Amid the Covid-19 outbreak that has disrupted business activities and led global economies to a state of recession, the Securities and Exchange Board of India (SEBI) has eased restrictions on companies and offered relaxation in norms for investors and depositors to collectively help tide over the crisis.
Here is the list of relaxations offered by SEBI:
- SEBI has eased fundraising norms for listed stressed companies. The existing pricing guidelines for buying via preferential route is quite cumbersome for any financial investor seeking to invest in a stressed company. So the SEBI has eased pricing norms and provided exemptions from open offers in listed stressed companies. In view of the deteriorating financial health of the stressed company, SEBI's new proposal on pricing states that "it should not be less than the weekly highs and lows of the volume-weighted average price of the related equity shares, quoted on a recognised stock exchange during the two weeks preceding the relevant date." As of now, the pricing covers a period of 26 weeks or more for frequently traded shares. The latency period is quite to create a wide gap in pricing at the beginning of the 26 weeks and then the current price later, when funds need to be raised.
- Also, an exemption from making an open offer in the stressed entity can be made, if the acquisition is beyond the limit prescribed in terms of the SAST Regulations and provided the issue is made to entities that are not a part of the promoter or promoter group, and the exemption from an open offer is approved by the majority of the minority shareholders. Given the restrictions laid that promoters will not be eligible for preferential issues unless approval is provided by a majority of minority stakeholders. This would thereby limit the pool of potential investors. SEBI also proposes that the proceeds of preferential issues to be disclosed and the shares issued to investors via the preferential route should be locked in for a period of 3 years, from the latest date of trading approval granted by all stock exchanges, wherein the specific securities are listed.
- To enable relatively quick access to capital, SEBI has decided to temporarily relax the period of restriction provided in Regulation 24(i)(f) of the Buyback Regulations from the said period of one year will be reduced to six months. This would be in line with section 68(8) of the Companies Act, 2013. This relaxation will be applicable until December 31, 2020.
- SEBI issued relaxation in timelines for compliance with regulatory requirements by trading members or clearing members as regards submission of data on monthly basis towards clients and fund balance under the provisions of Enhanced Supervision and daily margin trading reporting to not attract penal provisions in case of delay until May 17, 2020.
- Relaxation in the timeline for processing of the Demat request form by Issuer, Participants or Share Transfer Agents (RTA) has been issued by SEBI until May 17, 2020. An extra 15-day time period after May 17, 2020, is allowed to the SEBI registered intermediary, to clear the backlog.
- SEBI has decided to grant relaxations in a situation where FPIs are not in a position to send original and/or certified documents as specified in Operational guidelines for Foreign Portfolio Investors (FPIs) and Designated Depository Participants (DDPs) issued under Securities and Exchange Board of India (FPI) Regulations, 2019 till June 30, 2020. DDPs and Custodians should ensure to obtain the original and/or certified documents (as applicable normally) within 30 days from the aforesaid deadline.
- The due date for regulatory filings for All Alternative Investment Funds (AIFs) and All Venture Capital Funds (VCFs) for the periods ending March 31, 2020, and April 30, 2020, has been extended by two months, above the timelines prescribed under SEBI (Alternative Investment Funds) Regulations, 2012.
- The monthly reporting by portfolio managers to SEBI for periods ending March 31 and April 30, 2020, will be extended by 2 months, in light of the recent market events witnessed due to the COVID-19 pandemic.
- The due date of filing disclosures, in terms of Regulations 30(1), 30(2) and 31(4) of the SAST Regulations for the substantial acquisition of shares and takeovers for the financial year ending March 31, 2020, has been extended to June 01, 2020.
Measures by SEBI to facilitate fundraising from capital markets
In the wake of the COVID-19 pandemic and challenges posed to the Indian economy, SEBI has decided to grant certain temporary relaxations from the regulatory provisions related to rights/ public issuances by listed entities, which will help improve funding to corporates from capital markets.
For the purpose of fast track rights issuances, SEBI has relaxed the eligibility requirement of the average market capitalisation of public shareholding from Rs 250 crores to Rs 100 crore. Also with regards to the required period of listing of equity shares of the issuer for at least three years has been reduced to listing for eighteen months only. Further, the condition related to no audit qualifications on issuer's audited accounts has been replaced with the requirement to disclose the impact of audit qualifications on the issuer's financials.
To provide greater flexibility in fundraising from capital markets, the threshold for minimum subscription requirements for a rights issue has been reduced from the existing 90 per cent to 75 per cent of the offered size, subject to certain conditions.
To ease compliance requirements and reduce the time involved in fundraising, the listed entities raising funds up to Rs 25 crores in a rights issue will not be required to file draft offer documents. The existing threshold for the same is Rs 10 crores. The relaxation on the right issues is applicable for those that open on or before March 31, 2021.
Last year, SEBI had amended ICDR regulations to significantly reduce the timeline for the completion of the rights issue from T+ 55 days to T+ 31 days as well as introduced the dematerialization and trading of rights entitlements. These measures are intended to make the rights issue framework more efficient and effective.
Further, the validity of SEBI observations on all public issues/ rights issues has been extended by six months from the date of expiry for issuers, whose observations have expired or would expire between March 01, 2020, and September 30, 2020.