Sebi proposes relaxing norms for listing start-ups
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Seeking to boost listing of start-ups, markets watchdog Sebi on Monday proposed a slew of relaxations to norms, including reducing holding period for pre-issue capital, providing differential voting rights to promoters and allowing discretionary allotment to all eligible investors.

The changes have been proposed to the framework for listing on the Innovators Growth Platform (IGP). Other proposals include retaining superior voting rights for existing institutional investors holding over 10 per cent of the capital, and easing delisting requirements.

Issuing a consultation paper to review the IGP framework, Sebi has suggested reducing the period of holding of 25 per cent of pre-issue capital of the issuer company by eligible investors to one year from current requirement of two years.

On the lines of provisions for listing of companies on the main board, Sebi has proposed that the issuer company on the IGP should be allowed to allocate up to 60 per cent of the issue size on a discretionary basis prior to issue opening for subscription.

Also, the discretionary allotment should be allowed for all eligible investors, as per the consultation paper.

Issuer companies seeking listing under IGP should be allowed to issue Differential Voting Rights (DVRs) and Superior Voting Rights (SRs) equity shares to promoters and founders, Sebi has suggested.

The regulator has also proposed that there should be continuation of special rights, such as board seat and veto or affirmative voting rights, for existing institutional investors holding in excess of 10 per cent of capital.

Another proposal is to exempt Alternative Investment Fund (AIF) Category II investors from post issue lock-in requirement of six months, subject to certain conditions.

Further, Sebi has suggested that accredited investor's pre-issue shareholding should be considered for entire 25 per cent of the pre-issue capital of the issuer company.

As far as the IGP platform is considered, there is no difference between AIs (Accredited Investors) and QIBs (Qualified Institutional Buyers), as both are informed investors, the consultation paper said.

"Therefore, the said limit of 10 per cent on AIs may be removed and AIs' pre-issue shareholding may be considered for entire 25 per cent of the pre-issue capital required for meeting eligibility condition norms," it added.

According to the consultation paper, AI definition requires clarity as to whether promoters are excluded from it. Pre-issue capital held by promoters or promoter groups even if they are registered as AIs should not be considered for 25 per cent eligibility requirement.

It has been recommended that family trusts should be included in AI definition. Currently, definition covers only individuals and body corporate.

"Since, life cycle of start-up companies eventually lead them to get merged or acquired by a larger company, stringent takeover requirements, may become a road block in such scenarios," Sebi noted.

Accordingly, the regulator has recommended the threshold trigger for open offer may be relaxed from the 25 per cent to 50 per cent and other disclosure requirement thresholds should also be relaxed.

Sebi has suggested delisting may be considered if 75 per cent of the total shareholding and voting rights are acquired against the present requirement of 90 per cent.

Also, it has suggested relaxed framework for companies seeking to migrate to the main board.

An IGP company can migrate to the main board provided 40 per cent of its total capital as on the date of application of migration is held by QIBs as against the present criteria of 75 per cent, as per the consultation paper.

Public comments on the consultation paper have been sought till January 11.

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 (IGP).

(To download our E-paper please click here. The publishers permit sharing of the paper's PDF on WhatsApp and other social media platforms.)

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