Ipo Promoters Role
Name:
Roll no: 2011203
Div: Finance B
MMS II
Law assignment: IPO Promoters Role
INTRODUCTION
The Securities and Exchange Board of India (Sebi) has tightened rules governing promoter contributions in initial public offerings by mandating a one-year lock-in period on such holdings from the date of allotment of shares to other shareholders of the company. Presently only 20% of the promoters’ share in the IPO is subject to such lock-in.
Sebi has introduced this and a slew of other changes in its Disclosures and Investment Protection guidelines that have come into force with immediate effect. “It is clarified that lock-in period of one year shall be reckoned from the date of allotment of shares issued in a public issue,” the markets regulator said in a circular issued Friday night.
It said, the entire pre-issue capital, other than that locked in as minimum promoters’ contribution, cannot be sold for a period of one year from the date of allotment.
However, it clarified that where shares held by promoters are lent to the stabilising agent, these shall be exempted from the one-year lock-in starting from the date of such lending and ending on the date on which they are returned to the same lenders. The minimum promoter holding, however, will continue to attract the lock-in period of three years.
Sebi has also decided to rationalise disclosure requirements for rights and public issues by listed companies. These benefits will also be made available to those companies which are regular in filing periodic returns with stock exchanges and have a comprehensive investor grievance mechanism in place.
In order to bring uniformity, Sebi has decided to permit an issuer company making a rights issue to dispatch an abridged letter of offer containing disclosures as required in an abridged prospectus.
Currently, a company is prohibited from making a further issue of capital after filing a draft offer document with Sebi till the listing of the shares referred to in the
Roll no: 2011203
Div: Finance B
MMS II
Law assignment: IPO Promoters Role
INTRODUCTION
The Securities and Exchange Board of India (Sebi) has tightened rules governing promoter contributions in initial public offerings by mandating a one-year lock-in period on such holdings from the date of allotment of shares to other shareholders of the company. Presently only 20% of the promoters’ share in the IPO is subject to such lock-in.
Sebi has introduced this and a slew of other changes in its Disclosures and Investment Protection guidelines that have come into force with immediate effect. “It is clarified that lock-in period of one year shall be reckoned from the date of allotment of shares issued in a public issue,” the markets regulator said in a circular issued Friday night.
It said, the entire pre-issue capital, other than that locked in as minimum promoters’ contribution, cannot be sold for a period of one year from the date of allotment.
However, it clarified that where shares held by promoters are lent to the stabilising agent, these shall be exempted from the one-year lock-in starting from the date of such lending and ending on the date on which they are returned to the same lenders. The minimum promoter holding, however, will continue to attract the lock-in period of three years.
Sebi has also decided to rationalise disclosure requirements for rights and public issues by listed companies. These benefits will also be made available to those companies which are regular in filing periodic returns with stock exchanges and have a comprehensive investor grievance mechanism in place.
In order to bring uniformity, Sebi has decided to permit an issuer company making a rights issue to dispatch an abridged letter of offer containing disclosures as required in an abridged prospectus.
Currently, a company is prohibited from making a further issue of capital after filing a draft offer document with Sebi till the listing of the shares referred to in the