Sebi planning to amend corporate debt rejig norms

New Delhi: Regulator Sebi plans to put in place a stricter framework for providing exemption from open offer requirements with respect to corporate debt restructuring activities, a senior official said. The markets watchdog has proposed that relaxation might not be given to entities other than lenders in certain conditions as well as do away with the reference to 'competent authority' in the context of exemptions provided under its takeover regulations.

The proposals are expected to be taken up by the Sebi (Securities and Exchange Board of India) board at its meeting scheduled to be held on March 1, the official said. Under the Sebi norms, an entity has to make an open offer in case its shareholding goes beyond a certain threshold.

The open offer exemptions under Issue of Capital and Disclosure Requirements (ICDR) regulations as well as under takeover norms could be continued for allotment of shares to lenders pursuant to debt conversion in accordance with RBI norms, the official said.

Another proposal is that the open offer exemption might not be made available to "persons (other than lenders), the official added. Since the reference of 'competent' authority' has not been defined, the watchdog is planning to delete it with respect to open offer exemption under takeover regulations.

The exemption might be made available only for "scheme of arrangement or reconstruction pursuant to order of a court or tribunal", the official said. In February 2018, the Reserve Bank of India (RBI) repealed all then existing debt restructuring schemes and prescribed a new procedure regarding resolution of stressed assets.

The open offer exemption is also available in case of proceedings under the Insolvency and Bankruptcy Code (IBC).

Meanwhile, to provide a boost for startups, the Sebi board is likely to discuss this week the framework for accredited investors, including the eligibility criteria for such entities, according to an official. In December, the regulator approved inclusion of Accredited Investors (AI) for the purpose of Innovators Growth Platform (IGP).

Any individual with total annual gross income of Rs 50 lakh and a minimum liquid net worth of Rs 5 crore will be considered as an AI. In the case of body corporate, the net worth requirement would be Rs 25 crore. The requirements are part of the framework that is expected to be discussed during the Sebi's board meet on March 1, the official said.

An investor, having a demat account, can apply for recognition as an AI and their accreditation would be valid for three years.