SEBI Eases the Listing of Start-ups by Imposing the New Regulations

Apr, 2021 - By WMR

On March 26, 2021, the market regulator made it compulsory for top 1,000 listed firms, considering their market valuation, to have a dividend distribution policy and a risk management committee.

The Securities and Exchange Board of India (SEBI) will be imparting fluidity to mutual funds by initiating CDMDF (Corporate Debt Market Development Fund), Sithamaran said. The Finance Minister further announced the changes in regulations for listing of start-ups, along with the goal of increasing the transparency in the disclosure obligations for listed companies and focusing on ESG (Environment, Social and Governance) parameters. The new rules have eased the listing procedure and investors in retail are given authority of access to information.

The market regulator has revised the AIF (Alternative Investment Fund) by changing framework for re-segmentation of various entities. The key requirements for a new entity or start-up company to get listed under Innovators Growth Platform (IGP) are,

About 25% of their initial capital must be held by QIB (Qualified Institutional Buyer), accredited investors or a family trust.
Below 10% initial capital held by accredited investors will be considered as 25% of initial capital for eligibility obligation.
The time period for holding 25% of initial capital of the enlisting company (Start-up Company) by eligible investors, will now be one year (previously two years).
Initial share-holdings of eligible investors will be considered for whole 25% of initial capital of enlisting company (previously 10%).
The enlisting company can optionally allot about 60% of issue size. Eligible investors will need 30 days to issue the authority of such shares.

These new regulations from SEBI have sparked hopes of tranquillity for the growing number of entrepreneurs. With this amendment, SEBI has encouraged the rising entrepreneurs to list their start-ups and has restricted regulations for de-listing process for the established entities.