Sebi notifies new rights issue rules, rationalises eligibility, disclosures

Markets regulator Sebi has notified new rights issue rules to rationalise the eligibility criteria and disclosure requirements to make fund raising easier, faster and cost-effective.

The regulator has amended the Sebi (Issue of Capital and Disclosure Requirements) Regulations, which become effective from Monday, as per the notification.

Under the new norms, a company is allowed to make truncated disclosures, provided the firm has been filing periodic reports, statements, the information in compliance with listing regulations for last one year instead of last three years, as was required earlier.

This is also applicable to cases where three years have been passed after the change in management following the acquisition of control.

Disclosure requirements have been rationalised to avoid duplication of information in the letter of offer, especially the information which is already available in the public domain and is disclosed by the companies in compliance with the disclosure requirements.

Besides, Sebi has raised the threshold for companies to Rs 50 crore for which it will not be required to file the rights offer document with the regulator. The earlier limit was Rs 10 crore.

In addition, the mandatory 90 per cent minimum subscription would not be applicable to those issuers where object of the issue involves financing other than the financing of capital expenditure for a project.

This is subject to "the promoters and the promoter group of the issuer undertake to subscribe fully to their portion of rights entitlement".

Also, the regulator said a company can make a fast-track rights issue, in case of pending show-cause notices due to adjudication, prosecution proceedings and audit qualification.

This is subject to the company making necessary disclosures along with the potential adverse impact on the issuer in the letter of offer.