SEBI Announces Relaxation to Fast Track Public Offers

In an effort to support listed companies during the COVID-19 pandemic, the Securities and Exchange Board of India (SEBI) has introduced several relief measures. These include relaxation of various regulations pertaining to rights issues, creation of encumbrances by listed REITs, procedural matters relevant to buybacks and takeovers, and guidelines for initial public offerings (IPOs). Notably, these relaxations provide significant benefits to a wide range of businesses, including those focusing on annual filings for companies.

On June 9th, 2020, through a SEBI circular, temporary relaxations from specific eligibility conditions were provided for Fast Track Further Public Offers (FPOs). These Fast Track Further Public Offers facilitate eligible listed companies in raising public funds more quickly by streamlining the fund-raising process.

This article details the eligibility criteria and relaxations provided by SEBI, designed to benefit various organizations including those involved in sectors like business expansions.

Highlights of the Relaxations Announced for Fast Track Further Public Offers

The SEBI circular no. SEBI/HO/CFD/CIR/CFD/DIL/85/2020 dated 9th June 2020 relaxes various eligibility provisions within the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 for Further Public Offers. Below are key eligible conditions and the subsequent relaxations:

Reduction in the Requirement for Average Market Capitalization

Prevailing Condition: To qualify for Fast Track Further Public Offers, companies were required to maintain an average market capitalization of public shareholding at least INR 1,000 Crore.

Relaxation: Companies are now eligible if the average market capitalization of public shareholding is INR 500 Crores. This is a significant reduction, making it more accessible for smaller companies with less than 25% public holding.

This relaxation is beneficial for expanding companies, notably those in one-person company setups.

Relaxation in the Condition of Pending Show Cause Notice

Prevailing Condition: Previously, issuance of a show cause notice or initiation of prosecution proceedings by SEBI against an issuer, promoters, or whole-time director disqualified a company from a Fast Track Further Public Offer.

Relaxation: Companies remain eligible if the show cause notice pertains to adjudication proceedings or prosecution proceedings are initiated. However, valid disclosures of the notices or proceedings must be included in the FPO prospectus.

This change aids companies resolving compliance differences, akin to those that may require assistance with trademark registration compliance.

Adjustment in Settlement of Alleged Securities Law Violations

Prevailing Condition: Companies or promoters involved in a settlement of alleged securities law violations with SEBI in the last three years were deemed ineligible for Fast Track Further Public Offers.

Relaxation: Now, such past settlements do not affect eligibility if settlement terms have been met or the directive orders from settlements adhered to.

Such provisions allow companies, including those completing Nidhi company registration, to expedite public fundraising.

Relaxation in Conditions of Audit Qualification

Prevailing Condition: Companies with an audit qualification affecting more than 5% of net profit or loss after tax were ineligible for Fast Track Further Public Offers.

Relaxation: This ineligibility is lifted if the audit qualification is disclosed in the offer document and its impact is adjusted in the restated financial statements.

These regulatory relaxations are part of SEBI's comprehensive effort to bolster market liquidity and facilitate smoother operations for businesses, including those requiring detailed LLP annual filings or businesses involved in RCMC registration.

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Frequently Asked Questions

Common questions about SEBI Relaxation for Fast Track Public Offers.

A Fast Track FPO is a process that allows eligible listed companies to raise public funds through a further public offering in a significantly quicker duration by fast-tracking the fund-raising procedure.

Some key eligibility conditions for a Fast Track FPO include a minimum average market capitalization of public shareholding, no pending show cause notices or prosecution proceedings from SEBI (with exceptions), no settlement of alleged securities law violations in the last three years (with exceptions), and no significant audit qualifications.

SEBI has relaxed certain eligibility conditions, such as reducing the minimum average market capitalization of public shareholding from INR 1,000 crore to INR 500 crore, allowing companies with pending show cause notices or prosecution proceedings (with disclosure), and permitting companies with settled alleged violations or audit qualifications (with conditions).

SEBI has introduced these relaxations to aid listed companies in raising funds during the COVID-19 pandemic by making it easier for them to qualify for the faster Fast Track FPO process.

These relaxations benefit companies by expanding the pool of eligible companies for Fast Track FPOs, particularly smaller companies with lower market capitalization or those with certain pending regulatory issues or audit qualifications, as long as they meet the revised conditions.

Yes, companies availing of the relaxations related to pending show cause notices, prosecution proceedings, or audit qualifications must provide appropriate disclosures about these in their FPO prospectus.

The circular does not specify an end date for these relaxations, but they are likely temporary measures to help companies during the COVID-19 pandemic.

No, the article does not mention any relaxations related to investor grievances or disputes. Companies would still need to meet the existing eligibility conditions in this regard.

The article specifically mentions relaxations for Fast Track Further Public Offers (FPOs). It does not provide information on relaxations for other types of public offerings.

You can refer to the SEBI circular no. SEBI/HO/CFD/CIR/CFD/DIL/85/2020 dated 9th June 2020 for complete details on the eligibility conditions and relaxations for Fast Track Further Public Offers.