Sebi takes measures to deal with stressed companies

In a move which is in sync with the Reserve Bank’s announcements to deal with stressed assets, the Securities and Exchange Board of India (Sebi) board has approved various proposals to deal with restructuring in stressed companies.

It has been decided to extend the relaxations with regards to preferential issue requirements and from open offer obligations to the new investors acquiring shares in distressed companies pursuant to such restructuring schemes, Sebi said.

However, such relaxations shall be subject to certain conditions like approval by the shareholders of the companies by special resolution and lock-in of their shareholding for a minimum period of three years. Further, it has also been decided to extend the said relaxations to the lenders under other restructuring schemes undertaken in accordance with guidelines of RBI, Sebi said.

The board also approved the proposal to provide exemption from open offer obligations for acquisitions pursuant to resolution plans approved by National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016, Sebi added.

Currently, relaxations from preferential issue requirements and from open offer obligations  are available for lenders undertaking restructuring of listed companies in distress through Strategic Debt Restructuring (SDR) scheme in terms of the guidelines of RBI.

The market regulator also decided to levy a regulatory fee of $1,000 on each offshore derivative instrument (ODI) subscriber. ODIs were earlier known as participatory notes (P-Notes). “The board has decided to levy a regulatory fee of $1,000 on each ODI subscriber, to be collected and deposited by the ODI issuing FPI of such ODI subscriber, once every three years, starting from April 1, 2017. The board has decided to prohibit ODIs from being issued against derivatives, except on those which are used for hedging purposes,” the regulator said.

Sebi chief Ajay Tyagi, however, clarified that the regulator is not looking at banning P-Notes. “The idea is to tighten P-Notes just to make sure that you do not use that route for investing in India. The idea is not to stop it altogether as we understand that it should not be banned altogther,” Tyagi said.

Sebi also decided to further ease the access norms for investments by foreign portfolio investors (FPIs) in Indian securities market. Some of the proposed changes by the board include expansion of of eligible jurisdictions for grant of FPI registration to category I FPIs, by including countries having diplomatic tie-ups with India, simplification of broad based requirements, rationalisation of fit and proper criteria and permitting FPIs operating under the Multiple Investment Managers (MIM) structure and holding  foreign venture capital investor registration to appoint multiple custodians.