Major Decisions Taken at SEBI Board Meeting on 6th August 2021

New SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021

The Board considered and approved the merger of SEBI (Issue of Sweat Equity) Regulations, 2002 ('Sweat Equity Regulations') and SEBI (Share Based Employee Benefits) Regulations, 2014 ('SBEB Regulations') into a single regulation called the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

Major Provisions

1. SBEB to exclusive employees: The companies will be allowed to provide SBEB to employees, who are exclusively working for such company or any of its group companies including its subsidiary or its associate.

2. Flexibility to switch: The companies will have flexibility in switching the administration of their schemes from the trust route to the direct route and vice versa with the approval of the shareholders, subject to the condition that the switch is not prejudicial to the interest of the employees.

3. Appropriation: The time period for appropriating the unappropriated inventory of the trust has been extended from existing 1 year to 2 years subject to the approval of the Compensation/Nomination and Remuneration Committee for such extension.

4. Minimum vesting and lock-in period: In the event of death or permanent incapacity of an employee, there shall be no minimum vesting and lock-in period for all share benefit schemes.

5. Sweat equity shares for Innovators Growth Platform (IGP): In case of companies listed on the IGP, the yearly limit shall be 15% and overall limit shall be 50% (which is 25% for the Companies listed on the main board) of the paid-up capital at any time participation in the voting.

Review of regulatory framework for promoter, promoter group and group companies

The Board considered and approved the following:

I. Relaxation in lock-in requirements

1. Promoters:

The lock-in of promoter shareholding to the extent of minimum promoter contribution (i.e., 20% of post issue capital) shall be for a period of 18 months from the date of allotment in IPO/ FPO instead of existing 3 years and promoter shareholding in excess of minimum promoter contribution shall be locked-in for a period of 6 months instead of existing 1 year, in the following cases:

a. Object of the issue is only offer for sale (OFS)

b. Object of the issue is only raising of funds for other than for capital expenditure for a project (more than 50% of the fresh issue size)

c. In case of combined offering (fresh Issue + offer for sale), the object of the issue involves financing for other than capital expenditure for a project (more than 50% of the issue size excluding OFS portion)

2. Other than promoters:

a. The lock-in of pre-IPO securities held by persons other than promoters shall be locked-in for a period of 6 months from the date of allotment in IPO instead of existing 1 year.

b. The period of holding of equity shares for Venture Capital Fund (VCF) or Alternative Investment Fund (AIF) of Category I or II or a Foreign Venture Capital Investor (FVCI) shall be reduced to 6 months from the date of their acquisition of such equity shares instead of existing 1 year.

II. Reduction in disclosure requirements at the time of IPO

1. Rationalization of definition of promoter group: The definition of promoter group shall be rationalized, in case where the promoter of the issuer company is corporate body, to exclude companies having common financial investors.

2. Top 5 Group Companies: The disclosure requirements in the offer documents, in respect of Group Companies of the issuer company, shall be rationalized to, inter-alia, exclude disclosure of financials of top 5 listed/unlisted group companies. These disclosures will continue to be made available on the website of the group companies.

III. Shift from the concept of promoter to 'person in control' or 'controlling shareholders'

To this effect, the Board, advised SEBI to:

a. Engage with other regulators to ascertain and resolve regulatory hurdles, if any.

b. Prepare draft amendments to securities market regulations and analyze impact of the same.

c. Further deliberate at the Primary Market Advisory Committee (PMAC) and develop a roadmap for implementation of the proposed transition.

SEBI (Alternative Investment Funds) Regulations, 2012

The Board approved amendments to SEBI (AIF) Regulations, 2012 to provide investment flexibility and streamline regulatory processes.

Amendments

1. Category I AIF - VCFs to invest at least 75% of investable funds in

a. unlisted equity shares and equity linked instruments of venture capital undertakings or

b. in companies listed or proposed to be listed on a SME exchange or SME segment of an exchange

The existing investment restrictions on the residual portion of investable funds of VCFs have been removed.

2. The minimum amount of grant of ₹25 Lakhs stipulated for Category I AIFs – Social Venture Funds shall not apply to grants received from Accredited Investors.

3. AIFs can also issue partly paid-up units to investors to represent the portion of committed capital invested.

4. AIFs to file private placement memorandum with SEBI through registered Merchant Bankers.

Review of SEBI (LODR) Regulations, 2015

The Board considered and approved the proposals relating to SEBI (LODR) Regulations, 2015 pertaining to issuers who have listed Non-Convertible Debt Securities, Non- Convertible Redeemable Preference Shares, Perpetual Debt Instruments and/ or Perpetual Non-Cumulative Preference Shares.

Facilitating Ease of Doing Business in MIIs

The Board deliberated on various existing provisions of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 and SEBI (Depositories and Participants) Regulations, 2018 and approved the following proposals to facilitate ease of doing business in MIIs:

1. The provision applicable to listed stock exchanges/ depositories with regard to determination of 'fit and proper' status of persons acquiring less than 2 percent of its shareholding shall also be made applicable to unlisted stock exchanges/ depositories.

2. The existing requirement of seeking post-facto approval of SEBI for acquisitions between 2-5% shareholding shall be discontinued for all eligible shareholders.

SEBI (SAST) Regulations, 2011

The Board decided to amend the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

Applicability: w.e.f. 01^st April, 2022

1. The Board has decided to remove certain disclosure obligations for the acquirers/promoters, etc. pertaining to acquisition or disposal of shares aggregating to 5% and any change of 2% thereafter, annual shareholding disclosures and creation/invocation/release of encumbrance registered in depository systems under Takeover Regulations. These relaxations have been done on account of implementation of the System Driven Disclosures (SDD).

2. To remove obligation for physical disclosures.

What is System Driven Disclosures?

Under SDD, relevant disclosures are disseminated by the stock exchanges based on aggregation of data from the depositories without human intervention. The SDD for the said disclosures is already in place and runs parallel with the submission of physical disclosures under the Takeover Regulations.