Sebi on Friday approved a raft of measures, including relaxing sweat equity norms for new-age technology companies and doing away with various disclosure requirements, as the watchdog seeks to provide a fillip to startups, ease compliance burden and facilitate ease of doing business.
In a significant move, the markets watchdog's board has in-principle agreed to move away from the concept of 'promoters' in listed companies to that of 'controlling shareholders' apart from a reduction in the minimum lock-in period for promoters post an initial share sale.
Also, at its meeting on Friday, Sebi board cleared amendments to regulations governing alternative investment funds.
At a time when many startups are attracting significant investments, including from overseas, Sebi has decided to provide relaxations on the quantum of sweat equity that can be issued new-age technology companies listed on the Innovators Growth Platform.
In the case of IGP-listed companies, the yearly limit for sweat equity shares will be 15 per cent while the overall limit will be 50 per cent of the paid-up capital at any time, according to a press release.
This enhanced overall limit will be applicable for 10 years from the date of the company's incorporation.
For companies trading on the main board, the annual sweat equity ceiling will also be 15 per cent but the overall limit will be capped at 25 per cent.
The markets watchdog will merge two sets of regulations into one -- Sebi (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.
Sweat equity refers to shares issued by a company to its employees for non-cash consideration. Startups and promoters typically use sweat equity to fund their companies.
Among others, the minimum vesting period and lock-in period for all share benefit schemes in the event of death or permanent incapacity (as defined by the company) of an employee would be done away with.
The regulator's board has agreed in principle to the proposal to move away from the concept of the promoter to controlling shareholders.
According to the board, investor landscape is now changing, with private equity and institutional investors holding significant shareholding in listed companies.
"In recent years, a number of businesses and new-age companies with diversified shareholding and professional management that are coming into the listed space are non-family owned and/or do not have a distinctly identifiable promoter group," the release said.
About the lock-in period, Sebi said that if the object of the issue involves an offer for sale or financing other than for capital expenditure for a project, then the minimum promoters' contribution of 20 per cent should be locked in for 18 months from the date of allotment in the initial public offer and follow on public offer. Currently, the lock-in period is three years.
Further, in all these cases, the promoter shareholding above the minimum promoter contribution will be locked in for six months, instead of existing one year.
Separately, certain disclosure requirements for acquirers and promoters of companies would be scrapped in view of the implementation of the System Driven Disclosures (SDD).
Amendments will also be done to existing norms to help boost the corporate bond market.
"Certain disclosure obligations for the acquirers/ promoters, etc, pertaining to acquisition or disposal of shares aggregating to 5 per cent and any change of 2 per cent thereafter, annual shareholding disclosures and creation/ invocation/ release of encumbrance registered in depository systems under takeover regulations" would be done away with from April 1, 2022, as per the release.
(To receive our E-paper on whatsapp daily, please click here. We permit sharing of the paper's PDF on WhatsApp and other social media platforms.)