InvestorQ : What are the new rules that SEBI has notified with respect to rights issues?
Rashi Mehra made post

What are the new rules that SEBI has notified with respect to rights issues?

Answer
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Archita Jajjoo answered.
3 weeks ago


Here are the highlights of the new rules on rights announced by SEBI.

· The intent of the new rules is to rationalise eligibility criteria and disclosure requirements so that the process becomes faster and more effective.

· Towards this end, SEBI has amended the Issue of Capital and Disclosure Requirements Regulations, which will become effective from 05 October.

· Now companies will be allowed to make truncated disclosures, provided the firm has been filing periodic reports and statements with the relevant statutory authorities for the previous 3 years in succession.

· Disclosure requirements were rationalised to avoid duplication of information at multiple points. This will save time and the cost associated with a rights issue.

· In addition, the threshold for companies to raise rights without filing the rights offer document has been raised from Rs.10 crore to Rs.50 crore.

· One more change is that the mandatory 90% minimum subscription clause will not apply to issuers where object of the issue is other than funding capital expenditure if the promoter and promoter group agree to underwrite to the balance issue.

· Under the modified rules, the issuer company will be permitted to make a fast-track rights issue in the event of any prosecution proceedings or audit qualification.

The idea of the entire exercise is to ensure that the rights issue process becomes simpler and more user friend.