Capital markets regulator, the Securities and Exchange Board of India (SEBI) on Wednesday relaxed takeover norms for acquisition of stressed assets of listed companies to help the government and the Reserve Bank of India (RBI) in their efforts to tackle bad loans.SEBI Chairman Ajay Tyagi revealed this after a board meeting here.
The SEBI board also approved a proposal to tighten rules for participatory notes through imposition of a regulatory fee on issuers of such instruments.
But Tyagi said there is no proposal to completely ban participatory notes, as they can be useful for new foreign investors looking to test the Indian markets.
The SEBI will also issue a discussion paper for easier registration of foreign investors. Another discussion paper will be floated for ways to help develop equity derivatives markets.
The following decisions were as follows:
1. Restructuring in stressed companies
With a view to facilitate turnaround of listed companies in distress which will benefit their shareholders and lenders, the Board has approved the following proposals:
Presently, relaxations from preferential issue requirements under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 and from open offer obligations under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 are available for lenders undertaking restructuring of listed companies in distress through Strategic Debt Restructuring (SDR) scheme in terms of the guidelines of RBI. It has been represented to SEBI that where the lenders have acquired shares and propose to divest the same to a new investor, they are facing difficulties as the new investor would need to make a mandatory open offer which would reduce the funds available for investment in the company. Hence, they have requested for exemptions to these investors. Accordingly, it has been decided to extend the aforesaid relaxations to the new investors acquiring shares in distressed companies pursuant to such restructuring schemes. However, such relaxations shall be subject to certain conditions like approval by the shareholders of the companies by special resolution and lock-in of their shareholding for a minimum period of three years. Further, it has also been decided to extend the said relaxations to the lenders under other restructuring schemes undertaken in accordance with guidelines of RBI.
2. Resolution plans approved under the Insolvency and Bankruptcy Code, 2016
The Board has also approved the proposal to provide exemption from open offer obligations, under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, for acquisitions pursuant to resolution plans approved by NCLT under the Insolvency and Bankruptcy Code, 2016.
3. Extension of Lock-in-relaxation to Category II Alternative Investment Funds (AIF)
Presently, in case of an IPO, there are relaxed rules for lock-in provision to Category I AIFs. The Board approved the proposal for extending such relaxation to Category II AIFs also. This would bring about uniformity, ease of doing business and expand the investor base available for capital raising.
4. Consultation paper on Easing of access norms for investment by FPIs
FPI regime, which commenced from June 01, 2014, has been put in place with the objectives to rationalize various foreign portfolio investment routes, simplify the procedures to attract more foreign funds. SEBI proposes to carry out appropriate amendment (s) to SEBI (Foreign Portfolio Investors) Regulations, 2014 and issue necessary circular/guidelines etc. issued thereunder, to further ease the access norms for investments by FPIs in Indian securities market.
Some of the proposed changes are as follows:
1. Expansion of eligible jurisdictions for grant of FPI registration to category I FPIs by including countries having diplomatic tie-ups with India.
2. Simplification of broad based requirements.
3. Rationalization of fit and proper criteria.
4. Permitting FPIs operating under the Multiple Investment Managers (MIM)structure and holding FVCI registration to appoint multiple custodians.
Accordingly, the Board considered and approved the proposal for initiation of public consultation process before implementing the aforesaid proposed changes to SEBI (Foreign Portfolio Investors) Regulations, 2014 and necessary circular/guidelines etc. issued thereunder.
5. Offshore Derivative Instruments (ODI)
The Board has decided to levy a "Regulatory Fee" of US$1000 on each ODI subscriber, to be collected and deposited by the ODI issuing FPI of such ODI subscriber, once every three years, starting from April 1, 2017. SEBI shall amend SEBI (FPI) Regulations, 2014 to implement the decision taken by the Board.
The Board has decided to prohibit ODIs from being issued against derivatives, except on those which are used for hedging purposes. SEBI will issue a circular in this regard.
6. Growth and Development of Equity Derivatives Market in India
A paper was presented to the Board on "Growth and Development of Equity Derivatives Market in India". It was decided to have stakeholder consultation on the need to review the derivatives market framework including product suitability for investors so as to further strengthen the framework in line with the emerging trends and global best practices.
7. SEBI Annual Report 2016-17
The Board considered and approved the SEBI Annual Report 2016-17. In compliance with Section 18(2) of SEBI Act, 1992, the same Annual Report would be submitted to the Central Government.