SEBI temporarily relaxes pricing of preferential issues
June 26, 2020
In its Board Meeting on 25 June 2020, SEBI has taken significant decisions in respect of pricing of preferential issue, permitting bulk/block deals during an open offer under the Takeover Regulations and automating the process of making disclosures under Insider Trading Regulations, among others, as under:
Temporary relaxation in pricing of preferential issues:
In view of difficulties in raising capital on account of the Covid-19 pandemic, an additional option of pricing methodology for preferential issues has been provided for issues made between 1 July 2020 or date of notification of amendment to the Regulations, whichever is later and 31 December 2020, as follows:
In case of frequently traded shares, the price of the equity shares to be allotted pursuant to the preferential issue shall be not less than higher of (a) the average of the weekly high and low of the volume weighted average price of the related equity shares quoted on the recognised stock exchange during the twelveweeks preceding the relevant date; or (b) the average of the weekly high and low of the volume weighted average prices of the related equity shares quoted on a recognised stock exchange during the two weeks preceding the relevant date.
The specified securities allotted on preferential basis using the above pricing formula shall be locked-in for a period of three years. The existing pricing guideline under Regulation 164(1) of the ICDR Regulations shall continue to remain in force. The issuer may choose any one of the pricing options.
Amendments to the SEBI (SAST) Regulations 2011
Acquisition through stock exchange settlement process through bulk and/or block deals shall be permitted during the open offer, subject to conditions mentioned in regulation 22(2A) of Takeover Regulations.
In case of indirect acquisitions where public announcement of an open offer has been made, an amount equivalent to 100% of the consideration payable under the open offer must be deposited two working days before the date of detailed public statement. The escrow account shall be in the form of cash and/ or bank guarantee.
In case of delays in making open offer attributable to the acts of omission or commission of the acquirer, a simple interest of 10% shall be paid to all the shareholders who have tendered the shares in the open offer.
Amendments to SEBI (Prohibition of Insider Trading) Regulations, 2015
Maintenance of a structured digital database containing nature of unpublished price sensitive information and the names of persons who have shared the information;
Automated process for filing disclosures to stock exchanges, restriction on trading window will not apply to transactions as prescribed by SEBI, entities to file the non-compliances of Code of Conduct with the stock exchanges and amounts if any collected for such non compliances shall be credited to Investor Protection Education Fund administered by the Board under the SEBI Act.
Amendments to the SEBI (Settlement Proceedings) Regulations 2018 as under:
Inclusion of Promoters along with the Principal Officer for the purpose of calculation of the base amount in terms of Table X of Schedule II;
Base Amount for alleged defaults relating to open offer violations, where the making of the open offer has become infructuous, to be rationalised and benchmark for certain Base Amount in Schedule II to be suitably amended;
To refer to the SEBI press release dated 25 June 2020, click here.
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