SEBI amends rights issue norms: ASBA introduced and Minimal disclosure

SEBI vide its Circular SEBI/CFD/DIL/DIP/38/2009/08/20 dated August 20, 2009 has amended the SEBI (DIP) Guidelines, 2000 and effected the following changes. The new amendment that has been brought in follows SEBI’s decision of late last year to cut short the time period for allotment of shares in rights issue to 15 days from the previous 45 days.

Rationalized the disclosure requirements for rights issues: The reason being rights issues are further issuances of capital made by listed entities to existing shareholders who are in possession of basic information about the issuer company. According to the norms issuer companies are required to disclose only minimum information that will help in making the issuance process faster and also help in reducing cost.
Applications Supported by Blocked Amount (ASBA) in rights issues: SEBI extended the facility of ‘application supported by blocked amount’ (ASBA) to all rights issue which enables an investor to apply for an issue without making payment. Instead, the amount is blocked in investor’s personal account with the designated syndicate bank and only the required funds will be debited from the account upon allocation of shares. Currently SEBI had enabled the facility for applying through ASBA only in case of an initial public offer (IPO).
Utilisation of issue proceeds after finalization of the basis of allotment in the issue: Issuer company can now utilise the issue proceeds only after the basis of ‘allotment of rights share’ is finalised. Earlier, the issuer company was allowed to utilise the rights issue proceeds after satisfying the designated stock exchange that it’s rights offer had received minimum 90% subscription’.

A copy of the Circular is available here.
A copy of the amended DIP guidelines is available here.