5. This circular and the entire text of the SEBI (DIP) Guidelines, including the amendments contained in Annexure-I of this circular, are available on SEBI website at www.sebi.gov.in under the categories “Legal Framework” and “Issues and Listing”.
Yours faithfully,
Neelam Bhardwaj
Encl.: As above.
