The SEBI in its Board Meeting held on 25th June 2013 approved the following important matters among other things;
Amendment in SEBI (Buy Back of Securities) Regulations, 1998 The SEBI has approved Chandrasekhar Committee's recommendations on SEBI (Buy Back of Securities) Regulations, 1998. These amendments are in recognition of the fact that the buyback regulations for the stock exchange mechanism (i.e open market purchase) have been grossly misused over the years. Initially, there was no mandate on the amount of buyback that was required and therefore, companies would announce very high buyback price, not buy single share for the whole year and give wrong signal to the investors. Then the SEBI came up with the regulation mandating minimum buy back of 25% of the amount earmarked for buy back couple of years ago.Further, if you go through capital market data of the last 15 months or so, it is found that every third issue mobilised less than one third of its intended buyback amount. So 14 out of 43 companies bought back less than 30 percent of the intended buyback, this included some of the largest buyback announcements like Reliance industries and Reliance Infrastructure that ended up with 25-30 percent. The SEBI has made the following amendments in SEBI Buy Back Regulations to arrest misuse of open market buy back mechanism;1. The mandatory minimum buy-back has been increased to 50% of the amount earmarked for the buy-back from 25%, failing which amount in the escrow account would be forfeited subject to a maximum of 2.5% of the total amount earmarked.2. The maximum buy-back period has been reduced to 6 months from 12 months.3. The companies shall create an escrow account towards security for performance with an amount equivalent to at least 25% of the amount earmarked for buy-back.4. The company shall not raise further capital for a period of one year from the closure of the buy-back except in discharge of subsisting obligations as against the existing 6 months.5. The company shall not make another buy-back offer within a period of one year from the date of closure of the preceding offer.6. Rationalization of disclosure requirement.7. The companies can buy-back 15% or more of capital (paid-up capital and free reserves) only by way of tender offer.8. The companies are permitted to extinguish shares bought back during the month, within fifteen days of the succeeding month subject to the last extinguishment within seven days of the completion of the offer.9. The promoters of the company shall not execute any transaction, either on-market or off-market, during the buy-back period.Enabling Listing of Start-Ups and SMEs on Institutional Trading Platform (ITP) without having to make an IPO Lack of exit opportunities for the existing investors and restricted access to new investors is one of the problems faced by Start-Ups and SMEs. With a view to provide easier exit options for informed investors like Angel Investors, VCFs, PE, etc. to provide better visibility, wider investor base and greater fund raising capabilities to such companies, the Board approved the proposal to amend the SEBI (ICDR) Regulations to permit listing of Start-ups and SMEs in Institutional Trading platform (ITP) without having to make an IPO.
The companies eligible to be listed on this ‘Institutional Trading Platform’ can access investment only from the informed investors. Therefore the minimum amount for trading or investment on the ITP will be Rs 10 lakh. These companies shall be exempted from the requirements of rule 19(2)(b) of SC(R)R 1957 under which companies have to offer upto 25% of its shareholding to public through an offer document in order to get listed. Therefore the listing can be done without an IPO and the expenses associated with it. While such companies are listed on the ITP they will not be permitted to raise capital though they can continue to make private placements.
Listing on ITP by Start-Ups and SMEs is expected to offer their existing investors better chances to find alternate buyers than if they search using their own network in the investment community. Standardized norms of entry for companies, eligibility criteria, continuous disclosure requirements, simplified exit rules and corporate governance norms will be prescribed.
Amendments to SEBI ICDR - preferential issue With a view to enhance transparency, ensure adequate audit trail and apply lock-in for the shares allotted in preferential issues, the Board approved the following;1. Preferential issue shall be subscribed only through the allottee’s own bank account. Further, the issuing company shall disclose the ultimate beneficial owner of allotted shares.2. Allotments in preferential issues shall only be made in dematerialized form.3. Shares allotted in the preferential issue shall not be transferred till trading approval is granted for such shares by the stock exchanges. Further, the lock-in period shall commence on the date of such trading approvalRationalization of Investment Routes and Monitoring of Foreign Portfolio InvestmentsSEBI in its Board meeting discussed the report of the “Committee on Rationalization of Investment Routes and Monitoring of Foreign Portfolio Investments”, under the Chairmanship of Shri K. M. Chandrasekhar, former Cabinet Secretary, Government of India (GoI).The Board accepted the recommendations of the Committee which, inter alia, include: 1. Simplified and uniform entry norms for foreign investors by merging existing FIIs, Sub Accounts and Qualified Foreign Investors (QFIs) into a new investor class to be termed as “Foreign Portfolio Investors” (FPIs). 2. In order to make the procedure much simpler, prior direct registration of FIIs and Sub Accounts with SEBI be done away with. Instead, DDPs authorized by SEBI would register FPIs on behalf of SEBI subject to compliance with KYC requirements.3. Risk Based Approach towards Know Your Client (KYC) – From the point of KYC, the Committee recommended for categorization of FPIs into three categories. Category I - which would include Government and Government related entities such as Foreign Central Banks, Sovereign Wealth Funds, Multilateral Organizations etc, Category II - which would include regulated entities such as Banks, Asset Management Companies, Broad Based Funds such as Mutual Funds, Investment Trusts, Insurance and Reinsurance Companies, University Funds, Pension Funds and University related Endowments already registered with SEBI and Category III – All other FPIs not eligible to be included in the above two Categories.4. The approach to KYC will be risk based. The documents needed for registration and on boarding would be the simplest for Category I and most stringent for Category III.5. The requirement of submitting personal identification documents such as copy of passport, photograph etc. of the designated officials of FPIs belonging to Category I and Category II shall be done away with.6. Portfolio investments to be defined as investment by any single investor or investor group, which shall not exceed 10% of the equity of an Indian company. Any investment beyond the threshold of 10% shall be considered as Foreign Direct Investment (FDI). Trust this write up will be useful to you.Thanks & RegardsCS M Alagar,B.Com.,ACS,LLBDirectorGenicon Business Solutions Pvt.LtdUdhayam Royal TerraceNo.13/1, BasementTanjore Road (Near Krishna Ghana Sabha)T. NagarChennai – 600 017 Tel:044 4208 8484 M :91-9003199947Emaiil: alagar@geniconsolutions.comwww.geniconsolutions.com
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Amendment in SEBI (Buy Back of Securities) Regulations, 1998 The SEBI has approved Chandrasekhar Committee's recommendations on SEBI (Buy Back of Securities) Regulations, 1998. These amendments are in recognition of the fact that the buyback regulations for the stock exchange mechanism (i.e open market purchase) have been grossly misused over the years. Initially, there was no mandate on the amount of buyback that was required and therefore, companies would announce very high buyback price, not buy single share for the whole year and give wrong signal to the investors. Then the SEBI came up with the regulation mandating minimum buy back of 25% of the amount earmarked for buy back couple of years ago.Further, if you go through capital market data of the last 15 months or so, it is found that every third issue mobilised less than one third of its intended buyback amount. So 14 out of 43 companies bought back less than 30 percent of the intended buyback, this included some of the largest buyback announcements like Reliance industries and Reliance Infrastructure that ended up with 25-30 percent. The SEBI has made the following amendments in SEBI Buy Back Regulations to arrest misuse of open market buy back mechanism;1. The mandatory minimum buy-back has been increased to 50% of the amount earmarked for the buy-back from 25%, failing which amount in the escrow account would be forfeited subject to a maximum of 2.5% of the total amount earmarked.2. The maximum buy-back period has been reduced to 6 months from 12 months.3. The companies shall create an escrow account towards security for performance with an amount equivalent to at least 25% of the amount earmarked for buy-back.4. The company shall not raise further capital for a period of one year from the closure of the buy-back except in discharge of subsisting obligations as against the existing 6 months.5. The company shall not make another buy-back offer within a period of one year from the date of closure of the preceding offer.6. Rationalization of disclosure requirement.7. The companies can buy-back 15% or more of capital (paid-up capital and free reserves) only by way of tender offer.8. The companies are permitted to extinguish shares bought back during the month, within fifteen days of the succeeding month subject to the last extinguishment within seven days of the completion of the offer.9. The promoters of the company shall not execute any transaction, either on-market or off-market, during the buy-back period.Enabling Listing of Start-Ups and SMEs on Institutional Trading Platform (ITP) without having to make an IPO Lack of exit opportunities for the existing investors and restricted access to new investors is one of the problems faced by Start-Ups and SMEs. With a view to provide easier exit options for informed investors like Angel Investors, VCFs, PE, etc. to provide better visibility, wider investor base and greater fund raising capabilities to such companies, the Board approved the proposal to amend the SEBI (ICDR) Regulations to permit listing of Start-ups and SMEs in Institutional Trading platform (ITP) without having to make an IPO.
The companies eligible to be listed on this ‘Institutional Trading Platform’ can access investment only from the informed investors. Therefore the minimum amount for trading or investment on the ITP will be Rs 10 lakh. These companies shall be exempted from the requirements of rule 19(2)(b) of SC(R)R 1957 under which companies have to offer upto 25% of its shareholding to public through an offer document in order to get listed. Therefore the listing can be done without an IPO and the expenses associated with it. While such companies are listed on the ITP they will not be permitted to raise capital though they can continue to make private placements.
Listing on ITP by Start-Ups and SMEs is expected to offer their existing investors better chances to find alternate buyers than if they search using their own network in the investment community. Standardized norms of entry for companies, eligibility criteria, continuous disclosure requirements, simplified exit rules and corporate governance norms will be prescribed.
Amendments to SEBI ICDR - preferential issue With a view to enhance transparency, ensure adequate audit trail and apply lock-in for the shares allotted in preferential issues, the Board approved the following;1. Preferential issue shall be subscribed only through the allottee’s own bank account. Further, the issuing company shall disclose the ultimate beneficial owner of allotted shares.2. Allotments in preferential issues shall only be made in dematerialized form.3. Shares allotted in the preferential issue shall not be transferred till trading approval is granted for such shares by the stock exchanges. Further, the lock-in period shall commence on the date of such trading approvalRationalization of Investment Routes and Monitoring of Foreign Portfolio InvestmentsSEBI in its Board meeting discussed the report of the “Committee on Rationalization of Investment Routes and Monitoring of Foreign Portfolio Investments”, under the Chairmanship of Shri K. M. Chandrasekhar, former Cabinet Secretary, Government of India (GoI).The Board accepted the recommendations of the Committee which, inter alia, include: 1. Simplified and uniform entry norms for foreign investors by merging existing FIIs, Sub Accounts and Qualified Foreign Investors (QFIs) into a new investor class to be termed as “Foreign Portfolio Investors” (FPIs). 2. In order to make the procedure much simpler, prior direct registration of FIIs and Sub Accounts with SEBI be done away with. Instead, DDPs authorized by SEBI would register FPIs on behalf of SEBI subject to compliance with KYC requirements.3. Risk Based Approach towards Know Your Client (KYC) – From the point of KYC, the Committee recommended for categorization of FPIs into three categories. Category I - which would include Government and Government related entities such as Foreign Central Banks, Sovereign Wealth Funds, Multilateral Organizations etc, Category II - which would include regulated entities such as Banks, Asset Management Companies, Broad Based Funds such as Mutual Funds, Investment Trusts, Insurance and Reinsurance Companies, University Funds, Pension Funds and University related Endowments already registered with SEBI and Category III – All other FPIs not eligible to be included in the above two Categories.4. The approach to KYC will be risk based. The documents needed for registration and on boarding would be the simplest for Category I and most stringent for Category III.5. The requirement of submitting personal identification documents such as copy of passport, photograph etc. of the designated officials of FPIs belonging to Category I and Category II shall be done away with.6. Portfolio investments to be defined as investment by any single investor or investor group, which shall not exceed 10% of the equity of an Indian company. Any investment beyond the threshold of 10% shall be considered as Foreign Direct Investment (FDI). Trust this write up will be useful to you.Thanks & RegardsCS M Alagar,B.Com.,ACS,LLBDirectorGenicon Business Solutions Pvt.LtdUdhayam Royal TerraceNo.13/1, BasementTanjore Road (Near Krishna Ghana Sabha)T. NagarChennai – 600 017 Tel:044 4208 8484 M :91-9003199947Emaiil: alagar@geniconsolutions.comwww.geniconsolutions.com
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