Amendments in various SEBI Regulations

SEBI had, at its Board meeting held on 12th December 2018, approved certain amendments in certain SEBI Regulations. Accordingly, now SEBI has issued various Circulars and Notifications for amendments to the relevant SEBI Regulations.

In this newsletter, we have covered the amendments in the following Regulations:-

1. Amendment in Framework for Offer for Sale (OFS) of shares through Stock Exchange mechanism
2. Amendment in SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
3. Amendment in SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018

The details of these Amendments are as follows:-

1. Amendment in Framework for Offer for Sale (OFS) of shares through Stock Exchange mechanism – vide SEBI Circular dated 28^th December 2018:

SEBI had released comprehensive guidelines on Offer for Sale through stock exchange mechanism vide its Circular 18^th July 2012. There were certain amendments in these Guidelines vide SEBI’s Circulars dated 25^th January 2013, 30^th May 2013, 8^th August 2014, 12^th November 2014, 1^st December 2014, 26^th June 2015, 15^th February 2016 and 27^th June 2017. 

Now, SEBI has issued a Circular dated 28^th December 2018 for making following modifications / clarifications to the framework:-

1. Expansion of list of eligible companies: Till now, OFS mechanism was available to promoters and large shareholders of top 200 companies by market capitalization. Pursuant to SEBI Circular dated 28^th December 2018, now OFS mechanism shall be available for shareholders of companies with market capitalization of Rs.1000 crores and above, with the threshold of market capitalization computed as the average daily market capitalization for six months prior to the month in which the OFS opens
2. Cancellation of OFS: SEBI had vide its Circular dated 15^th February 2016, introduced certain conditions for cancellation of OFS. SEBI has tried to clarify the condition as follows:

If the seller fails to get sufficient demand from non-retail investors at or above the floor price on T day, then the seller may choose to cancel the offer, post bidding, in full (both retail and non-retail) on T day and not proceed with offer to retail investors on T+1 day.

The copy of the SEBI Circular dated 28^th December 2018 in this regard is available on following link:\

https://www.sebi.gov.in/legal/circulars/dec-2018/review-of-offer-for-sale-of-shares-through-stock-exchange-mechanism_41460.html

2. Amendment in SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2014 [“SEBI (SAST) Regulations”]– vide SEBI Notification dated 31^st December 2018:


Under Regulation 29(4) of SEBI (SAST) Regulations, any shares of any listed entity taken by any person / entity by way of encumbrance are treated as Acquisition of shares and shares given upon release of encumbrance are treated as a Disposal of shares under these Regulations. Such acquisition and disposal of shares are to be disclosed by the pledgee to stock exchanges where the entity is listed, within 2 working days from the date of acquisition or disposal, as the case may be.

Till now, such disclosure requirement was not applicable to a scheduled commercial bank or public financial institution as pledgee in connection with a pledge of shares for securing indebtedness in the ordinary course of business.

Now, SEBI has, vide its notification dated 31^st December 2018, amended Regulation 29(4), pursuant to which extended the aforesaid exception to the disclosure requirement is now also applicable to

o  Housing Finance Companies (HFCs), and

o  Systemically Important Non-banking Financial Companies (NBFCs).


   Pursuant to the amendment, shares taken by way of encumbrance or shares given upon release of encumbrance, by the said HFCs and Systemically Important NBFCs shall not be treated as acquisition or disposal, for the purpose of disclosure requirements under Regulation 29 of Takeover Regulations.

   The copy of the SEBI Notification dated 31^st December 2018 for amendment to SEBI (SAST) Regulations, 2011 in this regard is available on following link:

https://www.sebi.gov.in/legal/regulations/dec-2018/securities-and-exchange-board-of-india-substantial-acquisition-of-shares-and-takeovers-third-amendment-regulations-2018_41533.html

  3. Amendment in SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018     [“SEBI (ICDR) Regulations”]– vide SEBI Notification dated 31^st December 2018:

(A) Amendment in Allocation in Net offer Category in case of public issue:

Under SEBI (ICDR) Regulations, one of the conditions of public issue is mentioned under Section 252 that the minimum offer to public shall be as per the provisions of Rule 19(2)(b) of the Securities Contracts (Regulations) Rules, 1957, i.e., minimum 25% of the post offer shareholding should be held by public category investors.

Further, Section 253 of the SEBI ICDR Regulations prescribe subscriber-wise category of allocation in the net offer which is as follows:-

The allocation in the net offer category shall be as follows:

a) not less than thirty five per cent. to retail individual investors;

b) not less than fifteen per cent. to non-institutional investors;

c) not more than fifty per cent. to qualified institutional buyers, five per cent. of which shall be allocated to mutual funds:

Provided that the unsubscribed portion in either of the categories specified in clauses (a) or (b) may be allocated to applicants in any other category:

Provided further that in addition to five per cent allocation available in terms of clause (c), mutual funds shall be eligible for allocation under the balance available for qualified institutional buyers.

Now, SEBI has, vide its notification dated 31^st December 2018, amended Regulation 253 by renumbering the same as Regulation 253(1) and inserting the following as  Regulation 253(2)

253 (2) In an issue made other than through the book building process, the allocation in the net offer category shall be made as follows:

(a) minimum fifty per cent. to retail individual investors; and

(b) remaining to:

1. individual applicants other than retail individual investors; and
2. other investors including corporate bodies or institutions, irrespective of the number of specified securities applied for;

Provided that the unsubscribed portion in either of the categories specified in clauses (a) or (b) may be allocated to applicants in the other category.

Further, the following Explanation which was mentioned in the earlier Regulation 253 has been deleted from Regulation 253(1) and mentioned in Regulation 253(2) as follows:-

Explanation - For the purpose of sub-regulation (2), if the retail individual investor category is entitled to more than fifty per cent. of the issue size on a proportionate basis, the retail individual investors shall be allocated that higher percentage.

(B)  Amendment in situations which require filing of fresh draft offer document with SEBI along with fees:

As per Regulation 25(6) read with Schedule XVI of SEBI (ICDR) Regulations, 2018, in case of any increase or decrease in estimated issue size by more than 20%, fresh filing of the offer document with SEBI was required for both Fresh Issue and Offer for Sale.

Now SEBI has, vide its notification dated 31^st December 2018, amended these situations requiring filing of fresh draft offer document with SEBI along with fees as follows:-

(i) In case of a fresh issue: any increase or decrease in estimated issue size by more than twenty per cent. of the estimated issue size; or

(ii) In case of an offer for sale: any increase or decrease in either the number of shares offered for sale or the estimated issue size, by more than fifty per cent.; or

(iii) In case of an issue comprising of both fresh issue and offer for sale: the respective limits as above shall apply.]

 The copy of the SEBI Notification dated 31^st December 2018 for amendment to SEBI (ICDR) Regulations, 2018 in this regard is available on following link:

https://www.sebi.gov.in/legal/regulations/dec-2018/securities-and-exchange-board-of-india-issue-of-capital-and-disclosure-requirements-amendment-regulations-2018_41538.html