Sebi clears frameworks for gold, social stock bourses, changes to delisting norms

PTI, Sep 29, 2021, 9:27 AM IST

Mumbai:  Sebi on Tuesday approved frameworks for gold and social stock exchanges, and changes to delisting norms to make M&As more rational as well as to superior voting rights and various other proposals, mainly aimed at deepening the securities market.

The Sebi board at its meeting here decided on a framework for the social stock exchange (SSE) for fundraising by social enterprises.

After the board meeting on Tuesday, Sebi Chairman Ajay Tyagi said that SSE will be a separate segment of the existing stock exchanges.

Social Enterprises (SEs) eligible to participate in the SSE should be entities — Non-Profit Organisations (NPOs) and for-profit social enterprises — having social intent and impact as their primary goal.

The framework for the Social Stock Exchange (SSE) has been developed on the basis of the recommendations of a working group and technical group constituted by the regulator.

The Sebi board also cleared a proposal for setting up a gold exchange wherein the yellow metal will be traded in the form of electronic gold receipts and the bourse will help in having a transparent domestic spot price discovery mechanism.

The instruments representing gold will be called Electronic Gold Receipts (EGRs) and will be notified as securities, Tyagi said.

“EGRs will have the trading, clearing and settlement features akin to any other securities,” he said.

Any recognised stock exchange, existing as well as new, can launch trading in EGRs in a separate segment. The denomination for the trading of EGR and conversion of EGR into gold can be decided by the stock exchanges with the approval of Sebi.

The gold exchange, encompassing the entire ecosystem of trading of EGR and physical delivery of gold, is expected to create a vibrant gold ecosystem in India, Sebi said in a statement.

In a move to help new-age technology companies, the market regulator decided to relax the framework governing the issue of shares with superior voting rights (SR shares).

Sebi said promoters who have a net worth of over Rs 1,000 crore can have superior voting rights in their companies, raising it from the current Rs 500 crore.

In addition, the minimum gap between issuance of SR shares and filing of ”Red Herring Prospectus” has been reduced to three months from the existing requirement of six months.

Market participants are of the view that certain aspects of current framework on SR shares are onerous which delays such issuer companies from raising funds from capital markets.

The Sebi board also decided to amend rules pertaining to delisting of equity shares of a company following an open offer as part of efforts to make merger and acquisition transactions more rational and convenient.

Sebi said the new framework would be made available only in the case of open offers under the Takeover Regulations for an incoming acquirer that is seeking to acquire sole or joint control of the target company.

In case an acquirer is desirous of delisting the target company, the acquirer must propose a higher price for delisting with a suitable premium over open offer price.

Under the existing framework, if an open offer is triggered, compliance with the Takeover Regulations could take the incoming acquirer’s holding to above 75 percent or perhaps even 90 percent.

However, to ensure compliance with the Securities Contract (Regulation) Rules, the acquirer would be forced to first bring his stake down to 75 percent as the Sebi delisting norms would not let the acquirer even to attempt at delisting unless the holding is first brought down to 75 percent.

In addition, the Sebi board decided to make sweeping changes to strengthen the monitoring and enforcement of norms on related party transactions.

It has been decided to tweak the definition of Related Party and Related Party Transactions (RPTs), Sebi said.

Also, it has been decided to make changes to the process followed by a company’s audit committee for approval of RPTs that are material. Further, there would be a format for reporting of RPTs to the stock exchanges.

Under the framework approved by Sebi, a related party should be any person or entity belonging to the promoter or promoter group of the listed entity.

The regulator also approved an Investor Charter for investors in the securities market with a view to bringing in more transparency in the investment process.

The Investor Charter includes the vision statement of Sebi for investors, mission statement, rights and responsibilities of investors, do’s and don’t for investors in securities market among others, Sebi said in a press conference after the board meeting.

In addition, the regulator has developed Investor Charters of Sebi recognized Market Infrastructure Institutions (MIIs), registered intermediaries and regulated entities in consultation with various entities.