The Securities and Exchange Board of India (SEBI) plans to make life easier for companies going public.

As per current norms, company promoters need to contribute 20 per cent of the post-offer, paid-up equity share capital for meeting the minimum promoters’ contribution (MPC) on listing. An expert committee set up by the regulator has now proposed that equity shares from the conversion of compulsorily convertible securities held for a year before filing the DRHP be considered for meeting this requirement.

The regulator has proposed that non-individual shareholders holding 5-10 per cent of the post-offer equity share capital be permitted to contribute towards MPC without being identified as a promoter.

OFS size

The offer for sale size can now be based either on the estimated issue size (in rupee value) or the number of shares, as disclosed in the DRHP — and not on both criteria. Currently, an issuer is required to make a fresh filing if there is a change in the offer for sale by more than 50 per cent, based on either criterion.

SEBI has recommended that LODR regulations apply to a company based on its average market capitalisation for a six-month period ending December, instead of a single day. A listed entity coming under the fold of reporting requirements will get three months for compliance. Companies to which BRSR reporting requirements become applicable for the first time will be given a year to comply.

If a company’s m-cap remains outside the applicability range for three straight years, the entity need not comply with the provisions that are not applicable to it due to its current ranking. “This is in line with the sunset clause of three years specified for the corporate governance provisions of the LODR Regulations will facilitate ease of doing business for companies whose market capitalisation has consistently fallen below the applicable thresholds,” SEBI’s consultation paper said.

The expert committee has recommended that the time for filling up the vacancy of key managerial personnel be increased from three months to a maximum of six months. A director can be a member of a maximum seven audit committees in listed entities.

The timeline for prior intimation of board meetings may be harmonised to two working days for all types of events, and the maximum gap between the meetings of the risk management committee may be increased to 210 days. Prior intimation may not be required for the determination of issue price for fundraising done through qualified institutions placement in compliance with the ICDR regulations.

“Allowing compulsory convertibles towards promoters’ contribution was a long-pending demand and will result in a quicker DRHP filing, without having to wait for SEBI exemption. Permitting non-individuals to contribute towards promoters’ contribution is again a move to facilitate IPOs with inadequate founders’ holding in the IPO,” said Ravi Dubey, Partner, IndusLaw.

However, he added, such flexibility indicates SEBI’s intention to move away from professionally managed companies to more promoter/founder-driven companies, on account of lack of promoters’ contribution.