SME IPO and disclosure norms under review: A move by SEBI to empower investors
SEBI in a move to empower investors has recently published a consultation paper to review the SME IPO and disclosure norms. We have summarized the key points highlighted in this consultation paper.
key points highlighted in the review paper for sme ipo and disclosure
- Minimum application size shall be increased from one lakh rupees per application to Two Lakh rupees per application
- Increase the requirement of minimum allottees from 50 to 200
- OFS in SME IPO may be restricted to 20% of the issue size. Further, for selling shareholders, shares offered for sale in SME IPO shall not exceed more than 20% of their pre-issue shareholding on fully diluted basis.
- Requirement of appointment of Monitoring Agency shall be made applicable for issuer company if fresh issue size is higher than 20 crore.
- In cases where there is no requirement of appointment of Monitoring Agency, there should be a mandatory requirement of Statutory auditor’s certificate for utilization of money raised through the public issue, to be submitted to Exchange while filing the half yearly financial statement, till the issue proceeds are fully utilized. These certificates should also be submitted to the Audit Committee and Board of the Issuer Company.
- It is proposed that lock-in on minimum promoter contribution in SME IPO shall be increased to 5 years. Additionally, lock-in on promoters’ holding held in excess of MPC shall be released in phased manner i.e. lock-in for 50 promoters’ holding in excess of MPC shall be released after 1 year and lock-in for remaining 50% promoters’ holding in excess of MPC shall be released after 2 years.
- It is proposed that GCP amount in SME IPO may be restricted to 10% of issue size or Rs. 10 crore (whichever is lower).
- Removal of option for raising funds for unidentified target / acquisition.
- In case of conversion of Company from Limited Liability Partnership or from Partnership firm, the Company shall be in existence for at least period of Two full Financial Year before filing of DRHP.
- Proposal for 2 year cooling off period before SME IPO for a Company, if there is a change of promoter(s) or new promoter(s) have come after acquisition of 50% or more shareholding prior to filing of draft offer document.
- Minimum Issue Size – more than Rs 10 crore
- Repayment of Loan of Promoter, Promoter Group or any related party, from the issue proceeds, whether directly or indirectly should not be considered as object.
- No outstanding convertible securities before IPO.
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