SEBI

SEBI Announces Relaxation to Fast Track Public Offers

SEBI Announces Relaxation to Fast Track Public Offers

To aid the listed companies during COVID-19 pandemic, the Securities and Exchange Board of India has announced various relief measures like relaxation to several regulations applicable to right issue, creation of encumbrances by listed REITs, relaxation of certain procedural matters relevant to buybacks and takeovers and relaxation to guidelines applicable to initial public offerings.

Recently, vide circular dated 9th June 2020, the Securities and Exchange Board of India offered certain temporary relaxation from eligibility conditions for a Fast Track Further Public Offers.

Noticeably, the Fast Track Further Public Offers allows the eligible listed company to raise public funds within a significantly quicker duration by fast-tracking the fund-raising procedure.

The present article highlights the applicable eligible condition and relaxation offered thereon by the Securities and Exchange Board of India.

Highlights of the relaxations announced to undertake the Fast Track further Public Offers

The Securities and Exchange Board of India (i.e., SEBI), vide circular no. SEBI/HO/CFD/CIR/CFD/DIL/85/2020 dated 9th June 2020 relaxed various eligibility provisions of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 with regard to Further Public Offer. The prevailing eligible condition and subsequent relaxation thereon are highlighted hereunder-

Reduction in meeting the average market capitalization

Prevailing eligible condition- In order to be eligible for undertaking the Fast Track Further Public Offer, the company is required to meet the condition of the average market capitalization of its public shareholding, which should be at least INR 1,000 Crore.

Relaxation in condition- Now, the company would be eligible for Fast Track Further Public Offer if the average market capitalization of its public shareholding is INR 500 Crores.

In nut-shell, the condition of threshold average market capitalization of public shareholding has been reduced from INR 1,000 Crore to INR 500 Crores. The significant benefit of the said relaxation would be available to the company, which has a public holding of less than 25% of its paid-up share capital and relatively small companies.

Relaxation in the condition of pending show cause notice

Prevailing eligible condition- until now, if the SEBI has issued any show cause notice or has initiated any prosecution proceedings against an issuer, promoters or whole-time director of the company, then such company couldn’t be eligible for Fast Track Further Public Offer.

Relaxation in condition- however, now, the company would be eligible for Fast Track Further Public Offer in case the show cause notice relates to adjudication proceedings or where SEBI initiates the prosecution proceedings. However, the relaxation is available only if the Further Public Offer (FPO) prospects contain appropriate disclosure about the pending show cause notice or pending prosecution proceedings.

Relaxation in settlement of any alleged securities law violations

Prevailing eligible condition- at present in case the company or promoters or promoter group or director has settled any alleged violation of the securities laws via the consent/ settlement mechanism with SEBI during the last three years. Then in such a case, the company would be ineligible to undertake the Fast Track Further Public Offer.

Relaxation in condition- the above condition will have no eligible effect if the terms of the settlement have been fulfilled or if the directions of the settlement order have been adhered to.

Relaxation in the condition of audit qualification

Prevailing eligible condition- at present, the listed company with an audit qualification in the financial statement is expelled from undertaking a Fast Track Further Public Offer if the impact of audit qualification exceeds 5% of the net profit or loss after tax.

Relaxation in condition- now, the above condition will have no eligible effect to the extent the audit qualification is disclosed in the offer document, and the impact of the same is adjusted for in the restated financial statement.

Post by poonamgandhi

CA Poonam Gandhi is a Chartered Accountant and a Lawyer. With a wide practice experience and deep understanding of different laws and taxes, she has been an independent professional writer in the field of taxation, finance and laws.