Sebi liberalizes norms for fast-track issuance for FPOs and rights issues

Changes also announced in OFS to encourage greater retail participation

Stock market regulator Securities and Exchange Board of India (Sebi) today, 23 June 2015, liberalized norms for raising capital by way of Follow on Public Offerings (FPO) and rights issues using the fast-track route. In order to enable more number of listed companies to raise further capital using the fast-track route, the Sebi Board has approved the proposal to reduce the minimum public holding requirement from Rs 3000 crore to Rs 1000 crore in case of FPO and to Rs 250 crore in case of rights issue, subject to compliance with certain additional conditions.

Sebi has also announced changes in the Offer for Sale (OFS) to encourage greater retail participation in OFS through the stock exchange mechanism. To ensure increased retail participation in the OFS process, OFS notice shall be continued as per present practice i.e. latest by T-2 days. However, T-2 day shall be reckoned from banking day instead of trading day. To simplify the bidding process for retail investors, it would be mandatory for the seller in the OFS to provide the option to retail investors to place their bids at cut off price (default option) in addition to placing price bids.

Sebi today, 23 June 2015, announced that a rationalized and simple framework has been put in place for reclassification of promoters as public. When a new promoter replaces the previous promoter subsequent to an open offer or in any other manner, re-classification shall be permitted subject to approval of shareholders in the general meeting. In such case, the outgoing promoter can't hold more than 10% shares of the company. Shareholders need to specifically approve whether the outgoing promoter can hold any Key Management Personnel (KMP) position in the company. In any case, the outgoing promoter may not act as KMP for a period of more than 3 years from the date of shareholders' approval.

In case of transmission/succession/inheritance, the inheritor shall be classified as promoter.

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