All about SEBI (ICDR) (Amendment), Regulations, 2021

SEBI (ICDR) (Amendment), Regulations, 2021

The article focuses on the amendments made in ICDR regulations by SEBI to provide relaxations in Further Public Offer (FPO).

Under section 11(1) of the SEBI Act, 1992, to protect the investors’ interests, has issued a notification or circular on 9th June 2020, to provide certain relaxations in ICDR regulations, 2009 in respect of Further Public Offer (FPO).

The said circular is issued:

What is SEBI?

SEBI stands for Securities and Exchange Board in India. SEBI is a regulatory body assigned with the responsibility to control the capital markets in India. It enforces rules to regulate and monitor the security market and to protect the interest of the investors.

SEBI was established on 12th April 1992, under the SEBI Act, 1992. It is headquartered in Mumbai and has its regional offices in Chennai, Ahmedabad, New Delhi and Kolkata. It also has many other local, regional offices in prominent cities around the country.

The main objective of SEBI is to ensure a system for capital markets to work in India and provide transparency to investors. The other purpose of SEBI was to prevent malpractices and to promote development in the Indian capital market.

What are the ICDR Regulations?

Under Section 30 of the SEBI Act, 1992[1] it can formulate regulations to perform its functions. The regulations made under must be in accordance with the SEBI Act, 1992. SEBI in 2009 made a regulation, namely, SEBI (ICDR), 2009).

In SEBI (ICDR), 2009, ICDR stands for Issue of Capital and Disclosure Requirements.

The ICDR regulations as per regulation 3 apply to the following:

  • Public issue;
  • Preferential issue;
  • Rights issue (where aggregate value is Rs. 50 Lakh or more);
  • Issue of bonus shares by a listed issuer;
  • Issue of Indian Depository Receipts; and
  •  Qualified institutions placement by a listed issuer.
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The ICDR regulations have been amended from time to time.

The ICDR regulations aim to simplify the language and structure to increase the understanding of the text. It has various chapters to differentiate the type of issues and the regulation that deals with it.

What is FPO?

FPO stands for Further Public Offer. A FPO is made when a listed company to raise its funds comes with a fresh issue of shares or an offer for sale to the public. After the IPO (initial public offer), the subsequent issue to the public is FPO (further public offer).

An FPO is different from an IPO, as the name suggests. IPO is a process wherein an unlisted company raises its funds by offering its shares to the public and subsequently listing it. Whereas when the same company issues the shares for the second time to the public, it would be an FPO.

Amendment of ICDR regulations in respect of FPO norms

SEBI (Issue of Capital and disclosure requirements) Regulations, 2018, i.e., ‘ICDR Regulation’ makes it mandatory for the promoters of the issuer company to maintain ‘Minimum promoters’ contribution (MPC)’ to be locked in for a specified time.

The above requirements are not applicable in case when funds are raised through:

  • Rights issue;
  • IPO/FPO (when there is no identifiable promoter); and
  • FPO ( when the issuer’s equity shares are traded frequently for at least 3 years and the issuer is a dividend-paying company).

On 16th December 2020, in its board meeting, SEBI discussed the amendments to ICDR regulations, removed the MPC (Minimum Promoters’ Contribution) and the listed company’s lock-in requirement.

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The reason behind the proposed amendment was that when an issuer is already a listed company and has satisfied the condition of MPC at the initial stage while raising funds through an FPO. Further, when a company is already listed, its information becomes available in the public domain. Investors are willing to subscribe to the FPO as they have sufficient information/disclosure to make an informed decision.

Thus, SEBI, on 8th January 2021, issued SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2021 or SEBI (ICDR) (Amendment) Regulations, 2021 or (Amendments Regulations).

The fundamental changes in the amendment of ICDR Regulations, 2021 are:

Fundamental changes in the amendment of ICDR Regulations, 2021
  • MPC requirement;
  • Lock-in requirement; and
  • Lock-in requirement (in case of equity shares issued on preferential share basis).

MPC requirement

The existing clause of regulation 112(b) of ICDR regulations was substituted by SEBI in its recent amendment of 2021. The criterion of determining MPC and the lock-in through the dividend-paying capacity was removed. Furthermore, it inserted the additional compliance of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (referred to as ‘LODR regulations’). The issuer should have redressed at least 95% of the complaints received from the investors.

Lock in requirement

Regulation 115 of ICDR regulations make it mandatory for the promoters’ specified securities shall be locked in for a time period.

In its board meeting on 8th January 2021, SEBI considered that now if the MPC provision is removed, then the question of lock-in may not arise. So, SEBI deleted proviso after clause (c) of regulation 115 of ICDR regulations.

However, deleting the same has brought ambiguity in complying with the lock-in requirements, explained as:

  • The existing proviso after regulation 115(c) states that the excess promoters’ contribution, as mentioned in regulation 112(b), must not be subject to lock-in.
  •  Regulation 113 (1) (a) states that the promoters shall contribute:
    • Upto 20% of the proposed issue size, or
    • Upto 20% of post-issue capital.
  • The existing proviso of regulation 112(b) talks about the promoters who subscribe in excess of the higher of the 2 options mentioned above. The price of such excess subscription shall be determined in pricing guidelines for preferential issue under regulation 164 or the issue price, whichever is higher.
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Since the promoters contributed in excess of the option given, SEBI exempted them from the lock-in requirement.

Lock in requirement (in case of equity shares issues on preferential shares)

As per rule 19A (5) of Securities Contracts (Regulations) Rules, 1957, the minimum public shareholding (referred to as ‘MPS’) falls below 10% due to CRIP (Corporate Insolvency Resolution Process). Such a listed company is required to bring MPS at least 10% within 18 months and 25% within 3 years from the date of said fall.

Regulation 167(4) states that when equity shares are issued on a preferential shares basis in consonance with any resolution plan, they shall be locked-in for at least 1 year. Such lock-in foes not aid dilution of promoter’s shareholding to attain MPS.


SEBI, in its recent amendment of 2021, relaxed the ICDR regulations in respect of an FPO. The MPC and lock in requirements in case of issue of specified securities in consonance with specified securities to an FPO are removed from the regulations; this created ambiguity in the case of FPO. SEBI should review the deletion of the proviso after regulation 115 (c) of ICDR regulation.

Read our article: Securities & Exchange Board of India: SEBI Intermediaries Amendment Regulations, 2021

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