Relaxations and Amendments to SEBI ICDR Regulations

Rights Issue

In light of the COVID-19 pandemic, SEBI has, by way of its Circular dated May 6, 2020, provided certain relaxations under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (‘SEBI ICDR Regulations’) in relation to rights issues. Some of the key relaxations are as follows:

i.   Failure to adhere to requirements in relation to (a) dispatch of abridged letter of offer, application form, and other issue related material through registered or speed post, and (b) publication of issue related advertisements, will not be treated as non-compliance, and the same may be dispatched or issued electronically, subject to the specified conditions; and

ii.   In terms of SEBI Circular dated January 22, 2020, SEBI introduced dematerialized rights entitlements (‘REs’). Further, physical shareholders are required to provide their demat account details to the issuer or the registrar for credit of REs. In view of the COVID-19 pandemic, in case the physical shareholders who have not been able to open a demat account or are unable to communicate their demat details to the issuer/ registrar for credit of REs within specified time, such physical shareholders may be allowed to submit their application for the rights issue, subject to the specified conditions.

Fast Track Further Public Offer

In light of the COVID – 19 pandemic, SEBI by way of Circular dated June 9, 2020 has provided temporary relaxations to the eligibility conditions for fast track further public offer (‘FPO’) prescribed under the SEBI ICDR Regulations, which is applicable to FPOs that open on or before March 31, 2021. These relaxations are not applicable on issuance of warrants. Some of the key relaxations are as follows:

i.     The requirement of average market capitalisation of public shareholding of the issuer is now reduced to Rs 500 crore as opposed to Rs 1,000 crore;

ii.   In cases where show cause notices have been issued under adjudication proceedings by SEBI against the issuer or its promoters or whole-time directors as on the reference date, such issuers will now be eligible to apply in a fast track FPO, subject to certain specified conditions;

iii.  The issuer, its promoters, promoter group or the directors who have fulfilled the settlement terms or adhered to the directions of the settlement order issued by SEBI through the consent or settlement mechanism, are now eligible to participate; and

iv.   If the financial statements of the issuer, as disclosed in the offer document, consist of any audit qualifications, such issuer can include the restated financial statements in the offer document, adjusting the impact of these audit qualifications. If the impact of such audit qualifications cannot be ascertained, the same will have to be disclosed appropriately in the offer document.

Qualified Institutions Placements

SEBI by way of its Notification dated June 16, 2020, has amended Regulation 172(3) of the SEBI ICDR Regulations to reduce the time period between two consecutive qualified institutions placements by listed entities from 6 months to 2 weeks.

Published In:Inter Alia - Quarterly Edition - June 2020 [ English Chinese japanese ]
Date: June 30, 2020