SEBI Board Meeting Outcome: Easing IPO Rules, Startup ESOPs Norms To PSU Delistings Rules, 5 Key Takeaways

SEBI Board Meeting Outcome Today: The Securities and Exchange Board of India, in its Wednesday meeting, announced key measures related to IPO rules, Public Sector Undertaking (PSU) delistings, demat mandate, easing of Employee Stock Ownership Plan (ESOPs) for startups, etc.

SEBI Board Meeting: 5 Key Highlights

The SEBI has also announced category 1,2 alternative investment funds (AIFs) to offer co-investment schemes. Here are the key highlights from the SEBI Board Meeting.

ESOPs

SEBI has allowed startup owners to own ESOPs prior to the company's listing under certain conditions. SEBI has underlined that the move would encourage more startups for IPOs. Prior to the announcement, it was mandatory for startup and company owners to liquidate their ESOPs at the time of filing of draft red herring prospectus (DRHP). SEBI observed that the provision impacted founders classified as promoters at the time of filing IPO.

"The proposal approved by the Board shall facilitate founders who received such benefits at least one year prior to the filing of DRHP with the Board, to continue holding, and / or exercising such benefits even after being specified as the promoter/s and the company becoming a listed entity," noted SEBI in its press release.

Special Measure for Delisting of PSUs

In another amendment to SEBI Regulations, 2021, SEBI Board has introduced a special measure for PSUs (other than banks, NBFCs and insurance companies) to go for voluntary delisting through fixed price delisting process.

The board has allowed PSUs (other than NBFCs and banks), where aggregate government shareholding is more than 90% of total issued shares of the PSU, to be eligible for delisting under the relaxed route.

"The Board approved amendment to SEBI (Delisting of Equity Shares) Regulations, 2021 for introduction of a special measures for PSUs [other than Banks, Non-banking Financial Companies (NBFCs) and Insurance Companies] those which are under the ambit of any financial sector regulator) to undertake voluntary delisting through fixed price delisting process when the shareholding of Government of India as a promoter and/or other PSUs equals or exceeds 90%. Such measures include relaxations from requirement of two-third threshold for approving delisting by public shareholders and in the mode of computation of floor price," noted SEBI in its press release.

AIF Co-Investment

The SEBI Board meeting has also greenlit the proposal to provide flexibility to alternative investment funds. The move would allow them to offer co-investment opportunities to investors within the AIF structure.

"The Board approved the proposal to permit Category I & II AIFs to offer Co-investment scheme ('CIV scheme') under SEBI (Alternative Investment Funds) Regulations, 2012. This will further facilitate AIFs and investors to co-invest and will support capital formation in unlisted companies through AIFs."

Demat Mandate

The SEBI on Wednesday also approved changes related to Demat as well. SEBI has approved the mandate that select shareholders, including directors and key managerial personnel to hold their shares in the company in Demat form before IPO filing.

QIP Documents

The Market watchdog has eased the amendments related to the SEBI (ICDR) Regulations, 2018. The move would help in rationalising the disclosure requirements in QIP placement documents. SEBI's announcement would help in reducing the compliance burden.