Sebi Relaxations Post Covid 19

The Securities and Exchange Board of India (SEBI) on 21st April 2020 came up with three circulars offering various relaxations due to the spread of COVID-19. The current article tries to explain all the SEBI relaxations provided by the vide three circulars issued on 21st April 2020.

One-time relaxation concerning the validity of SEBI observation

SEBI, vide Circular no. SEBI/HO/CFD/DIL1/CIR/P/2020/66 dated 21st April 2020, granted following one-time relaxation:

Validity of SEBI observations on all the public issues or rights issues has been extended by 6 months from the date of expiry. The relaxation is applicable for the issuers whose observation expires between the period 1st March 2020 to 30th September 2020.
Currently, the increase or decrease in estimated fresh issue size, by more than 25% of the estimated fresh issue size, requires the fresh filing of the draft offer document along with fees.

However, as per the relaxation, now, the issuer shall be permitted to increase or decrease the estimated fresh issue size up to 50% without requiring to file the fresh draft offer document, if the following conditions are satisfied:

There should not be any change in the object of the issue.
The lead manager needs to ensure that all the appropriate changes are done to the relevant section of DRHP, and the supplement, to the same, is made in public.
The lead manager accepts that the draft offer document complies with provisions of Regulation 7(1)(e).

Please note, the relaxation is available for all public issues/right issues or FPO opening before 31st December 2020.

Relaxation on timeline for compliance with regulatory requirements by trading or clearing members

SEBI, vide circular no. SEBI/HO/MIRSD/DOP/CIR/P/2020/68 dated 21st April 2020, has extended following time limit:

Type of compliance Type of extension

Submission of report towards weekly monitoring of the client funds (under the provisions of Enhanced Supervision).
No penalty shall be levied, for the delay, till 17th May 2020.
Submission of monthly data towards the clients and fund balance (under the provisions of Enhanced Supervision).
Reporting of Daily Margin Trading.
Updating the Income Tax PAN of Key Management Personnel or Directors.
Due date extended by one month.
Issuance of ‘Annual Global Statement’ to the clients

Relaxation concerning certain provisions of SEBI relating to Right Issue

SEBI, vide circular no. SEBI/HO/CFD/CIR/DIL/67/2020 dated 21st April 2020, has relaxed following provisions of the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 relating to Right Issue. It is important to note that the relaxations apply to the Right issue that is open on or before 31st March 2021. Relaxation relating to the eligibility conditions relevant to Fast Track Rights Issue:

The period of listing of equity shares of the issuer on any stock exchange for ‘at least three years’ has been reduced to ‘18 months’.
The average market capitalization of public shareholding of the issuer of R.250 Crores has been reduced to Rs.100 Crores.
The period of compliance/non-compliance with the equity listing agreement/SEBI LODR Regulations has been reduced to 18 months (earlier it was three years).
The period requirement of equity shares of the issuer not being suspended from trading, as a disciplinary measure, has been reduced to 18 months (earlier it was three years).
The requirement relating to no audit qualifications on the issuer’s audited accounts has been relaxed with the requirement to provide the restated financial statements of the issuer adjusting the impact of audit qualification.

Relaxation relating to a minimum subscription

The minimum subscription to be received in the issue has been reduced to 75% (earlier it was 90%) of the offer through the offer document. However, the issue shall be considered successful only if the following condition is satisfied:

In case the issue is subscribed between 75% and 90%, out of the total funds, at least 75% of the issue size should be utilized for the objects of the issue (other than general corporate purpose).

Relaxation relating to the minimum threshold required for not filing draft offer letter with SEBI

The listed entities raising funds to Rs.25 Crores (earlier it was Rs.10 Crores) in a rights issue will not be required to file a draft offer document.

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Frequently Asked Questions

Common questions about SEBI Relaxations Post COVID-19.

The purpose of the SEBI relaxations issued on 21st April 2020 was to provide relief to issuers and market participants due to the challenges posed by the COVID-19 pandemic. The relaxations aimed to facilitate smoother operations and compliance with regulatory requirements during the crisis period.

The one-time relaxation concerning the validity of SEBI observation is applicable for issuers whose observation expires between 1st March 2020 and 30th September 2020. The validity of SEBI observations on public issues or rights issues has been extended by 6 months from the date of expiry for these issuers.

As per the relaxation, issuers are now permitted to increase or decrease the estimated fresh issue size up to 50% without requiring to file a fresh draft offer document, provided there is no change in the object of the issue, appropriate changes are made to the relevant sections, and the lead manager ensures compliance with Regulation 7(1)(e).

SEBI has provided relaxation to trading or clearing members for the submission of reports related to weekly monitoring of client funds, monthly data on clients and fund balance, and reporting of Daily Margin Trading. The due dates for these compliances have been extended by one month.

SEBI has relaxed the eligibility conditions for Fast Track Rights Issue, including reducing the required period of listing to 18 months, lowering the average market capitalization requirement, relaxing the compliance period with listing agreements, and allowing audit qualifications with restated financial statements.

The minimum subscription requirement for a Rights Issue has been reduced from 90% to 75% of the offer through the offer document. However, if subscribed between 75% and 90%, at least 75% of the issue size should be utilized for the objects of the issue (other than general corporate purpose).

Listed entities raising funds up to Rs. 25 Crores (earlier it was Rs. 10 Crores) in a rights issue will not be required to file a draft offer document with SEBI.

The relaxations concerning certain provisions of SEBI relating to Rights Issues are applicable to the Rights Issues that are open on or before 31st March 2021.

The purpose of extending the validity of SEBI observations on public issues or rights issues is to provide issuers with more time to complete the issuance process, given the challenges posed by the COVID-19 pandemic.

SEBI has extended the due date for updating the Income Tax PAN of Key Management Personnel or Directors by one month as a relaxation for trading or clearing members.