pri SEBI Issue of Capital and Disclosure Requirements (ICDR) Regulations 2009 SEBI Issue of Capital and Disclosure Requirements (ICDR) Regulations 2009

The Securities and Exchange Board of India is turning a stricter eye on company promoters who have been issued preferential warrants, saying that they will have to forfeit the upfront payment made on unexercised warrants.This is contained in its recently notified Issue of Capital and Disclosure Requirements (ICDR) Regulations 2009 , which SEBI made public on Thursday 3rd September 2009.

These regulations replace the Disclosure and Investor Protection (DIP) Guidelines 2000 that now stand rescinded.

In the matter of preferential warrants, SEBI’s new norms are probably meant to contain the situation following January 2008, when the stock market crash brought the price of several shares below the warrant exercise price for promoters, several of whom decided not to exercise their warrants in full. Promoters will now have to be more careful, as their upfront payment made only against exercised warrants will now be adjusted, said an expert familiar with regulatory matters.

The ICDR Regulations have been primarily created by conversion of the SEBI (Disclosure and Investor Protection) Guidelines 2000, a SEBI circular said.

Tighter norms

SEBI has made some alterations in the matter of group companies; if the promoter of a debarred company is also a promoter, director or person in control of any other company, even that company would now be barred from accessing the capital markets.

The new norms also ban firm allotment to privileged people, who generally used to be relatives, associates or friends of promoters or promoters’ group. Even these categories have to apply through the regular process. Promoters with majority shareholding in a listed company can offer shares to the public straightaway.

This would help the Government, as it is keen on disinvestment opportunities.

Only promoters whose identity, photograph, etc., are disclosed in the offer document shall be recognised as ‘promoters’.

Public Issues

“With the notification of the regulations, there will be a credible and stable framework for disclosure and investor protection, which would go a long way in streamlining the process of issue of capital,” an expert familiar with SEBI matters said. According to the new ICDR Regulations, the allotment/refund period in public issues has been reduced to 15 days for both fixed-price and book-built issues.

The new regulations have also removed the exemption available to banking companies for IPOs; these companies had until now enjoyed exemptions on norms such as track record, minimum tangible assets, distributable profits, etc.The issue period for infrastructure companies has been brought on a par with that for other companies, and is now down to 10 days from 21.

As institutional and mutual funds have a separate window for allotment through QIPs now, SEBI has removed mandatory firm allotment to them as it has become redundant.However, a shareholder of a listed company whose group/sister concern is coming out with IPO, will have a special reservation window.“The ICDR Regulations would empower the regulator to deal with non-compliance with appropriate enforcement actions, which would be legally sustainable,” said a legal expert.

Some provisions under the earlier DIP guidelines (now rescinded) have been incorporated in the equity listing agreement. In the case of follow-on offers SEBI has introduced a sub-clause to Clause 19 in the equity listing agreement, saying a minimum 48-hour intimation should be given to the bourses of any proposed Board meeting for determination of issue price. Earlier Clause 19 was about prior notification to the stock exchanges, while it directed companies to give 7 days’ prior notification to stock exchanges in case of buyback of securities, declaration/recommending of Dividends, Rights Issue, Issue of Convertible Debentures.

Download Issue of Capital and Disclosure Requirements (ICDR) Regulations 2009

Download Notification of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009

New Guidelines

Description New Norms Existing Norms
Book Building Process 100% of Issue Size Book Building Process through 75% or 100% of Issue size
Allotment – Refund period in Public issues 15 days for both fixed price and book built issue 30 days for fixed price issue and 15 days for book-built issues
Disclosure of Price or Price band Not required to be disclosed in draft prospectus Required in draft prospectus in case of fixed price Public issues
Issue period in case of Public issues Total issue period not to exceed 10 days, including any revision in price band Issue period not clear in case of revision of Price band in book-built public issues.
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