SEBI board approves new rules for gold spot trading, IPOs, delisting

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admin November 9, 2021
Updated 2021/11/09 at 2:21 PM

The Securities and Exchange Board of India (SEBI) board of directors made a number of important decisions, including laying out a framework for spot gold trading, tightening related party transaction rules, easing rules for issuance of shares with superior voting rights in tech companies, and relaxing delisting rules.

The framework for gold spot trading in India has been authorised by the regulator. Vault managers, as defined under the framework, may take gold deposits and issue securities known as electronic gold receipts (EGRs). These EGRs may be traded as a distinct sector on exchanges alongside other securities (such as stock options or stock futures). The EGRs’ denomination (e.g., 1 gram, 2 gram, etc.) is up to the exchange. Investors may keep the EGRs for as long as they like or surrender the instrument to any vault manager to convert it to the underlying gold.

The SEBI board of directors has agreed to modify the qualifying criteria for Superior Voting Rights (SR) shares. SR shares may be granted to companies belonging to a promoter group with a net worth of up to Rs 1,000 crore, according to the regulator. This is a significant rise above the existing ceiling of Rs 500 crore.

Second, instead of waiting six months, businesses may file for an initial public offering (IPO) three months after distributing SR shares to founders.

After an acquisition, the SEBI board made it simple for acquirers to delist target businesses. Currently, an acquirer cannot delist after making an open offer to shareholders, even if it receives 90 percent of the shares. Because existing regulations require the purchaser to reduce its ownership to 75% before beginning the delisting process, this is the case.

An acquirer may propose a higher price for delisting with a sufficient premium above the open offer price under the present system.

“If the open offer’s response results in the 90 percent delisting threshold being met, all shareholders who tender their shares will be paid the same delisting price,” SEBI said. “If the open offer’s response results in the 90 percent delisting threshold not being met, all shareholders who tender their shares will be paid the same takeover price.” Acquirers who reach 75 percent but fall short of the 90 percent delisting criteria are given a 12-month grace period to complete the delisting.

The regulator has restricted related party transactions, or RPTs, which are a major problem in corporate governance.

A related party transaction is one that takes place between two parties that have a previous relationship.

The SEBI board of directors has broadened the definition of a connected party to include all firms in the promoter group. A connected party is sometimes defined as a shareholder who owned at least 20% of the company’s stock in the previous fiscal year. From April 2023, the 20 percent ceiling will be reduced to ten percent.

For RPTs over a particular level – the lower of Rs. 1000 crore or 10% of the listed entity’s consolidated annual revenue – the SEBI board further asked for increased audit committee scrutiny and shareholder approval.

The parameters for identifying a “Fit and Proper Person” have also been modified by the SEBI board. It said that these criteria should be founded on principles and/or rules.

Integrity, honesty, ethical behaviour, reputation, justice, and character should all be part of the principle-based criterion, according to the report.

“An order of conviction passed by a court for any offence involving moral turpitude, or such person has been declared insolvent and not discharged, or has been categorised as a willful defaulter, or has been declared a fugitive economic offender, or against whom an order has been passed by SEBI or any other financial sector regulator,” it says.

 

Source: MoneyControl

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