The Securities and Exchange Board of India (SEBI) has eased the rules for IPO-bound companies dealing with pledged shares owned by untraceable or non-cooperative promoters.
Through a circular issued on April 8, the market regulator said the Issue of Capital and Disclosure Requirement (ICDR) regulations have been amended. After the changes, shares for which lock-in couldn’t be created will now be marked as “non-traceable” by depositories. Companies will also need to amend their Articles of Association, issue necessary intimation to lenders, and make suitable disclosures in offer documents, the circular said.
With this, the regulator has addressed an issue raised by companies looking to go public.
Earlier, if promoters pledged their shares and became untraceable or non-cooperative, it became difficult to create the lock-in on their shares, stalling the company's IPO process.
Under ICDR regulations, promoters' shares must be locked in for one-three years, while non-promoter holdings should be locked in for six months from the date of allotment.
However, as per a November consultation paper issued by SEBI, promoters and non-promoters are free to pledge their shares before the IPO allotment date. With the latest circular, SEBI has implemented all the proposals made in its consultation paper.
