Sebi eases compliance requirement for rights issues

New Delhi: Markets regulator Sebi on Wednesday gave certain relaxations to companies from compliance with procedural norms pertaining to rights issues opening up to July 31 amid the coronavirus lockdown.

The regulator said the abridged letter of offer, application form and other issues material to shareholders can be undertaken by electronic transmission as already provided under the ICDR (Issue of Capital and Disclosure Requirements) norms.

Failure to adhere to modes of dispatch through registered post or speed post or courier services due to prevailing COVID-19 related conditions will not be treated as non-compliance, the Securities and Exchange Board of India (Sebi) said in a circular.

However, the issuers would have to publish the letter of offer, abridged letter of offer and application forms on the websites of the company, registrar, stock exchanges and the lead manager(s) to the rights issue.

Further, the issuer company along with lead manager(s) need to undertake all adequate steps to reach out its shareholders through other means such as ordinary post, SMS, audio-visual advertisement on television or internet, among others.

The issue related advertisement needs to contain additional details as regards the manner in which the shareholders who have not been served notice electronically may apply.

The advertisement should also be made available on the website of the issuer, registrar, lead managers and stock exchanges.

The issuer needs to make use of advertisements in television channels, radio, internet, among others, to disseminate information relating to the application process.

Such advertisements can be in the form of crawlers or tickers as well.

Further, physical shareholders are required to provide their demat account details to issuer or registrar to the issue for credit of right entitlements (REs).

In view of COVID-19 pandemic and the lockdown measures, in case the physical shareholders have not been able to open a demat account or are unable to communicate their demat details to the issuer/ registrar for credit of REs within specified time, such shareholders should be allowed to submit their application, Sebi said.

The regulator said the issuer along with lead manager(s) and other recognized intermediary need to institute a mechanism to allow physical shareholders to apply in the rights issue.

They have to take adequate steps to communicate this mechanism to such shareholders before the opening of the issue.

Such shareholder would not be eligible to renounce their rights entitlements. Besides, such physical shareholders would receive shares, in respect of their application, only in demat mode.

Under the ICDR norms, application for a rights issue has to be made only through ASBA (Application Supported by Blocked Amount) facility.

“In view of the difficulties faced due to COVID-19 pandemic and the lockdown measures, and in order to ensure that all eligible shareholders are able to apply to rights issue during such times, the issuer shall along with lead manager(s) to the issue, the registrar, and other recognized intermediaries (as deemed fit by issuer and lead manager(s)] institute an optional mechanism (non-cash mode only) to accept the applications of the shareholders subject to ensuring that no third party payments shall be allowed in respect of any application,” Sebi said.

The mechanism would only be an additional option and not a replacement of the existing process. As far as possible, attempts will be made to adhere to the existing prescribed framework.

The mechanism would be transparent, robust and have adequate checks and balances. It should aim at facilitating subscription in an efficient manner without imposing any additional costs on investors.

The issuer along with lead manager(s), and registrar would have to satisfy themselves about the transparency, fairness and integrity of such mechanism.

An FAQ, online dedicated investor helpdesk, and helpline need to be created to guide investors in gaining familiarity with the application process and resolve difficulties faced by investors on priority basis.

The issuer along with lead manager(s), registrar, and other recognized intermediaries would be responsible for all investor complaints.

Sebi said it has decided to grant the relaxations in respect of all offer documents filed until July 31.

The regulator said that authentication/ certification in respect of offer documents can be done using digital signature certifications and the issuer along with lead manager(s) can provide procedure for inspection of material documents electronically.