SEBI eases delisting norms, enables call and put options for debt securities

The securities market regulator SEBI has eased norms related to delisting and made further changes in rules related to issue or partly paid shares and warrants besides corporate debt securities to generate more liquidity in the market and streamline separate regulations.

In its meeting held on January 22 it has decided to relax the requirement that delisting offers should see participation of at least a quarter of the public shareholders.

SEBI said it has decided to add a provision that if the acquirer and the merchant banker are able to demonstrate that they have contacted all the public shareholders, about the offer in the manner prescribed, then the condition of mandatory participation of 25 per cent of the public shareholders holding shares in demat mode would not be applicable.

The regulator has also eased the provisions for firms looking to move from a regional stock exchange to a national stock exchange. This follows concerns raised by companies that they are unable to get listed on nation-wide stock exchanges due to shortage of time in complying with the listing norms of such stock exchanges.

SEBI has decided to give a time of 18 months, within which such companies may obtain listing subject to compliance with the listing requirements of the nation-wide stock exchanges and till such listing the shares of 'exclusively' listed companies will remain on the dissemination board of nation-wide stock exchanges.

Moreover, in order to harmonise the norms on receipt of upfront payment and tenure of partly paid shares/warrants between the SEBI (ICDR) Regulations, 2009 and Foreign Exchange Management Act, SEBI has said that in case of partly paid shares issued through public/rights issue, a minimum 25 per cent of the issue price shall necessarily be received upfront.

“The balance consideration shall continue to be received within 12 months if the issue size is less than Rs 500 crore. Where the issue size exceeds Rs 500 crore and the issuer has appointed a monitoring agency, the period can be decided by the issuer as per the existing regulatory framework,” SEBI said.

In respect of warrants issued along with public or rights issue of specified securities, 25 per cent of the consideration shall be received upfront by the issuer and tenure of such warrants shall be 18 months as against 12 months presently, it has been decided.

Notably, equity convertible warrants issued under a preferential allotment already require conversion within 18 months.

Debt securities

SEBI has also approved amendments to Issue and Listing of Debt Securities (ILDS) regulations to incorporate express provisions for enabling "Consolidation and Re-issuance of Debt Securities" and "Call and Put options".

By enabling consolidation and re-issuance of debt-securities, the illiquid and infrequently traded corporate bonds can be re-issued, leading to creation of a larger floating stock that can increase liquidity in the market. By enabling Call and Put options, the issuer and investors would have flexibility in redemption of debt securities.

Moreover, SEBI has also approved amendments in Securitised Debt Instruments (SDI) regulations to rationalise and clarify the role and responsibilities of trustee, allowing banks and public financial institutions to act as trustee without obtaining registration, terms of appointment and capital requirement for trustee, and providing for a summary term sheet.

(Edited by Joby Puthuparampil Johnson)

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