SEBI Board Revises Delisting Rules, Classification of Promoters, Disclosure of Meets with Analysts, and Investors
Market regulator Securities and Exchange Board of India (SEBI) on Thursday has approved several key changes in its regulations for delisting, Alternative Investment Fund, promoter reclassification, sustainability reporting and dividend policy. The SEBI board, at its meeting in Mumbai, which was attended through video conferencing by out-of-station members, also decided to extend to top-1,000 companies by market-capitalisation, the dividend distribution policy and need to have a risk management committee.
The SEBI board approved several amendments to the SEBI (delisting of equity shares) regulations (delisting regulations) primarily to make the process more transparent and efficient. Under the amended regulations, promoter and acquirer will have to disclose their intention to delist the company by making an initial public announcement.
"Promoter / acquirer will be permitted to specify an indicative price for delisting which should not be less than the floor price. Promoter will be bound to accept the price discovered through reverse book building if the same is equal to the floor price or indicative price," SEBI says.
While stipulating timelines for completion of various activities for the delisting process, SEBI says, "The committee of independent directors is required to provide their reasoned recommendations on the proposal for delisting."
In its review of regulatory framework for reclassification of promoter and promoter group entities, the market regulator decided to reduce the time gap between the date of board meeting and shareholders' meeting for consideration of reclassification request, to a minimum of one month and a maximum of three months from the existing requirement of minimum period of three months and maximum six months.
Further SEBI decided to exempt promoters from the requirement of seeking approval of shareholders in cases where the promoter seeking reclassification holds shareholding of less than 1%, subject to the promoter not being in control.
Promoters are also exempted from few procedural requirements related with reclassification like obtaining request from promoter, approval from the board and shareholders in case of open offer under SEBI takeover regulations and scheme of arrangement. "This exemption will be subject to the outgoing promoter's intent of reclassification being disclosed in the letter of offer or scheme of arrangement along with fulfilling other requirements such as not being in control, and not represented on the board," the release from SEBI says.
The board also approved several amendments to SEBI (listing obligations and disclosure requirements) regulations (LODR). Under the new changes, the requirement for formulation of dividend distribution policy by the existing top 500 listed entities has been extended to the top 1,000 listed entities based on market capitalisation.
Further, in case a board meeting is held for more than one day, financial results should be disclosed by listed entities within 30 minutes of end of the board meeting for the day on which the financial results are considered, SEBI says.
While dispensing with the requirement of seeking approval from stock exchange for change of name of a listed entity, the market regulator streamlined report submission to 21 days. It says, "The timelines for submission of periodic reports like statement of investor complaints, corporate governance report and shareholding pattern will be harmonised to 21 days from the end of each quarter."
The SEBI board also approved the proposal to amend the AIF Regulations. This will provide a definition of 'start-up' as specified by government of India for the purpose of investment by angel funds.
The amendment removes the list of restricted activities or sectors from the definition of venture capital (VC) undertaking to provide flexibility to VC Funds registered under Category I AIFs in making investments.
It will allow AIFs, including fund of AIFs, to simultaneously invest in units of other AIFs and directly in securities of investee companies subject to certain conditions. The amendment is expected to provide clarity on scope of responsibilities of managers and members of investment committees and prescribe a code of conduct for AIF, trustee and directors of the trustee, designated partners and directors of the AIF, manager, members of investment committee and key management personnel of AIF and manager, SEBI says.
The SEBI board also reviewed disclosures for analyst and institutional investor meets by listed entity. At present, a listed entity is required to disclose the schedule of analyst and institutional investors meet and presentations made in such meetings, to the stock exchanges and on its website.
SEBI decided to introduce audio or video recordings of such meetings on the website of the listed entity and exchanges promptly, before next trading day or within 24 hours, whichever is earlier and written transcripts of such meetings within five working days from the meeting.
The market regulator has also asked top 1000 listed companies to submit business responsibility and sustainability report (BRSR) on voluntary basis for FY2021-22 and on mandatory basis afterwards. The BRSR will replace existing business responsibility report (BRR).
In a release, SEBI says, "The new reporting requirements are expected to bring in greater transparency through disclosure of material ESG-related information to enable market participants to identify and assess sustainability-related risks and opportunities. These requirements set the stage for taking a leap for better disclosures in the ESG space in India."
The disclosures under the BRSR are segregated into essential (mandatory) and leadership (voluntary) indicators. "The BRSR lays considerable emphasis on quantifiable metrics, which allows for easy measurement and comparability across companies, sectors and time periods. Further, the disclosures on climate and social like employees, consumers and communities, related issues of the entity have been significantly enhanced and made more granular," SEBI says.
During the meeting the market regulator also decided to review its framework for innovators growth platform (IGP). At present eligibility requirement under IGP, for issuer is to have 25% of pre-issue capital held by eligible investors for two years, which is now reduced to one year.
The term 'accredited investor' for the purpose of IGP is renamed as 'innovators growth platform investors'. At present, pre-issue shareholding of such investors for meeting eligibility, is considered for only 10%, which is now increased and will be considered for the entire 25% required for meeting eligibility norms.
Further, currently issuer company is not permitted to make discretionary allotment. SEBI decided to allow issuer company to allocate up to 60% of the issue size on a discretionary basis, prior to issue opening, to eligible investors with a lock in of 30 days on such shares.
For companies listed under IGP framework, stipulation for triggering open offer under takeover regulations has been relaxed to 49% from existing 25%. However, SEBI says irrespective of acquisition or holding of shares or voting rights in a target company, any change in control directly or indirectly over target company will trigger open offer.