{"id":7119,"date":"2021-07-28T06:48:54","date_gmt":"2021-07-28T06:48:54","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=7119"},"modified":"2021-07-28T06:48:58","modified_gmt":"2021-07-28T06:48:58","slug":"sebi-icdr-regulations-2021","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/sebi-icdr-regulations-2021\/","title":{"rendered":"An Overview of Amendment to SEBI ICDR Regulations 2021"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Under Section 11 (1) of SEBI Act, 1992, to safeguard the interests of investors has announced a notification on 9<sup>th<\/sup> June 2020 to deliver assured relaxations in ICDR Regulations, 2009 concerning <strong><em>FPO (Further Public Offer). <\/em><\/strong>The announced notification is issued to all the registered Merchant Bankers and to all the acknowledged Stock Exchanges. This blog emphasises the SEBI amendments made in ICDR Regulations to furnish relaxations in FPO.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3aa37cd64c5\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3aa37cd64c5\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-icdr-regulations-2021\/#What_are_the_SEBI_ICDR_Regulations\" title=\"What are the SEBI ICDR Regulations?\">What are the SEBI ICDR Regulations?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-icdr-regulations-2021\/#FPO_%E2%80%93_Meaning\" title=\"FPO \u2013\nMeaning\">FPO \u2013\nMeaning<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-icdr-regulations-2021\/#SEBI_Amendment_of_ICDR_Regulations_Concerning_FPO_Norms\" title=\"SEBI Amendment of ICDR Regulations Concerning FPO Norms\">SEBI Amendment of ICDR Regulations Concerning FPO Norms<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-icdr-regulations-2021\/#Lock-in_Requirement\" title=\"Lock-in\nRequirement\">Lock-in\nRequirement<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-icdr-regulations-2021\/#MPC_Requirement\" title=\"MPC\nRequirement\">MPC\nRequirement<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-icdr-regulations-2021\/#Lock-in_Requirement_In_the_Case_of_Equity_Shares_on_Preferential_Shares\" title=\"Lock-in\nRequirement (In the Case of Equity Shares on Preferential Shares)\">Lock-in\nRequirement (In the Case of Equity Shares on Preferential Shares)<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-icdr-regulations-2021\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_SEBI_ICDR_Regulations\"><\/span>What are the SEBI ICDR Regulations?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section\n30 of the SEBI Act, 1992, it can make regulations to execute its functions. The\nICDR Regulations made under should be as per the SEBI Act, 1992. In 2009, SEBI\nmade a regulation called <strong><em>SEBI (ICDR) 2009<\/em><\/strong>. In this\nregulation, ICDR stands for <strong><em>Issue of Capital and Disclosure Requirements<\/em><\/strong>.\nFollowing are some ICDR Regulations:<\/p>\n\n\n\n<ol><li>Preferential Issue;<\/li><li>Bonus shares issue by a listed\nissuer;<\/li><li>Qualified or competent\ninstitutions placement by a listed issuer;<\/li><li>Rights issue (where aggregate\nvalue is Rs. 50 lakh or more);<\/li><li>Public Issue;<\/li><li>Issue of IDRs (Indian\nDepository Receipts).<\/li><\/ol>\n\n\n\n<p>The\nICDR Regulations have been changed from time to time. The ICDR Regulations\nintend to simplify the framework and language to increase the text insight. It\nhas different chapters to distinguish the type of issues &amp; the regulation\nthat deals with it.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"FPO_%E2%80%93_Meaning\"><\/span>FPO \u2013\nMeaning<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The\nfull form of FPO is Further Public Offer. An FPO is made when a listed company\nto elevate its funds comes with a fresh issue of shares or an offer for sale to\nthe public. After the Initial Public Offer (IPO), the subsequent issue to the\npublic is Further Public Offer (FPO).<\/p>\n\n\n\n<p>A Further Public Offer is dissimilar from an Initial Public Offer, as the name suggests. An Initial Public Offer is a procedure wherein an unlisted company raises their funds by providing its shares to the public and subsequently listing it. Whereas, when a similar company issues the shares for the 2<sup>nd<\/sup> time to the public, it would be a Further Public Offer (FPO).<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"SEBI_Amendment_of_ICDR_Regulations_Concerning_FPO_Norms\"><\/span>SEBI Amendment of ICDR Regulations Concerning FPO Norms<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>SEBI\n(Issue of Capital &amp; Disclosure Requirements) Regulations, 2018<\/em><\/strong>\nthat is ICDR Regulation makes it compulsory for the promoters of the Issuer\nCompany or entity to regulate <strong><em>MPC (Minimum Promoters\u2019 Contribution) <\/em><\/strong>to\nbe locked in for a stated time.<\/p>\n\n\n\n<p>The\naforementioned necessities are not applicable in the case when funds are raised\nvia:<\/p>\n\n\n\n<ul><li>IPO or FPO (where is no\nidentifiable promoter);<\/li><li>Rights Issue;<\/li><li>FPO (When the equity shares of\nthe issuer are traded frequently for at least three years and the issuer is a\ndividend-paying company).<\/li><\/ul>\n\n\n\n<p>On\nDecember 16, 2020, in their board meeting, the Securities and Exchange Board of\nIndia discussed the changes to ICDR Regulations, removed <strong><em>Minimum Promoters\u2019 Contribution\n(MPC)<\/em><\/strong> and the listed company\u2019s lock-in necessity.<\/p>\n\n\n\n<p>The\nreason behind the suggested amendment was that when an issuer is already a\nlisted company and has fulfilled the situation of MPC at the beginning stage\nwhile raising funds via an FPO. Moreover, when a company or an entity is already\nlisted, its information becomes available in the public domain. Investors are ready\nto subscribe to the FPO as that has enough knowledge or disclosure to make an\nadvised decision.<\/p>\n\n\n\n<p>Hence,\non January 08, 2021, issued <strong><em>SEBI (Issue of Capital &amp; Disclosure\nRequirements) (Amendment) Regulations, 2021 or SEBI (ICDR) (Amendment)\nRegulations, 2021 or (Amendments Regulations).<\/em><\/strong><\/p>\n\n\n\n<p>Following\nare some basic changes in the SEBI amendment of ICDR Regulations, 2021:<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/07\/image001-15.png\" alt=\"SEBI Amendment of ICDR Regulations Concerning FPO Norms\" class=\"wp-image-7122\" width=\"749\" height=\"285\" srcset=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/07\/image001-15.png 998w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/07\/image001-15-300x114.png 300w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/07\/image001-15-768x292.png 768w\" sizes=\"(max-width: 749px) 100vw, 749px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Lock-in_Requirement\"><\/span>Lock-in\nRequirement<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Regulation\n115 of ICDR makes it compulsory for the promoters\u2019 stated securities shall be\nlocked in for time duration. In its board meeting on January 2021, SEBI deemed\nthat now if the MPC provision is removed, then the query of lock-in may not\narise. So, the SEBI (Securities and Exchange Board of India) deleted provision\nafter clause (c) of regulation 115 of ICDR Regulations.<\/p>\n\n\n\n<p>But,\ndeleting the same has brought uncertainty in complying with the lock-in\nrequirements, explained as:<\/p>\n\n\n\n<ol><li>After regulation 115(c), the\npresent provision states that the excess contribution of promoters, as\nmentioned in Regulation 112(b), shouldn&#8217;t be subject to lock-in.<\/li><li>Regulation 113 (1)(a) provides\nthat the promoters shall contribute:<\/li><li>Up to 20% of the suggested\nissue size;<\/li><li>Up to 20% of post-issue\ncapital.<\/li><li>The present provision of Regulation\n112(b) discuss the promoters who subscribe in surplus of the higher of the two\noptions described above. The price of such surplus subscription shall be\nidentified in pricing guidelines for preferential issue under Regulation 164 or\nthe issue price, whichever is higher. Since the promoters furnished in surplus\nof the option given, SEBI exempted them from the lock-in requirement. <\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"MPC_Requirement\"><\/span>MPC\nRequirement<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The current clause of Regulation 112(b) of the regulations of ICDR was substituted by SEBI in its recent amendment, 2021. The criterion of deciding lock-in and MPC the dividend-paying capacity was removed. Moreover, it inserted the extra compliance of <strong><em>SEBI (Listing Obligations &amp; Disclosure Requirements) Regulations, 2015<\/em><\/strong><sup><a href=\"https:\/\/www.sebi.gov.in\/sebi_data\/attachdocs\/1441284401427.pdf\" class=\"text-primary\"><strong><em>[1]<\/em><\/strong><\/a><\/sup><strong><em>. <\/em><\/strong>The issuer should have rectified at least 95% of the grievances received from the investors.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Lock-in_Requirement_In_the_Case_of_Equity_Shares_on_Preferential_Shares\"><\/span>Lock-in\nRequirement (In the Case of Equity Shares on Preferential Shares)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>According\nto Rule 19A (5) of Securities Contracts (Regulations) Rules, 1957, the minimum\npublic shareholding (mentioned as MPS) falls below 10% due to CRIP. Such a\nlisted company is required to get MPS at least 10% within eighteen months and\n25% within three years from the date of fall.<\/p>\n\n\n\n<p>Regulation\n167(4) declares that when equity shares are issued on the basis of a\npreferential share in agreement with any resolution plan, they shall be locked\nin for at least one year. Such lock-in doesn&#8217;t help dilution of shareholding of\nthe promoter to get MPS.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In its current amendment of 2021, the Securities and Exchange Board of India relaxed the ICDR Regulation concerning a Further Public Offer. The Minimum Promoters&#8217; Contribution and lock-in requirements in the case of issue of stated securities in agreement with specified securities to a Further Public Offer are removed from the regulations; this created uncertainty in the case of FPO. Securities and Exchange Board of India should examine the deletion of the provision after Regulation 115 (c) of ICDR Regulation. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/sebi-guidelines-for-ipo-guidelines-for-making-public-offer-in-india\/\">SEBI Guidelines for IPO: Guidelines for Making Public Offer in India<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Under Section 11 (1) of SEBI Act, 1992, to safeguard the interests of investors has announced a notification on 9th June 2020 to deliver assured relaxations in ICDR Regulations, 2009 concerning FPO (Further Public Offer). The announced notification is issued to all the registered Merchant Bankers and to all the acknowledged Stock Exchanges. This blog [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":7121,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[64],"tags":[774],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/7119"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=7119"}],"version-history":[{"count":13,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/7119\/revisions"}],"predecessor-version":[{"id":7136,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/7119\/revisions\/7136"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/7121"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=7119"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=7119"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=7119"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}