SEBI Issue of Capital and Disclosure Requirements ICDR Regulations 2009
The Securities and Exchange Board of India is turning a stricter eye on company promoters who have been issued preferential warrants, saying that they will have to forfeit the upfront payment made on unexercised warrants.This is contained in its recently notified Issue of Capital and Disclosure Requirements (ICDR) Regulations 2009 , which SEBI made public on Thursday 3rd September 2009.
These regulations replace the Disclosure and Investor Protection (DIP) Guidelines 2000 that now stand rescinded.
In the matter of preferential warrants, SEBI’s new norms are probably meant to contain the situation following January 2008, when the stock market crash brought the price of several shares below the warrant exercise price for promoters, several of whom decided not to exercise their warrants in full. Promoters will now have to be more careful, as their upfront payment made only against exercised warrants will now be adjusted, said an expert familiar with regulatory matters.
The ICDR Regulations have been primarily created by conversion of the SEBI (Disclosure and Investor Protection) Guidelines 2000, a SEBI circular said.
SEBI has made some alterations in the matter of group companies; if the promoter of a debarred company is also a promoter, director or person in control of any other company, even that company would now be barred from accessing the capital markets.
The new norms also ban firm allotment to privileged people, who generally used to be relatives, associates or friends of promoters or promoters’ group. Even these categories have to apply through the regular process. Promoters with majority shareholding in a listed company can offer shares to the public straightaway.
This would help the Government, as it is keen on disinvestment opportunities.
Only promoters whose identity, photograph, etc., are disclosed in the offer document shall be recognised as ‘promoters’.
“With the notification of the regulations, there will be a credible and stable framework for disclosure and investor protection, which would go a long way in streamlining the process of issue of capital,” an expert familiar with SEBI matters said. According to the new ICDR Regulations, the allotment/refund period in public issues has been reduced to 15 days for both fixed-price and book-built issues.
The new regulations have also removed the exemption available to banking companies for IPOs; these companies had until now enjoyed exemptions on norms such as track record, minimum tangible assets, distributable profits, etc.The issue period for infrastructure companies has been brought on a par with that for other companies, and is now down to 10 days from 21.
As institutional and mutual funds have a separate window for allotment through QIPs now, SEBI has removed mandatory firm allotment to them as it has become redundant.However, a shareholder of a listed company whose group/sister concern is coming out with IPO, will have a special reservation window.“The ICDR Regulations would empower the regulator to deal with non-compliance with appropriate enforcement actions, which would be legally sustainable,” said a legal expert.