SEBI Board Meeting

SEBI Board Meeting

The SEBI Board met today in Mumbai and took the following decisions:

Platform for E-Voting by Shareholders of Listed Entities

In line with the budget proposal of Hon’ble Finance Minister, to make it mandatory for top listed companies to provide for electronic voting facilities, it has been decided to implement the said proposal by making electronic voting mandatory for all listed companies in respect of those businesses to be transacted through postal ballot. The same would be implemented in a phased manner. To begin with, it would be mandated for top 500 listed companies at BSE and NSE based on market capitalization. Listed companies may choose any one of the agency which is currently providing the e-voting platform.

Manner of dealing with Audit Reports filed by listed entities

In order to enhance the quality of financial reporting done by listed entities, it has been decided to put in place, a mechanism to process qualified annual audit reports filed by the listed entities with stock exchanges and Annual Audit Reports where accounting irregularities have been pointed out by Financial Reporting Review Board of the Institute of Chartered Accountants of India (ICAI-FRRB). It has been, inter-alia, decided that:

• Deficiencies in the present process would be examined and rectified.
• SEBI would create Qualified Audit Report review Committee (QARC) represented by ICAI, Stock Exchanges, etc. to guide SEBI in processing audit reports where auditors have given qualified audit reports.
• Listed entities would be required to file annual audit reports to the stock exchanges alongwith the applicable Forms (Form A: 'Unqualified' / 'Matter of Emphasis Report'; Form B: 'Qualified' / 'Subject To' / 'Except For Audit Report').
• After preliminary scrutiny and based on materiality, exchanges would refer these reports to SEBI/QARC.
• Cases wherein the qualifications are significant and explanation given by Company is unsatisfactory would be referred to the ICAI-FRRB. If ICAI-FRRB opines that the qualification is justified, SEBI may mandate a restatement of the accounts of the entity and require the entity to inform the same to the shareholders by making the announcement to stock exchanges.

Amendment to certain provisions in SEBI (ICDR) Regulations relating to Infrastructure Sector

In order to harmonize the SEBI (ICDR) Regulations relating to Infrastructure Sector with the amended Securities Contracts (Regulation) Rules, 1957, it has been decided to carry out consequential amendments to SEBI (ICDR) Regulations pertaining to minimum public shareholding and minimum subscription requirements. It has also been decided to modify the minimum subscription requirements for companies coming out with IPOs to state that the minimum subscription shall not be less than 90% of the offer, subject to allotment of minimum 25% or 10%, as the case may be, of the securities offered to the public.

Review of Offer for Sale (OFS) through stock exchange mechanism

1. The Board has approved the following changes in the OFS mechanism through stock exchange:

i. Within the cooling off period of +12 weeks, the promoter(s)/promoter group entities can offer their shares only through OFS or Institutional Placement Programme (IPP) while maintaining a gap of 2 weeks between two successive OFS or IPP. This would also be applicable on promoters who have already offloaded their shares through OFS or IPP. Board also approved these changes in the SEBI (ICDR) Regulations for OFS through IPP route.

ii. Modification / cancellation of bids shall not be allowed during the last 60 minutes from the close of bidding session instead of last 30 minutes.

2. The Board also took note of the following changes in the OFS mechanism:

a. Indicative price shall be displayed during the last 60 minutes of the close of bidding session irrespective of the book being built.

b. The dissemination of floor price shall not be a part of the notice. If the seller intends to disclose the floor price, the price shall be disclosed after the close of business hours on (T-1) day (T day being the day of OFS).

c. The minimum size of the offer shall be Rs.25 crore. However, the size of offer can be less than Rs.25 crore so as to achieve minimum public shareholding in a single tranche.

d. The issuer shall have the option to upsize the offer subject to appropriate disclosure in the notice and advance pay-in of shares.

e. Institutional investors shall have the option of applying with 100% upfront margin in cash or with an adhoc margin of certain lower percentage to be determined by the Exchanges. In the latter case the bids shall not be permitted to be modified.

f. Additional time shall be provided to the custodians to confirm the institutional bids during post close trading hours subject to the condition that the bids and payments have been received before closure of the bidding process.

Mumbai

June 26, 2012