With the latest amendments coming in for the ease of doing business, the financial market regulator, Securities and Exchange Board of India (SEBI) on 23rd September, 2020 eased the rights issue norms to make the fundraising process easier for the listed companies. The previous regulations required companies doing a rights issue to ensure minimum 90% subscription. SEBI on Wednesday said the mandatory 90% minimum subscription would not be applicable to those issuers where object of the issue involves financing other than financing of capital expenditure for a project, provided that the promoters and promoter group of the issuer undertake to subscribe fully to their portion of rights entitlement. It allows companies to make limited disclosures if they mobilise funds through the rights issue route “provided that necessary disclosures along with potential adverse impact on the issuer are made in the letter of offer”. 

SEBI has also allowed truncated disclosures for rights issues. It said companies can file financial statements and periodic reports for last year instead of the last three years as required earlier. That is also applicable to cases where three years have passed after change in management following acquisition of control. The regulator decided to amend the Sebi (Issue of Capital and Disclosure Requirements) Regulations “with an objective to make the fund-raising through this route easier, faster and cost-effective,” it said through a release. Disclosure requirements have been rationalised to avoid duplication of information in letter of offer, especially the information which is already available in public domain and is disclosed by the companies in compliance with the disclosure requirements,” SEBI said in a statement on its website.
The SEBI has also increased the threshold to Rs 50 crore from Rs 10 crore for prospective issuers to file with Sebi the rights issue draft letter of offer for the regulator's observations.

“The issuer shall be eligible to make fast-track rights issue in case of the pending show- cause notices in respect to adjudication, prosecution proceedings and audit qualification provided that necessary disclosures along with potential adverse impact on the issuer are made in the letter of offer.”

This news report has been reported and written by- Ms. ROSHNI KAPUR.