SEBI eases preferential issue pricing norms for companies and amends open offer rule

The Securities and Exchange Board of India on 25^th June 2020 decided to relax the pricing methodology for preferential issuance of shares and has revised various regulations like SEBI (Prohibition of Insider Trading) Regulations, 2015, The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, Securities and Exchange Board of India (Settlement Proceedings)(Amendment) Regulations, 2020.

Key highlights from the board meeting:

• The Board has decided to provide an additional option to the existing pricing methodology for preferential issuance. As per the new pricing formula, the price for allotment of shares under preferential issue will be volume weighted average of weekly highs and low for 12 weeks or two weeks–whichever is higher.
• The specified securities allotted on a preferential basis using the above pricing formula shall be locked-in for a period of three years.
• The board has made certain amendments to the Substantial Acquisition and Takeover Regulations, allowing acquisition of shares by way of stock exchange settlement process through bulk and/or block deals during the open offer.
• For indirect acquisitions where the public announcement of an open offer has been made, 100 percent of the consideration payable under the open offer must be deposited in an escrow account.
• In case of delays in making open offer due to acts of omission or commission of the acquirer, a 10% interest to be paid to all shareholders who have tendered the shares in the open offer.

Further, the board has also approved amendments to SEBI (Prohibition of Insider Trading) Regulations, 2015, which includes maintaining a structured digital database containing the nature of unpublished price sensitive information and the names of persons who have shared the information. This will involve the automation of the process of filing disclosures to stock exchanges, restriction on the trading window not to be made applicable for transactions as prescribed by SEBI, and includes entities to file the non-compliances of Code of Conduct with the stock exchanges.

Click here to read the notification.