In a move that will offer a major relief to the start-ups founders planning public listing, capital market regulator Sebi has allowed them to hold on to their employees stock ownership plan (Esops) provided they were issued one year before the public issue filing.
The regulator has also created a special category for foreign funds to invest in government securities called GS-FPIs and aligned their KYC norms with that of the Reserve Bank. Announcing these decisions and a host of others after a marathon board meeting here this evening, which cleared as many as 19 proposals/amendments to the existing sebi norms on Wednesday, Sebi chairman Tuhin Kanta Pandey said all the 19 decisions have been taken after detailed consultation with the industry and will go a long way to further relax the ease of doing business.
“The proposal approved by the Sebi board shall facilitate founders who received ESOP benefits at least one year prior to the filing of IPO papers with the Sebi, to continue holding, and/or exercising such benefits even after being specified as the promoters and the company becoming a listed entity," the chairman said highlighting that the decisions are part of an overall objective of enhancing the ease of business.
The start-up ecosystem has been seeking amendment to the Esop rules as many founders are listed as promoters for an IPO, based on their shareholding including the options which were vested, because public-issue norms require that. This decision is expected to convince start-up founders to come to the public markets, said Pandey, adding however, that an industry proposal for allowing fresh ESOPs benefits to be availed by founders after the listing was not approved by the board.
Currently, founders have to be classified as promoters before filing for an IPO, but the hindrance is that the rule also prohibit issuance of Esops to them as promoters. The watchdog said a person who ceased to be an employee after having been identified as a promoter be allowed to continue to hold their Esops, provided those or other benefits were issued one year before the IPO. In another decision that help help secure more stable long term fund foreign inflows into the country through government bonds, the Sebi has approved easier norms for FPIs to invest only in government bonds.
A key relaxation is that going forward, Sebi will not demand anything more than what the RBI seeks from them when it comes to KYC norms. “We will not ask anything beyond what the RBI norms on the KYC front, “ whole time member Anantha Narayan told reporters.
In relief to the government as well to the harried investors of those government companies which have very low public float the sebi has allowed their voluntary delisting provided those companies are not in the banking and other financial sector space. Chairman Pandey said only five such central PSUs are eligible for voluntary delisting under the new norms. These companies are the Kochi-based fertiliser maker FACT, the defunct watch maker HMT, KIOCL, State Trading Corporation and another defunct company ITI. Though there are four staterun banks with over 90 performers government shareholding and the largest financial entity that LIC is with just 3 percent public float against the mandated 25 percent they are not eligible for the new relaxation, Pandey added. In another development the sebi has also gave relief to merchant bankers by allowing them non-regulated activities under same firm of those activities are not fund based but fee based and are not governed by any other regulator as well but with full disclosures.
The other changes include allowing setting up of social stock exchanges for listing not for profit organisations. The chairman said so far 20 such bodies have raised Rs 20 crore from the public market but there is huge potential for more fundraising by such entities if there is a special platform for that. Other measures include relaxation for REITs and Invits by reducing complaince burden , allowing AIFs to make co-investments, easing the norms for fundraising by angel funds, easing the disclosure norms for portfolio managers, settlement scheme for certain category of brokers who traded on the now defunct NSEL, settlement scheme for venture capital funds and relaxing the listing norms disclosures for facilitating full dematerialisation of shares, among others.