SEBI Extends Relaxations For Rights Issue Compliances
The Securities and Exchange Board of India extended relaxations for companies with regards to compliance with procedural norms pertaining to rights issues opening till March 31 amid the ongoing coronavirus pandemic.
Earlier, this relaxation was given for rights issues opening till July 31, 2020, which was further extended till Dec. 31, 2020.
Based on the representations received from the market participants, the validity of relaxations is further extended and shall be applicable for rights issues opening up to March 31, 2021, SEBI said in a circular.
Under the relaxations, 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 coronavirus-related conditions will not be treated as non-compliance.
However, the issuers will 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 managers to the rights issue.
Further, the issuer company, along with the lead manager, needs to undertake all adequate steps to reach out to its shareholders through other means such as ordinary post, SMS, and audio-visual advertisement on television or internet.
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 and internet, among others, to disseminate information related 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.
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.
Further, the issuer, along with lead manager and other recognised intermediary, needs to institute a mechanism for allowing 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 the Application Supported by Blocked Amount facility.
In order to ensure that all eligible shareholders are able to apply to rights issue during such times, the issuer will along with lead manager to the issue, the registrar, and other recognised intermediaries institute an optional mechanism (non-cash mode only).
The mechanism will be for accepting the applications of the shareholders, subject to ensuring that no third-party payments will be allowed in respect of any application.
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 and robust, and should 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 and registrar will have to satisfy themselves about the transparency, fairness and integrity of such mechanism.
Frequently asked questions, 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, registrar, and other recognised intermediaries will be responsible for all investor complaints.
The authentication in respect of offer documents can be done using digital signature certifications and the issuer along with lead manager can provide procedure for inspection of material documents electronically.