The SEBI headquarters in Mumbai. (Photographer: Santosh Verma)

SEBI Revises IPO Timeline, Share Buyback Regulations

The Securities and Exchange Board of India today made a slew of changes, particularly in its regulations for initial public offerings and share buybacks, aimed at simplifying language and reducing redundancies.

Share Buyback Guidelines

Under the new regulations, the buyback period of a company’s shares has been redefined as the time between the board’s resolution to that effect and the date on which the payment will be made to shareholders. SEBI also said that at least 15 percent of the securities a company proposed to buy back should be reserved for small shareholders, while the maximum limit was capped at 25 percent of the paid-up capital. Besides, the regulator allowed companies to buy back as much as 10 percent of shares outstanding without shareholders’ resolution.

IPO Timeline

IPO issuers can now announce the price band of the offer two days before it opens for subscription as opposed to five days earlier, chairman Ajay Tyagi told reporters at a media conference in Mumbai.

Takeover Regulations

With respect to takeover regulations, SEBI proposed changes related to revision of the open offer price. “As part of the amendments, it has been decided to grant additional time for upward revision of open offer price till one working day before the commencement of the tendering period,” the regulator said.

Governance Norms For Exchanges, Depositories

SEBI also approved changes to regulations governing Market Infrastructure Institutions – stock exchanges, clearing corporations and depositories – in line with the recommendations of a committee headed by former Reserve Bank of India Deputy Governor R Gandhi. The regulator “harmonised” the shareholding limits in these entities in order to bring parity across them.

Eligible domestic and foreign entities, may be permitted to hold up to 15 percent shareholding in case of depository and clearing corporation, as is the case for stock exchanges. Additionally, multilateral and bilateral financial institutions, as notified by the government, have also been recommended to hold up to 15 percent in an MII.
  • Public interest directors and managing directors at stock exchanges, depositories and clearing corporations can have a maximum of two terms of five years each.
  • The second term would be “subject to satisfactory performance review”.
  • Besides, there should be a cooling-off period of one year prior before the same person is nominated as a PID in another market infrastructure institution.
  • The cooling-off period for a director to become a shareholder director in the same institution or a director in its subsidiary would be three years.
  • A person may serve as managing director of a MII, for a maximum of two terms of up to 5 years each or up to 65 years of age, whichever is earlier. The said requirement would also be applicable to existing MDs of MIIs.
  • The number of PIDs, on the governing board and the committees of the MIIs, should be at least equal to the number of shareholder directors (including the managing director) and in case of an equality of votes, the chairperson of the board or committee (who is a PID), should have a second or casting vote.

Other Highlights

  • Auditor disclosures to be in line with Kotak committee recommendations
  • Mandatory auditor disclosures to be effective from April
  • SEBI will do away with the category of sub-brokers, to migrate sub-brokers to authorised category
  • Enforcement action in NSE co-location base likely to be completed in next few days.
  • Action taken in the case to be made public in next few days.
  • SEBI received four reports on WhatsApp leak issue, yet to take action.

Also read: SEBI Initiates Enforcement Action In NSE Co-Location Case

Watch the full press conference here:

Will SEBI’s tweaked norms for IPOs and share buybacks help market participants? In conversation with Sandip Bhagat and Pranav Haldea.