SEBI Relaxation

SEBI notifies relaxations from certain provisions (Issue of Capital and Disclosure Requirements) Regulations, 2018 in respect of Rights Issue, in wake of COVID-19

In  the  wake  of  developments  relating  to the Covid-19  pandemic,  a  number  of suggestions  have  been  received  by Securities and Exchange Board of India (SEBI)  from  industry  bodies  and  market participants for easing of conditions relating to raising of funds from the securities market. In  this  context,  SEBI  has  decided  to  introduce  temporary  relaxations  in  the provisions related to Rights Issues as contained in the SEBI (Issue of Capital and Disclosure Requirements) Regulations,2018(“ICDR Regulations)as follows

A.Relaxations with respect to the eligibility conditions related to Fast Track Rights Issues: Unless otherwise specified, nothing contained in sub-regulations (1), (2), (4) and (5)  of  the  Regulation  71  shall  apply  if  the  issuer  satisfies  the  conditions mentioned under Regulation 99 of ICDR Regulations for making a rights issue through the fast track route. 

Certain  temporary  relaxations  with  respect  to Regulation  99  of  ICDR Regulations are extended as follows:
(i)In  regulation  99(a) the  words ‘three  years’ shall be  read  as ‘eighteen months’ 
(ii)In regulation 99(c) the words ‘two hundred and fifty crores’shall be read as ‘one hundred crores’
(iii)In regulation 99(f) and its proviso the words ‘three years’shall be read as ‘eighteen months’
(iv)Regulation 99(h) shall be read as under:“no show-cause notices,excluding under adjudication proceedings,have been issued by the Board and pending against the issuer or its promoters or whole-time directors as on the reference date;

In  cases where against  the  issuer  or  its  promoters/  directors/  group companies, i)a show  cause  notice(s)has  been  issued by  the  Board in  an adjudication proceeding or ii)prosecution proceedings have been initiated by the Board; 

necessary disclosures in respect of such action (s) along-with its potential adverse impact on the issuer shall be made in the letter of offer.(

v)Regulation 99(i) shall be read as “the issuer or promoter or promoter group or  director  of  the  issuer  has fulfilled the  settlement  terms  or  adhered  to directions  of  the  settlement  order(s)  in  cases  where  it has  settled  any alleged  violation  of  securities  laws  through  the  consent  or  settlement mechanism with the Board”
(vi)In  regulation  99  (j)  the  words ‘three  years’shall  be  read  as ‘eighteen months’.
(vii)Regulation  99  (m)  shall  be  read  as “For  audit  qualifications,  if  any,  in respect of any of the financial years for which accounts are disclosed in the letter  of  offer,  the  issuer  shall  provide  the restated  financial  statements adjusting for the impact of the audit qualifications. 

Further, that for the qualifications wherein impact on the financials cannot be  ascertained  the  same  shall  be  disclosed  appropriately  in  the  letter  of offer.

B.Relaxation with respect to Minimum Subscription:

Regulation 86(1) shall be read as under-

The minimum subscription to be received in the issue shall be at least seventy-five per cent of the offer through the offer document.

Provided  that  if  the  issue  is  subscribed  between  75%  to  90%,  issue  will  be considered  successful  subject  to  the  condition  that  out  of  the  funds raised at least 75% of the issue size shall be utilized for the objects of the issue other than general corporate purpose

C.Relaxation with  respect  to the  minimum  threshold required for  not  filing  draft letter of offer with SEBI:

In  regulation 3(b),  proviso  to  regulation  3 and in regulation  60,  the  words ‘ten crores’shall be read as ‘twenty-five crores’. 

The eligibility  and  general  conditions  as  specified  in  Regulation  61  &  62 respectively shall continue to apply.

These temporary relaxations are applicable for Right Issues that open on or before March 31, 2021.The relaxations mentioned  in  the  circular are not  applicable  for  issuance  of warrants.The circular shall come into force with immediate effect. The Stock Exchanges are advised by SEBI to bring the provisions of this circular to the notice of all entities who have listed their equity and convertible securities. The circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992. 

The  circular  can be accessed on SEBI website at http://www.sebi.gov.in under the category-‘Legal–>Circulars

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