Continuing the reforms march and taking another step in the direction of “Ease of Doing Business in India”, Indian capital markets regulator Securities and Exchange Board of India (SEBI) has relaxed its norms and regulations for start-ups companies in India. The underlying objective behind this is to enable startups to raise funds within the domestic market rather than having to go overseas. This step is likely to be a major boost for Indian start-ups.
For start-ups, the following regulations shall be applicable:
- The minimum trading amount has been mandated at Rs. 1 million.
- The number of allottees in case of a public offer shall be 200 or more.
- Will get an institutional trading platform.
- Can list if 25 per cent of pre-IPO capital is issued to qualified institutional placement (QIP).
- 75 per cent shares can be reserved for institutional investors, while allocation can be on discretionary basis for such investors. For non-institutional categories, it will be on proportional basis.
- All investors lock-in period in start-up IPOs will be 6 months.
- Considering the nature of business of companies which may list on the said platform, disclosure may contain only broad objects of the issue and there shall be no cap on amount raised for General Corporate Purposes.
- Issue price disclosure to be mandatory in offer for sale.
News Update from Bhumesh Verma:
Bhumesh Verma is a Corporate Lawyer and Partner at DGS Associates, Advocates based in New Delhi. He graduated in law from Delhi University in 1994. In 2000, he was selected as one of the scholars under the British Chevening Scholarship for Young Indian lawyers. Under this scholarship, he studied at the College of Law at York and worked with Ashurst in London. He advises Indian and foreign corporate clients,including startups, regularly. To get more updates on this, connect with him on LinkedIn.