India's market regulator on Tuesday decided to simplify the framework for raising of capital by technological companies, streamline the process of public issues and fast track follow-on or rights issues.

 

 

 In a statement issued here, the Securities and Exchange Board of India (SEBI) said: "The Board undertook a review of the extant regulatory framework in the primary market and noted the suggestions of market participants on making the existing avenues for capital raising amenable for accommodating a larger number of start-up companies."

 

 Based on it, the SEBI approved various proposals to amend the regulations concerning the Institutional Trading Platform to make it accessible to companies intensive in their use of technology, information technology, intellectual property, data analytics, bio-technology, nano-technology to provide products, services or business platforms with substantial value addition.

 

 It said 25 percent of the pre-issue capital is to be held by qualified institutional buyers (QIB) or any other company in which at least 50 percent of the pre-issue capital is held by QIBs, and no person (individually or collectively with persons acting in concert) in such a company shall hold 25 percent or more of the post-issue share capital.

 

 SEBI said issue disclosure may contain only broad objects of the issue and there shall be no cap on amount raised for general corporate purposes.

 

 Further, the lock in of the entire pre-issue capital shall be for a period of six months from the date of allotment uniformly for all shareholders. 

 

 Companies intending to list on the proposed ITP, shall be required to file draft offer document with SEBI for observations, as provided in SEBI (ICDR) Regulations, 2009.

 

 According to SEBI, only two categories of investors – institutional and non-institutional investors other than retail individual investors can access the proposed ITP.

 

 The minimum application size in case of such issues will be Rs.10 lakh, the minimum trading lot Rs.10 lakh and the number of allottees in case of a public offer shall be 200 or more.

 

 According to SEBI, the company will have the option to migrate to main board after three years subject to compliance with eligibility requirements of the stock exchanges.

 

 To streamlining the process of public issues, SEBI decided that all investors should make only application supported by blocked amount (ASBA), which would enable investors not to incur any interest loss and avoid the hassle of refunds.

 

 To help intermediaries and banks to modify their existing systems and train their staff and also enable the investors to adapt to the new system, there will be a six month phase-in period. Accordingly, a public issue which opens on or after January 1, 2016 will have to follow the new system.

 

 The SEBI board also approved the proposal to reduce the minimum public holding requirement from Rs.3,000 crore to Rs.1,000 crore in case of follow on public offer and to Rs.250 crore in the case of rights issue so that companies can raise capital on fast track route.

 

 In such right issues, the promoters shall not renounce their rights, except to the extent of renunciations within the promoter group, or for the purposes of complying with minimum public shareholding norms.

 

 Shares of the company should not have been suspended from trading as a disciplinary measure in past three years and the issuer, promoter group and directors of the issuer should not have settled any alleged violation of securities laws through the consent mechanism with SEBI in last three years.

 

 This is in addition to the existing condition that no show-cause notices should have been issued or prosecution proceedings initiated by SEBI or pending against the issuer or its promoters or whole-time directors, the regulator said.

 

 The SEBI board also discussed operational issues relating to the merger of Forward Markets Commission (FMC) with it.

 

 It also approved the proposal for reclassification of promoters as public shareholders under different situations.

 

 Existing promoter of a listed entity may cease to be a promoter and/or re-classify themselves as public in the cases like a new promoter replacing the previous promoter subsequent to an open offer or in any other manner and subject to approval of shareholders in the general meeting.

 

 Shareholders need to specifically approve whether the outgoing promoter can hold any key management personnel (KMP) position in the company, and in any case, the outgoing promoter may hold such post for more than three years from the date of approval.

 

 The outgoing promoter will also not be allowed to hold more than 10 percent shares of the company.

 

 If any public shareholder seeks to re-classify itself as promoter, it shall be required to make an open offer to the shareholders and would not be eligible for exemption from the said obligation.