SEBI notifies guidelines for startups
If the post-offer acquirer or promoter shareholding, together with the shares tendered and accepted, exceeds 75% of the total issued shares of that class, and at least 50% of the public shareholders’ shares are tendered and accepted, the delisting will be deemed effective. Markets regulator Sebi has announced a series of regulatory changes aimed at encouraging start-ups to list, including reducing the holding period for pre-issue capital and enabling discretionary allotment to qualifying investors. According to two separate notifications released on Wednesday, amendments to the process for listing on the Innovators Growth Platform (IGP) have been introduced.
This comes after the Sebi board of directors accepted a proposal in this regard in March. Other changes include relaxing the conditions for delisting and loosening the rules for migrating to the mainboard. In light of the emerging start-up ecosystem, this is aimed at making the platform more available to businesses.
The regulator has reduced the requirement for eligible investors to retain 25% of the issuer company’s pre-issue capital for one year instead of the previous requirement of two years.For the purposes of IGP, the word “accredited investor” has been renamed “Innovators Growth Platform Investors.”The pre-issue shareholding of such an investor will be considered for the entire 25% of the issuer company’s pre-issue shares, as opposed to the current limit of just 10%.
Sebi said the issuer company on the IGP will be able to assign up to 60% of the issue size on a discretionary basis prior to issue an opening for a subscription to qualifying investors with a 30-day lock in on such shares, similar to the provisions for listing companies on the mainboard.The discretionary allotment is currently not allowed by the issuer firm.According to Sebi, issuer companies that have given superior voting rights (SR) equity shares to promoters and founders will be permitted to list under the IGP system in accordance with the provisions of mainboard IPO.
In addition, the threshold trigger for an open bid has been lowered from 25% to 49%. Any change of control directly or indirectly over a target company, regardless of the acquisition or holding of shares or voting rights in the target company, would cause an open bid, according to Sebi. An issuer company whose specified securities are traded on the IGP as part of an initial public offering can exit the platform if the board of directors of the company approves it in a meeting, according to Sebi.
Furthermore, the regulator stated that such an exit is accepted by the company’s shareholders through a special resolution passed by postal ballot or e-voting, following disclosure of all relevant details in the explanatory statement sent to the shareholders in connection with such resolution.If the post-offer acquirer or promoter shareholding, together with the shares tendered and accepted, exceeds 75% of the total issued shares of that class, and at least 50% of the public shareholders’ shares are tendered and accepted, the delisting will be deemed effective.
Furthermore, Sebi stated that the Reverse Book Building process would not be applicable for delisting and that the floor price will be calculated in accordance with takeover regulations, as well as a delisting premium as justified by the acquirer/promoter, for the computation of offer price.In addition, the structure for businesses wishing to move to the mainboard has been simplified.
Currently, for a company not satisfying the conditions of profitability, net assets, net worth among others for migration from IGP to mainboard requires a company to have 75 per cent of its capital held by QIBs as on the date of application for migration. This requirement has now been reduced to 50 per cent, Sebi said. To give effect to this, Sebi has amended ICDR (Issue of Capital and Disclosure Requirements) Regulation and SAST (Substantial Acquisition of Shares and Takeovers) norms.
The new rules have become effective from May 5, as per the notifications. In 2015, Sebi introduced the Institutional Trading Platform (ITP) with a view to facilitating the listing of new-age start-ups. However, the ITP framework failed to evince interest. Last year, Sebi renamed it the Innovators Growth Platform.