Sebi rationalizes eligibility criteria, disclosure norms to speed up rights issues

Mumbai: The Securities and Exchange Board of India (Sebi) on Wednesday rationalized the eligibility criteria and disclosure requirements for rights issue, in an attempt to make fundraising easier, faster and cost effective.

It also increased the threshold from Rs 10 crore to Rs 50 crore, for filing requirement of rights issue draft letter of offer with the board for its observations.

Sebi also said mandatory 90 per cent minimum subscription criteria for rights issue shall not be applicable where object of the issue involves financing other than capital expenditure for a project, provided that the promoters undertake to subscribe fully to their portion of rights entitlement.

Under the key amendments, the issuer will be eligible to make truncated disclosures in terms of Part B, if it has been filing periodic reports, statements and information in compliance with listing regulations for the last one year instead of the last three years as required earlier. If three years have passed after change in management due to acquisition of control or listing consequent to a scheme of arrangement.

The markets regulator said other issuers not satisfying Part B eligibility conditions will make disclosures in terms of new set of proposed disclosures i.e. Part B-1. Part B-1 disclosures would be more detailed than Part B, but truncated compared to Part A, which is meant for IPO/FPO offer documents.

“Disclosure requirements under Part B have been rationalized to avoid duplication of information in letter of offer, especially the information which is already available in public domain and is disclosed by the companies in compliance with the disclosure requirements under Sebi listing regulations,” Sebi said in a press release.

The markets regulator also said the issuer will be eligible to make fast track rights issue, in case of pending show-cause notices in respect to adjudication, prosecution proceedings and audit qualification, provided necessary disclosures along with potential adverse impact on the issuer are made in the letter of offer.