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Mitali Bhutta made post

What are the new SEBI norms for stressed companies in India? How will promoters benefit from the norms?

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Dawn Cherian answered.
4 weeks ago

One of the major concerns with the current NCLT process has been that many promoters could end up with loss of control because they got into a difficult financial or liquidity situation. The latest SEBI norms come in handy for promoters as they can get out of the financial mess if they are genuinely interested in running the business and holding control.

Under the new SEBI norms, promoters of stressed companies may find it a lot easier to raise funds in the market in the light of the recent amendments made by SEBI. This will be better for the promoter group than getting completely dispossessed by the IBC, which eventually hands over the company to another entity.

In fact, many promoters had suggested that IBC should be voluntary and a promoter who was willing to run the business should be given another chance. The new guidelines will allow the promoters to get new investors on board without diluting stake. SEBI has already relaxed guidelines for pricing and open offer requirements in such cases.

The idea of the new SEBI norms is to enable easier fund raising through preferential allotment in the case of stressed companies. The normal restrictions will not apply but it will only be given in some very deserving cases where promoters can still add value. This special restructuring window will be available as one last option to promoters before going to IBC.