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JC - Legal Updates - IPO & FPO lock-in requirements relaxed!

Legal Updates

18 Aug 2021

IPO & FPO lock-in requirements relaxed!

The lock in requirements in an initial public offer (“IPO”) and further public offer (“FPO”) for promoters and persons other than promoters have been relaxed. Following are the key amendments introduced:

1.    ‘Promoter group’ definition narrowed

A body corporate shall no more be treated as part of the promoter group of an issuer merely because a group of individuals/companies/combinations thereof (acting in concert) hold 20% or higher of its share capital, and they also hold 20% or more of the share capital of an issuer company (and are acting in concert).

2.    Reduction of promoter and non-promoter lock-in:

(a)  Promoters:

(i)   Minimum promoters’ contribution (“MPC”) under an IPO / FPO shall now be locked-in only for a period of 18 months as against the previous lock-in requirement of 3 years.

(ii)  Promoters’ holding exceeding MPC in an IPO/FPO shall now be locked in for a period of 6 months as against the previous lock-in requirement of 1 year.

The above relaxations however, shall not be applicable in case majority of the IPO/FPO issue proceeds (excluding the portion of offer for sale) are utilised for capital expenditure which has been defined to include civil work, miscellaneous fixed assets, purchase of land, building, plant and machinery, etc.

(b)  Non-Promoters:

(i)   The entire pre-issue capital of non-promoters shall now be locked-in for a period of 6 months as against the previous lock-in requirement of 1 year.

(ii)  The lock-in (from date of purchase) applicable to (i) venture capital funds, (ii) category I or category II alternative investment fund or (iii) foreign venture capital investors has been reduced to 6 months as against the previous lock-in requirement of 1 year.

The Securities and Exchange Board of India (“SEBI”) has introduced the above amendments by way of an amendment to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

http://jclex.com/uploads/pdf/Amendments%20to%20ICDR%20Regs.pdf

For any further information, please contact Ms. Apurva Kanvinde (apurva.kanvinde@jclex.com) or Mr. Sumitava Basu (sumitava.basu@jclex.com).