Sebi extends relaxations for compliance with rights issues

Markets regulator Sebi on Friday extended relaxations for companies with regard to compliance with procedural norms on rights issues opening till March 31, 2022.

As per Issue of Capital and Disclosure Requirements norms, an application for a rights issue shall be made only through the ASBA facility.

However, because of the COVID-19 pandemic and to ensure that all eligible shareholders can apply to rights issues during such times, Sebi had in May 2020 said that the issuer shall along with the lead manager to the issue, the registrar and other recognised intermediaries institute an optional mechanism (non-cash mode only) to accept the applications of the shareholders, subject to ensuring that no third-party payments shall be allowed in respect of any application.

This relaxation has now been further extended and shall be applicable for rights issues opening up to March 31, 2022, Sebi said in a circular.

This is subject to the condition that the issuer and lead manager ensure that the mechanism will only be an additional option and not a replacement of the existing process and has to be transparent, robust and have adequate checks and balances.

Besides, it should aim at efficiently facilitating subscriptions without imposing any additional costs on investors. The issuer and lead manager, and registrar shall satisfy themselves about the transparency, fairness and integrity of such mechanism.

In this regard, an FAQ, online dedicated investor helpdesk, and helpline shall be created by the issuer company along with the lead manager

Issuer company is required to conduct a vulnerability test for optional mechanism (non-cash mode only) provided to accept the applications in the rights issue, from an independent IT auditor and submit the report to exchanges, Sebi said.

The issuer along with the lead manager, registrar and other recognised intermediaries are required to ensure compliance with this requirement.