SEBI relaxes norms for listing of start-ups; allows discretionary allotment to eligible investors

At the meeting of Sebi board on Thursday, it was also decided to introduce new requirements for sustainability reporting by listed entities

Seeking to boost listing of start-ups, markets watchdog SEBI on Thursday decided a slew of relaxations to norms, including reducing holding period for pre-issue capital and allowing discretionary allotment to eligible investors.

The changes have been approved to the framework for listing on the Innovators Growth Platform, SEBI said in a statement after the board meeting.

Other proposals approved include easing de-listing requirements and relaxation in guidelines for migrating to main board.

“The board has approved the proposals with respect to framework of Innovators Growth Platform (IGP) under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, with an objective to make the platform more accessible to companies in view of the evolving start-up ecosystem,” SEBI said.

The regulator has decided to reduce the period of holding of 25% of pre-issue capital of the issuer company by eligible investors to one year from the current requirement of two years.

The term ‘Accredited Investor’ for the purpose of IGP is renamed as ‘Innovators Growth Platform Investors’.

Such investor’s pre-issue shareholding should be considered for entire 25% of the pre-issue capital of the issuer company, against the current limit of only 10%.

On the lines of provisions for listing of companies on the main board, SEBI has decided that the issuer company on the IGP should be allowed to allocate up to 60% of the issue size on a discretionary basis, prior to issue opening for subscription to eligible investors with a lock in of 30 days on such shares.

Currently, issuer company is not permitted to make discretionary allotment.

“In line with the provisions of main board IPO, issuer companies which have issued superior voting rights (SR) equity shares to promoters/ founders shall be allowed to do listing under IGP framework,” SEBI said.

The regulator has also decided that threshold trigger for open offer should be relaxed from the existing 25% to 49%.

However, irrespective of acquisition or holding of shares or voting rights in a target company, any change in control directly or indirectly over target company will trigger open offer, SEBI said.

The delisting should be considered successful if the post offer acquirer or promoter shareholding, taken together with the shares tendered and accepted, reaches 75% of the total issued shares of that class; and at least 50% shares of the public shareholders are tendered and accepted.

Further, for delisting, SEBI said the Reverse Book Building mechanism will not be applicable, and for computation of offer price, the foor price will be determined in terms of Takeover Regulations, along with delisting premium as justified by the acquirer/promoter.

Also, it has decided to relax framework for companies seeking to migrate to the main board.

Currently, for a company not satisfying the conditions of profitability, net assets and net worth, among others, for migration from IGP to main board requires a company to have 75% of its capital held by QIBs (qualified institutional buyers) as on date of application for migration. This requirement has now been reduced to 50%, SEBI said.

In 2015, Sebi introduced the Institutional Trading Platform (ITP) with a view to facilitate listing of new-age start-ups. However, the ITP framework failed to evince interest. Last year, SEBI renamed it as the Innovators Growth Platform.

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