Policy

SEBI exempts lenders investing in stressed co from open offer

Our Bureau Mumbai | Updated on January 09, 2018 Published on August 16, 2017

sebi

The relaxation will be subject to special resolution

In a major relief to banks and other lenders holding stressed assets, market regulator SEBI relaxed norms for a stake purchased in distressed listed companies by lenders, exempting them from making open offers for shareholders.

The relaxation will be subject to certain conditions, including shareholders’ approval of the stake acquisition by way of special resolution, SEBI said.

Bad loans in India amount to around ₹8 lakh crore and the government and the Reserve Bank of India have been making efforts to tackle it. SEBI eased the norms for restructuring in stressed companies that are listed on exchanges as well as resolution plans approved under the Insolvency and Bankruptcy Code.

The move could lead to a turnaround of listed companies in distress which will benefit their shareholders and lenders.

Restructuring under SDR

Currently, relaxations from preferential issue requirements and open offer obligations are available for lenders undertaking restructuring of distressed listed companies under the Strategic Debt Restructuring (SDR) scheme.

Relaxations will be subject to a lock-in of their shareholding for a minimum three years.

“The lock-in of equity shares acquired pursuant to conversion of convertible securities purchased from the lenders shall be reduced to the extent the convertible securities have already been locked-in,” SEBI said.

Conditions

The special resolution requires approval of at least 75 per cent of a company’s shareholders.

Besides, the issuer will have to make certain disclosure about the proposed acquirer in the explanatory statement to the notice for the general meeting proposed for passing the special resolution.

These disclosures are about the ultimate beneficial owners of the shares proposed to be purchased, its business model, a statement on growth of business over a period of time, summary of financials of the previous three financial years, track record in turning around companies, and the proposed road map for effecting turnaround of the issuer.

Published on August 16, 2017

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