SEBI Issues Circular Setting Guidelines For Clarity in Draft Offer Documents, Ensuring Timely Processing

In its circular, SEBI underscored the importance of adequate disclosures by issuers and the timely processing of offer documents. The circular highlighted the imperative need for offer documents to comply with Schedule VI of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations), which delineates essential information for disclosure in draft offer documents or letters of offer.

The Circular mentioned, “It is imperative that the offer documents as filed by the issuers and lead manager(s) are compliant with Schedule VI of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”), which specifies information for disclosure in the draft offer document or the draft letter of offer and the offer document or the letter of offer, as applicable.”

As per the circular, instances where draft offer documents fail to meet the stipulated requirements may prompt revisions or changes, elongating the processing time. The circular laid down specific guidelines for returning draft offer documents and their subsequent resubmission.

According to the guidelines, draft offer documents may be returned if they fail to satisfy one or more of the following requirements:

1. Clarity and Simplicity: Offer documents must be drafted in simple language with visual representation of data, adhering to principles such as the use of short sentences, definite and unambiguous words, active voice, tabular presentation or bullet lists, and avoidance of multiple negatives.
2. Conciseness and Intelligibility: Information must be presented in a clear, concise, and intelligible manner, with clear sections, paragraphs, and sentences, descriptive headings and subheadings, avoidance of legal and technical terminology, and clarification of technical terms in simple language.
3. Avoidance of Complexity: Offer documents should avoid complex presentations, vague explanations, repetition of disclosures, inconsistency in information, and complexity in risk factors, ensuring that risk factors are appropriately worded to convey the risk to investors clearly.

Additionally, if substantial revisions or addenda are required, or if the information necessitates regulatory interpretation, the draft offer document may be returned to the issuer.

To facilitate ease of doing business for issuers, the circular stipulates that if an offer document is returned as per these guidelines, no fees will be required for resubmission. It mandates that the issuer and lead manager(s) must ensure that the resubmitted draft offer document addresses the insufficiencies for which it was returned and complies with the provisions of ICDR Regulations and other applicable laws.

“The Issuer and the Lead Manager(s) shall ensure that the draft offer document is resubmitted only after addressing insufficiency for which the draft offer document was returned and such draft offer document is in compliance with provisions of ICDR Regulations and other applicable laws,” the Circular mentions.

Click Here To Read Circular