SEBI Board Meet On Sept 12 — Minimum Public Shareholding Norms, AIF Entry Rules In Focus
The Securities and Exchange Board of India (SEBI) will take up a series of market reform proposals at its board meeting scheduled for September 12.
The Securities and Exchange Board of India (SEBI) will take up a series of market reform proposals at its board meeting scheduled for September 12. The agenda includes proposals across minimum public shareholding rules, entry into alternate investment fund schemes, brokers, analysts, and related party transactions.
Here's a look at the key proposals:
Relief In IPO Norms For Big Companies
SEBI has proposed that, for companies with post-issue capital above Rs 50,000 crore but less than or equal to Rs 1 lakh crore, the offer size must be equivalent to Rs 5,000 crore and at least 8% of securities.
If the post-issue capital is above Rs 1 lakh crore but less than or equal to Rs 5 lakh crore, the company would need to offer shares equivalent to Rs 6,250 crore and at least 2.75% of its securities.
Finally, for the largest companies with post-issue capital above Rs 5 lakh crore, the requirement would be shares equivalent to Rs 15,000 crore and at least 1% of securities, subject to a floor ensuring that every company offers at least 2.5% to the public.
Another critical aspect is the timeline to achieve the statutory 25% minimum public shareholding.
For companies in the Rs 1,600 crore to Rs 4,000 crore range, and those above Rs 4,000 crore but below Rs 1 lakh crore, SEBI requires that 25% MPS be achieved within three years of listing.
The proposed amendments extend these timelines considerably for large firms. Companies with public shareholding below 15% at the time of listing will be required to achieve 15% within five years and 25% within 10 years.
Where public shareholding is already above 15% on listing, such companies will need to reach the 25% threshold within five years.
Lowering Entry Thresholds For Large AIF Schemes
SEBI wants to make it easier for big funds called Large Value Funds (LVFs) to operate.
Right now, anyone investing in such funds has to put in at least Rs 70 crore. SEBI has proposed cutting this minimum to Rs 25 crore. The idea is that if the entry amount is lower, more big Indian institutions like insurance companies will be able to invest, making the investor pool wider.
SEBI also plans to relax some of the rules these funds currently follow.
New AIF category for accredited investors
SEBI is looking at creating a new category of alternative investment funds (AIFs) that will be open only to accredited investors. Accredited investors are wealthy or financially sophisticated individuals or institutions who get special access to invest in such funds under lighter rules.
To qualify, they must first go through an accreditation process.
SEBI had already simplified this accreditation framework in December 2023. Now, the regulator is considering further changes to make the process quicker and more efficient.
One proposal is to use the existing KYC (Know Your Customer) system so that more agencies can issue accreditations. Another is to allow managers of AIFs to do the first level of checks when onboarding accredited investors.
If these proposals are approved, there will be more agencies available to grant accreditation
Easier rules for investment advisors and analysts
SEBI is also looking to ease rules for investment advisors (IAs) and research analysts (RAs). The proposals include allowing them to share past performance with clients, permitting IAs to give a second opinion on already distributed assets, and easing the compulsory corporatization requirement for IAs.
SEBI also plans to relax eligibility norms by lowering educational criteria, as well as reducing documentation requirements such as proof of address, CIBIL reports, net worth or asset-liability statements, and infrastructure details.
Proposals for related party transactions
One proposal is that if a subsidiary of a listed companyenters into a transaction worth more than Rs 1 crore, and the subsidiary does not yet have at least one year of audited financial statements, then the parent company’s audit committee must give prior approval.
The threshold for approval will depend on either 10% of the subsidiary’s net worth or the listed company’s own materiality threshold, whichever is lower. If the subsidiary has negative net worth, then its paid-up share capital plus securities premium will be considered instead.
SEBI is also proposing to ease compliance for smaller RPTs. Currently, transactions up to Rs 1 crore are exempt from detailed disclosure requirements.
It is now being suggested that if a transaction is above Rs 1 crore but still small — not exceeding 1% of the listed company’s annual consolidated turnover or Rs 10 crore, whichever is lower.
