SEBI Board decisions: MPS norms for CIRP companies, minimum promoter contribution for FPOs, criteria for sponsors of MFs, etc.
December 17, 2020
In its Board Meeting of 16 December 2020, SEBI has approved amendments to several regulations. Notably, the Minimum Public Shareholding (MPS) norms for listed companies going through Corporate Insolvency Resolution Process (CIRP) have been recalibrated ; the applicability of Minimum Promoters’ Contribution and subsequent lock in requirements for issuers making a Further Public Offer have been done away with under the ICDR Regulations 2018. Specifically, the following decisions were taken:
- Amendments to Mutual Fund (MF) Regulations 2008:
- To facilitate enhanced investor outreach, sponsors that do not fulfil the profitability criteria at the time of making an application will also be considered eligible to sponsor a mutual fund, provided they have a net-worth of not less than INR 100 Cr. for contribution towards the net-worth of the Asset Management Company (AMC). This net-worth of the AMC must be maintained till the time AMC makes profit for 5 consecutive years.
- The manner of computation of net-worth of the AMC has been streamlined and it is mandatory for all AMCs to maintain the minimum net-worth on a continuous basis.
- In addition to the existing requirement of segregating bank accounts and securities accounts, all assets and liabilities of each scheme shall be segregated and ring-fenced from other schemes of the mutual fund.
- Recalibration of Minimum Public Shareholding (MPS) norms for listed companies going through CIRP : Following the SEBI consultation paper proposing a recalibration of the MPS norms and enhanced disclosures by companies undergoing CIRP, it is mandated that companies which continue to remain listed as a result of implementation of a resolution plan under the I&B Code 2016 must have at least 5% public shareholding at the time of their admission to dealing on the stock exchange (as against no minimum requirement at present) ; 10% public shareholding within a period of 12 months therefrom and 25% public shareholding within a period of 36 months thereafter. The lock-in on equity shares allotted to the resolution applicant under the resolution plan will not apply to achieve 10% public shareholding within 12 months.
- Additional disclosures are required to be made by such companies, such as, specific details of resolution plan, assets post-CIRP, securities continuing to be imposed on the companies’ assets, proposed steps to be taken by the incoming investor/acquirer for achieving MPS; and quarterly disclosure of the status of achieving the MPS.
- Amendments to the ICDR Regulations 2018 to do away with the applicability of Minimum Promoters’ Contribution and the subsequent lock in requirements for issuers making a Further Public Offer of specified securities, provided that (i) the equity shares of the issuer are frequently traded on a stock exchange for a period of at least three years, (ii) the issuer has been in compliance with the LODR Regulations 2015 for a period of at least three years, and (iii) the issuer has redressed at least ninety-five per cent of the complaints received from the investors.
- Amendment to AIF Regulations 2012 to provide certain exemptions to AIFs in respect of Investment Committee members, in terms of Regulation 20(6) of AIF Regulations, conditional upon capital commitment of at least INR 70 Crore from each investor accompanied by a suitable waiver.
- Amendments to the Investment Advisers (IA) Regulations 2013 to mandate Investment Advisers to seek membership of a body recognised by SEBI for administration and supervision of IAs. The Board also approved modification to the structure of fees payable by IAs, while ensuring that the total cost borne by IAs towards fees remains same as that payable by IAs under the present IA Regulations.
- Amendments to the Intermediaries Regulations 2008 to rationalize the processes in it and to avoid duplicity of proceedings before the Designated Authority and the Designated Member.
- Repeal of the Central Database of Market Participants Regulations, 2003 on account of the introduction of PAN as the sole identification number for all securities market transactions and discontinuance of requirement of Unique Identification Number under these regulations.
To refer to the press release dated 16 December 2020, click here.