SEBI

Analysis of SEBI Relaxations relating to procedural matters – Issues & Listing

This article gives the reflection of SEBI relaxation and analysis of SEBI Relaxations to procedural matters of issuing and listing. This is important for the investor trust to sustain in the market. During the Pandemic SEBI has issued two circulars on the temporary basis. This SEBI relaxation Circular is the need of the hour during this pandemic situation. This indeed will help the Investment Advisor registration with SEBI. The economies have gone into a recession. The GDP of any country is influenced by the performance of its security markets, whether it is the primary or secondary market.

How many times the SEBI Relaxation Circular has been issued?

SEBI first relaxation came in the Procedural matters & Issuing matters:

1. SEBI vide Circular no- SEBI/HO/CFD/DIL2/CIR/ P/2020/78 dated 6^th May 2020- where it granted one-time relaxation to the from strict enforcement of specific guidelines of SEBI (Issue of Capital and Disclosure Requirement) Regulations, 2018 about the Right Issue which are opening from 31^st July, 2020.
2. It is based on the representations received from the market participants, the validity of relaxation, and Circular No. SEBI/HO/CFD/DIL/2 CIR//P/2020/78 dated 6^th May 2020 is further extended for the Right Issue opening up to 31^st December 2020.
3. The Circular is issued in pursuance of the powers conferred by Section 11(1) of the SEBI Act, 1992^[1].

Purpose of SEBI Relaxation Circular

The purposes of the SEBI Relaxation Circular are:

1. To improve the fundraising access to the listed corporate entities.
2. To revive the investor confidence in the market.

Analysis of SEBI Relaxation

A. Relaxation in respect of Right Issue

1. Difficult Postal Services in Covid Situation

As soon the Pandemic hit the country, it was seen that as per the Regulation of 77(2) of the SEBI ICDR, where the offer letter/letter of offer has to be sent through speed post/ registered post/ courier service/electronic transmission/to the existing shareholders of the company which is only possible in case of the operation of Postal Services, which were disrupted.

Where SEBI has to specifically clarify that the failure of dispatching of postal letters will not be treated as the non-compliance for the right issue by the company.
The company publish the letter of offer and application form on their website or the websites of the lead managers to the issue, registrar of stock exchange. The issuers should reach the shareholders via Email, What’s App, SMS.

The measures were taken to negate the difficulties faced by the shareholders due to the physical distribution which has been stopped. This makes the Indian market a technologically driven. This increases the scope of electronic mode of transmission for the dispatch of offering materials.

2. Difficulty as per the Section 62(1)(a)(i) Companies Act, 2013.

According to this section, SEBI relaxation- clarification was issued for the Sec 62(1). Where the mode of issue of Notice has been prescribed for the right issue of shares, issued by the company. Also, the difficulties faced by the company in the guise of dispatching notice through postal or courier service. The MCA clarified with respect to SEBI relaxation Circular that, the inability of the company for Section 62 of the Companies Act, 2013, is following the SEBI clarification issued for right issue of shares up to 31st July 2020.

3. Publication in Newspaper prohibited

The difficult part of the Pandemic was that prior to the opening of right issue of shares, it has to publish the advertisement in the Newspaper; it is a mandatory disclosure which has to be given in Section 84(1) of the SEBI ICDR Regulations (statutory advertisement). However, during the initial days of Covid-19, it was difficult to publish the advertisement.

The clarification by SEBI relaxation provided the freedom to publish about the dispatch of the abridged letter of offer and application form in the local newspapers and not specifically in the statutory Newspaper. The advertisement can be made on the electronic platforms and websites of the company for disseminating information relating to the application process.

4. Application By Physical Shareholders

As per the January Circular, where the e-trading platform has been initiated for the shareholders –a proposed electronic right issue of shares process and e-trading rights entitlements. Where the shareholders were required to provide details of their Demat account prior to the issue of right shares, two days before to the registrar and in the given time frame, it was not possible.

The SEBI relaxation circular clarified that it allows the physical shareholders to submit the their applications for their right issue of shares, irrespective whether their Demat account is open or whether they communicated the details of the Demat account to the registrar because of the January Circular.

5. ASBA Process- Application Supported by Blocked Amount

After the January Circular of SEBI, it was asked to all the eligible shareholders to mandatorily require using the application process supported by blocked amount mechanism for applying for the shares of right issue. The SEBI Relaxation provided that the issuers, intermediaries can use the optional mode of non-cash mode only to accept the application money of the shareholders.

6. Relaxation in respect of digital signatures

The SEBI relaxation circular clarified over digital signature certification for authenticating and certifying the offer documents. It allowed the electronic inspection of the material documents.

Conclusion

It can be concluded that SEBI relaxation over the issuing and the procedural requirements were the guided steps taken by our government. The aim of the government is to protect the interest of the investors, and sustain his trust over the market in the days of Pandemic. The steps such as for the right issue of share which has to be done before e31st July and extended up to 31st December 2020, allowing of the digital advertisement about the application process. Allowing the companies to advertise on television and radio about the letter of offer issuance to the respective shareholders. Such steps are investor-friendly. This protects the investment Advisors Registration with SEBI.

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Read our article:SEBI’s Relaxation to Listed Companies for filing Financials amid Covid-19 and other measures taken by Regulators