SEBI Invites Public Feedback on Proposals to Streamline Business Operations

On January 11, the Securities and Exchange Board of India (Sebi) invited public comments on various proposals aimed at improving the ease of doing business in India. These proposals include changes to the timeline for filling up key managerial posts at listed companies, limiting the membership of directors in committees, and providing flexibility in offer-for-sale size and offer closing dates.

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Key Managerial Posts

The expert committee, chaired by former Sebi whole-time member S K Mohanty, has recommended increasing the timeline for filling up key managerial positions. Currently, companies are required to fill such positions within three months. The committee has suggested extending this timeline to six months for cases where regulatory or government approvals are required.

Committee Membership and Chairmanship

The committee has also proposed limiting the membership and chairmanship of committees for directors. A director can be a member of a maximum of seven audit committees in listed entities. The limit of chairmanship of not more than five committees would now be chairmanship of a maximum of five audit committees at listed entities across listed entities.

Offer-for-Sale Size and Closing Dates

The expert panel has suggested flexibility in the offer-for-sale size as well as offer closing dates in public issues due to force majeure events like a bank strike. Instead of the current requirement of a minimum three-day extension, the recommendation is to permit issuer companies to extend the issue period by just one day in such scenarios.

Other Proposals

The committee has also made several other proposals, including:

• Including equity shares received on conversion or exchange of fully paid-up compulsory convertible securities and depository receipts for minimum promoters contribution.
• Permitting non-individual shareholders, who would hold 5% or more of the post-offer equity share capital, to contribute towards the shortfall in minimum promoters contribution without being identified as a promoter.
• Allowing flexibility to extend bid/offer closing dates due to force majeure events like a bank strike.
• Basing the offer for sale size on either the estimated issue size in rupee value or the number of shares, as disclosed in the draft red herring prospectus (DRHP), and not on both criteria.
• Harmonizing the timeline for prior intimation of board meetings under LODR rules to two working days for all types of proposals.
• Increasing the maximum gap between the meetings of the risk management committee to 210 days from the present 180 days.
• Considering the average market capitalization of six months (July-December) and determining the ranking on December 31 for the applicability of LODR rules based on market capitalization.

Sebi has sought public comments on these proposals till February 1. The regulator aims to facilitate ease of doing business and harmonize the provisions of the ICDR Issue of Capital and Disclosure Requirements and LODR Listing Obligations and Disclosure Requirements rules.