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.

Clarifications on parity in exit load

SEBI vide its Circular SEBI/IMD/CIR No. 7/173650/2009 dated August 17, 2009 has issued clarifications with regard to bringing parity in exit load among all classes of unit holders.

AMCs while bringing parity in exit load have to comply with the following requirements: -

• The principle laid down in the SEBI circular No. SEBI/IMD/CIR No. 5/126096/08 dated May 23, 2008 (clause 16 of the standard observations) that “any imposition or enhancement in the load shall be applicable on prospective investments only” should be followed.
• The parity among all classes of unit holders in terms of charging exit load should be made applicable at the portfolio level.

A copy of the Circular is available here.

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Exit load - Parity among all classes of unit holders

SEBI vide its Circular SEBI / IMD / CIR No. 6 /172445/ 2009 dated August 7, 2009 has decided that no distinction among unit holders should be made by Mutual Funds based on the amount of subscription while charging exit loads. 

SEBI has observed that the mutual funds are making distinction between the unit holders by charging differential exit loads based on the amount of subscription.

A copy of the Circular is available here.

Commission should be paid to Self Certified Syndicate Banks (SCSBs) under ASBA process

SEBI vide its Circular SEBI/CFD/DIL/MB/IS/5/2009/05/08 dated August 5, 2009 has clarified that both ASBA and non ASBA process should be treated on par and commission should be paid self certified syndicate banks (SCSBs) under ASBA process. SEBI also noted that one of the reasons for poor response to ASBA was the lack of incentive for Self Certified Syndicate Banks (SCSBs) to do the assigned task of accepting ASBAs, uploading details in the bidding system and blocking or unblocking of the account.

A copy of the Circular is available here.

SEBI issue clarifications on creeping acquisition

SEBI vide its Circular CFD/DCR/TO/Cir-01/2009/06/08 dated August 6, 2009 has issued clarifications regarding the applicability of the Regulation 11 (2) of the Takeover Code. In October 2008, this regulation was amended to increase the creeping acquisition limit from 55% to 75%. Now SEBI has issued clarifications with regard to this. The clarifications are as follows: -

• The acquisition, within the limit of five per cent (5%) under the second proviso to sub-regulation (2) of regulation 11, may be made by an acquirer who, together with persons acting in concert with him, holds fifty five percent (55 %) or more but less than seventy five per cent (75 %) of the shares or voting rights in the target company ;
• The acquirer together with persons acting in concert with him, holding shares or voting rights as specified at (a) above, may acquire additional shares or voting rights upto a maximum of five per cent (5 %) voting rights in the target company in one or more tranches, without any restriction on the time-frame within which the same can be acquired;
• The aforesaid acquisition of five per cent (5 %) shall be calculated by aggregating all purchases, without netting the sales.
• Consequent to such acquisition, the percentage of shareholding / voting rights of the acquirer, together with persons acting in concert with him, in the target company, shall not increase beyond seventy five per cent (75 %). This limit is applicable irrespective of the level of minimum public shareholding required to be maintained by the target company in terms of clause 40A of the Listing Agreement.

A copy of the Circular is available here.