The Securities and Exchange Board of India (Sebi) today allowed promoters of listed companies to make offer for sale. The move assumes significance as such promoters can now sell their stake directly to the public.
As of now, promoters who raise money through public issues have to go for follow-on offers or rights issues, which many of them are not comfortable with. So, promoters of many listed companies would sell their stake to private equity firms. But with Sebi permission to make offer for sale, they can avoid their shares getting concentrated in a few hands.
In fact, the market regulator today replaced the Disclosure and Investor Protection (DIP) Guidelines, 2000 with the Issue of Capital and Disclosure Requirements (ICDR) Regulations, 2009 to prevent frequent changes in the norms, besides giving them a legal sanctity.
ICDR would govern all disclosure norms regarding securities and no changes to this can now be made without the consent of Sebi. The new regulations have been issued by the regulator under Section 11 of the Sebi Act, 1992. The changes follow recommendations by Sebi’s Primary Market Advisory Committee, chaired by leading banker Deepak Parekh, set up to simplify the procedures governing various capital-raising measures.The new regulations also contain provisions pertaining to regulation of the activities of merchant bankers, debenture trustees and registrars to an issue.
Consequential amendments have also been made to the Sebi (ESOS and ESPS) Guidelines, 1999 and the Equity Listing Agreement through circulars issued today. Sebi has clarified that a company making a public offer can allot shares only to its own employees and not to employees of its parent organisation or subsidiary under the employee quota.
The new regulations put all companies on a par. Earlier, government companies were enjoying some exemptions in case of filing of results and in eligibility criteria in filing for initial public offers (IPOs). Now there will be no preferential treatment given to any one.
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Strategy and Planning Vice President Harshad Apte said, “The DIP guidelines have been changed in keeping with changing times. However, the companies that have filed draft prospectus and received comments will not have to refile them to confirm with the new norms.”
Sebi has also issued another circular under Section 11 of the Sebi Act, read with rule 19(7) of the Securities Contracts Regulation Rules (SCRR), 1957 in respect of matters relating to listing of securities under the SCRR, hitherto contained in the rescinded guidelines.
One of the significant amendments to the listing agreement makes it mandatory for a listed company, which desires to make a further public offer through the fixed price route, to notify stock exchanges at least 48 hours in advance about the meeting of its board of directors for determination of the issue price. Also, companies willing to offer ESOPs will have to make disclosures to the exchanges in a format specified by Sebi.