No preferential allotment to promoter for 1 year on warrant failure, Be a retail investor UPTO 2 lakhs, Advertise filing of offer documents, Uniform allotment in offer to public, Asks company to decide whether partly/fully paid shares - SEBI ICDR 4th Amendment 2010

SEBI Issue of Capital & Disclosure Requirements - ICDR (Fourth Amendment) Regulations, 2010: The amendment includes postal insurance funds as QIB, increases retail investor limit to 2 lakhs [ie, those who will fall in the 35% in net offer category], mandates company to advertise filing of offer documents, clarifies on pending convertible securities before IPO, as usual puts extra responsibility on Merchant banker to certify on advertisements issued in all types of media, unifies allotment in offer to public as 50%-35%-15% (for QIB-Retail-Others), issue to give either part payment or full payment option to investors (& not both) and finally clarifies on eligibility of Preferential Allotment to Promoters or Promoters Group (i.e) if they have sold shares within past 6 months or if they have failed to exercise warrants issued within past 1 year, then such promoters/promoters group becomes ineligible for preferential allotment.

Retail investors/reservation to employees limit extended

Reg 2(ze) “retail individual investor” means an investor who applies or bids for specified securities for a value of not more than  Rs. 2 lakhs (erstwhile limit was Rs. 1 lakh).

Reg 2(zf) “retail individual shareholder” means a shareholder of a listed issuer, who applies or bids for specified securities for a value of not more than Rs. 2 lakhs.

Reg 42(4): The reservation on competitive basis to any employee shall not exceed Rs. 2,00,000/- (erstwhile limit was Rs. 1,00,000)

Reg 2(zd) “Qualified Institutional Buyer” (QIB) has 12 items now:

“(xii) insurance funds set up and managed by the Department of Posts, India.”

In addition to SEBI, Stock Exchange & Merchant banker who publish draft offer documents in their website, the company shall publish the same in dailies

New Reg 9(3): The issuer company either on the date of filing the draft offer document with SEBI or on the next day shall make a public  announcement in one English/Hindi/Regional daily newspaper with wide  circulation about the fact of filing of draft offer document with SEBI and inviting public comments.

Reg 26(5): IPO can be made with FULLY PAID outstanding convertible securities which are required to be converted on or before the date of filing of prospectus.

Same allocation even if minimum public shareholding is 10/25%Reg 43(2): Allocation in net offer to public category shall be:

• UPTO 50% to QIB
• Atleast 35% to Retail Investors
• Atleast 15% to Non-Institutional Investors

(irrespective of whether the offer is made under Rule 19(2)(b) or not [i.e, even if minimum public shareholding is 10%])

Hence, the erswhile limits of 60%, 30%, 10% will  not apply.

Make it fully paid or partly paid & not both

New Reg 54(7):  “The issuer shall give only one payment option out of the following to all the investors -  

(a) part payment on application with balance money to be paid in  calls; or 
(b) full payment on application:

Provided that where the issuer has given the part payment option to  investors, such issuer shall  obtain the necessary regulatory  approvals to facilitate the same.”

Now, Merchant banker shall also certify the Public communications, publicity materials, advertisements and research reports in all medias

New Reg 60(14): “The merchant bankers shall submit a compliance certificate in the format specified in  Part D of Schedule XIII, for the period between the date of filing the draft offer document with SEBI and the date of closure of the issue, in respect of news reports appearing in any of the following media:
(a) newspapers mentioned in sub-regulation (3) of regulation 9;
(b) major business magazines;
(c) print and electronic media controlled by a media group where the media group has a private treaty/shareholders’ agreement with the issuer or promoters of the issuer.”

Conditions for Preferential Allotment made more stringent

“Explanation: Where any person belonging to promoter(s) or the promoter group has sold his  equity shares in the issuer during the 6 months preceding the relevant date, the promoter(s) and promoter group shall be ineligible for  allotment of specified securities on preferential basis”.

New Reg 72(3): Where any person belonging to promoter(s) or the  promoter group has previously subscribed to warrants of an issuer but failed to exercise the warrants, the promoter(s) and promoter group shall be ineligible for issue of specified securities of such issuer on preferential basis for a period of one year from the date of expiry of the tenure/cancellation of  the  warrants.

Download the SEBI ICDR 4th Amendment 2010 issued vide No. LAD-NRO/GN/2010-11/19/26456 dated 12th November 2010