SEBI vide Circular No. SEBI/HO/CFD/DIL2/CIR/P/2020/78 dated 06th May, 2020 has issued Circular titled ‘Relaxations relating to procedural matters – Issues and Listing’ by which SEBI has granted the following one time relaxations from strict enforcement of certain regulations of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations), pertaining to Rights Issue opening upto July 31, 2020:
| Regulation(s) | Compliance Particulars | Relaxations | Other Conditions |
| 77(2) of the ICDR Regulation | Service of the abridged letter of offer, application form and other issue material to shareholders may be undertaken by electronic transmission | Failure to adhere to modes of dispatch through registered post or speed post or courier services due to prevailing Covid-19 related conditions will not be treated as non-compliance during the said period. | the issuers shall publish the letter of offer, abridged letter of offer and application forms on the websites of the company, registrar, stock exchanges and the lead manager(s) to the rights issue. |
| 84(1) of the ICDR Regulation | Advertisement shall contain additional details as regards the manner in which the shareholders who have not been served notice electronically may apply | The issuer may have the flexibility to publish the dispatch advertisement in additional newspapers, over and above those required in Regulation 84. | The advertisement should also be made available on the website of the Issuer, Registrar, Lead Managers, and Stock Exchanges. The Issuer shall make use of advertisements in television channels, radio, internet etc. to disseminate information relating to the application process. |
| SEBI circular dated January 22, 2020, SEBI introduced dematerialized rights entitlements (REs). | physical shareholders are required to provide their demat account details to Issuer/ Registrar to the Issue for credit of REs | Relaxations:
in case the physical shareholders who have not been able to open a demat account or are unable to communicate their demat details, may be allowed to submit their application subject tofollowing conditions: a) Issuer along with lead manager(s) and other recognized intermediary shall institute a mechanism to allow physical shareholders to apply in the rights issue and shall ensure to take adequate steps to communicate b) Such shareholder shall not be eligible to renounce their rights entitlements. c) Such physical shareholders shall receive shares, in respect of their application, only in demat mode |
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| Regulation 76 of the ICDR Regulations | an application for a rights issue shall be made only through ASBA facility | Relaxations:
the issuer shall along with lead manager(s) to the issue, the registrar, and other recognized intermediaries [as deemed fit by issuer and lead manager(s)] institute an optional mechanism (non- cash mode only) to accept the applications of the shareholders subject to ensuring that no third party payments shall be allowed in respect of any application. |
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| all offer documents filed until July 31, 2020 | Relaxations:
a) Authentication/ certification/ Undertaking(s) in respect of offer documents, may be done using digital signature certifications. b) The issuer along with lead manager(s) shall provide procedure for inspection of material documents electronically |
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In respect of mechanisms as stated under SEBI circular dated January 22, 2020, SEBI introduced dematerialized rights entitlements (REs)and Regulation 76 of the ICDR Regulations, the issuer alongwith Lead Manager(s)shall ensure the following:
- The mechanism(s) shall only be an additional option and not a replacement of the existing process.
- The mechanism(s) shall be transparent, robust and have adequate checks and balances.
- It should aim at facilitating subscription in an efficient manner without imposing any additional costs on investors.
- The issuer along with lead manager(s), and registrar shall satisfy themselves about the transparency, fairness and integrity of such mechanism.
- An FAQ, online dedicated investor helpdesk, and helpline shall be created by the issuer company along with lead manager(s) to guide investors in gaining familiarity with the application process and resolve difficulties faced by investors on priority basis.
- The issuer along with lead manager(s), registrar, and other recognized intermediaries (as incorporated in the mechanism) shall be responsible for all investor complaints.
About Author: CS Lalit Rajput – Partner, Xcede Consultech LLP – Email id: [email protected]
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