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SEBI announces relaxed rules for listing Startups

To encourage listing of start-ups, markets regulator Sebi has announced several relaxations to norms, including decreasing the holding period for pre-issue capital and enabling discretionary allotment to suitable investors.

The alterations have been made to the structure for listing on the Innovators Growth Platform (IGP), according to two separate notifications circulated on Wednesday.

Other relaxations include easing delisting conditions and relaxation in guidelines for transferring to main board.

This is directed at making the platform more accessible to firms given the evolving start-up ecosystem.

SEBI has decreased the period of holding of 25 percent of pre-issue capital of the issuer company by eligible investors to one year from the existing requirement of two years.

The term ‘Accredited Investor’ for IGP is renamed ‘Innovators Growth Platform Investors’.

Such investor’s pre-issue shareholding would be regarded for the entire 25 percent of the pre-issue capital of the issuer company against the existing limit of just 10 percent.

For provisions for the listing of firms on the main board, Sebi stated the issuer company on the IGP would be permitted to allocate up to 60 percent of the issue size on a discretionary basis before issue opening for a subscription to eligible investors with a lock-in of 30 days on such shares.

This is subject to that the price of the specified securities offered to eligible investors would not be less than the price offered to other applicants and eligible investors would make an application of a value of at least Rs 50 lakh.

At present, the issuer company is not allowed to make discretionary allotment.

In line with the provisions of main board IPO, issuer companies that have issued superior voting rights (SR) equity shares to promoters and founders will be permitted to do listing under the IGP framework, Sebi stated.

The threshold trigger for open offer has also been relaxed from the existing 25 percent to 49 percent.

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

An issuer company whose specified securities are traded on the IGP under an initial public offer may exit from the platform if such an exit is authorized by the board of directors of the company in its meeting, Sebi said.

Additionally, SEBI stated that such an exit is authorized by the shareholders of the company by a special resolution passed through postal ballot or e-voting, after revealing all material facts in the explanatory statement sent to the shareholders concerning such resolution.

The delisting would be deemed successful if the post-offer acquirer or promoter shareholding, collectively with the shares tendered and accepted, equals 75 percent of the total issued shares of that class; and at least 50 percent shares of the public shareholders are tendered and accepted.

Moreover, for delisting, Sebi said the Reverse Book Building mechanism will not be applicable, and for computation of offer price, the floor price will be defined in terms of takeover regulations, along with delisting premium as justified by the acquirer/promoter.

It has also relaxed the structure for companies looking to migrate to the main board.

At present, for a company not meeting the conditions of profitability, net assets, net worth among others for migration from IGP to main board requires a company to have 75 percent of its capital held by QIBs as of the date of application for migration. This condition has now been decreased to 50 percent, Sebi said.

To put this into practice, Sebi has amended ICDR (Issue of Capital and Disclosure Requirements) Regulation and SAST (Substantial Acquisition of Shares and Takeovers) norms.

The new rules have become effective from May 5, as per the notifications.

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