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7 Key Highlights Of SEBI Board Meeting: Rules For Investment In Distressed Firms Relaxed

Aasavri Rai
22 Jun 2017 7:43 AM GMT
7 Key Highlights Of SEBI Board Meeting: Rules For Investment In Distressed Firms Relaxed
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The SEBI Board met in Mumbai on Wednesday and took the following decisions:

  1. Restructuring in distressed companies 

Presently, relaxations from preferential issue requirements under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, and from open offer obligations under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, are available for lenders undertaking restructuring of listed companies in distress through Strategic Debt Restructuring (SDR) scheme in terms of the guidelines of RBI. It has been represented to SEBI that where the lenders have acquired shares and propose to divest the same to a new investor, they are facing difficulties as the new investor would need to make a mandatory open offer which would reduce the funds available for investment in the company. Hence, they have requested for exemptions to these investors.

Accordingly, it has been decided to extend the aforesaid relaxations to the new investors acquiring shares in distressed companies pursuant to such restructuring schemes. However, such relaxations shall be subject to certain conditions like approval by the shareholders of the companies by special resolution and lock-in of their shareholding for a minimum period of three years.

Further, it has also been decided to extend the said relaxations to the lenders under other restructuring schemes undertaken in accordance with RBI guidelines.

  1. Resolution plans approved under the Insolvency and Bankruptcy Code, 2016

The proposal to provide exemption from open offer obligations under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, for acquisitions pursuant to resolution plans approved by the NCLT under the Insolvency and Bankruptcy Code 2016, has been approved.

  1. Extension of lock-in-relaxation to Category II Alternative Investment Funds (AIF)

Presently, in case of an IPO, there are relaxed rules for lock-in provision to Category I AIFs. The board approved the proposal for extending such relaxation to Category II AIFs also for uniformity, ease of doing business and expanding the investor base available for capital raising.

  1. Consultation paper on easing of access norms for investment by FPIs

 Some of the proposed changes to ease access norms for investments by FPIs in Indian securities market are as follows:

  1. Expansion of eligible jurisdictions for grant of FPI registration to Category I FPIs by including countries having diplomatic tie-ups with India.

  2. Simplification of broad based requirements.

  3. Rationalisation of fit and proper criteria.

  4. Permitting FPIs operating under the multiple investment managers (MIM) structure and holding FVCI registration to appoint multiple custodians.

Accordingly, the board considered and approved the proposal for initiation of public consultation process before implementing the aforesaid proposed changes to the SEBI (Foreign Portfolio Investors) Regulations, 2014, and necessary circular/guidelines etc. issued thereunder.

  1. Offshore derivative instruments (ODI)

The board has decided to levy a ‘regulatory fee’ of US$1000 on each ODI subscriber, to be collected and deposited by the ODI issuing FPI of such ODI subscriber, once every three years, starting from April 1, 2017.

The SEBI shall amend the SEBI (FPI) Regulations, 2014, to implement the decision taken by the board. It has decided to prohibit ODIs from being issued against derivatives, except on those which are used for hedging purposes. The SEBI will issue a circular in this regard.

  1. Growth and development of equity derivatives market in India

It was decided to have stakeholder consultation on the need to review the derivatives market framework, including product suitability for investors, so as to further strengthen the framework in line with the emerging trends and global best practices.

  1. SEBI Annual Report 2016-17

The board considered and approved the SEBI Annual Report 2016-17. In compliance with Section 18(2) of the SEBI Act, 1992, the annual report would be submitted to the Central Government.

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