The Securities and Exchange Board of India (SEBI) on 28th September 2020, issued the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Fourth Amendment) Regulations, 2020 thereby amending the Regulations of 2018. These Amendment Regulations come into force from 28th September 2020.
Some of the key amendments to the Regulations are as follows:
- These Regulations will now be applicable to a rights issue by a listed issuer; where the aggregate value of the issue is INR 50 crore or more. Further, in case of rights issue of less than INR 50 crore, the issuer shall prepare the letter of offer in accordance with requirements and file the same with SEBI, for information and dissemination on the SEBI’s website
Prior to this amendment, the aggregate value of the right issue was required to be INR 10 crore or more and the present amendment has enhanced this value to INR 50 crore or more.
- In respect of the general conditions of the rights issue, the Amendment Regulations explain the concept of ‘finance for the specific project’ to mean finance of capital expenditures only. Prior to this amendment, there was no explanation provided for this term.
- The Amendment Regulation stipulates for clarification on the conditions for accepting applications on plain paper from applicants in rights issues. The amendment states that the Self Certified Syndicate Banks (SCSBs) shall accept such application forms only if all details required for making the application as per these regulations are specified in the plain paper application.
- The Amendment Regulations have brought sweeping changes and have thoroughly revised its provisions relating to disclosures in the letter of offer. Part B of Schedule VI has been revised by virtue of this amendment and Part B -1 has been inserted.
If the issuer satisfies the conditions in clause 1 of Part B of the Schedule VI, he is required to comply with the provisions in Part B. On the other hand, if the issuer does not satisfy these conditions then he must make disclosures in his offer letter as per provisions contained in Part B-1.
These provisions include which issuers are mandatorily required to make disclosures, stipulations as regards the front and back cover pages of the offer letter, table of contents, definitions, summaries, risk factors, introduction, particulars of the issue, details of the business, management (Board of Directors and Senior Management) and organisational structure, financial information of the issuer, etc.
