Sebi Proposes Ease of Doing Business Reforms

New Delhi, Jan 11 (PTI) Sebi on Thursday sought public comments on various proposals, including on timeline for filling up key managerial posts at listed companies and limiting membership of directors in committees, aimed at improving the ease of doing business.

Sebi floated the consultation paper on the interim recommendations of the expert committee that suggested increasing the timeline for filling up key managerial positions.

The expert committee under the chairmanship of S K Mohanty, a former whole-time member of Sebi, has given recommendations on limiting membership and chairmanship of committees for a director and the gap between meetings of the risk management committee.

Additionally, the expert panel has suggested flexibility on the offer-for-sale size as well as offer closing dates in the public issues due to force majeure events like a bank strike.

The regulator has sought comments till February 1, on the interim recommendations of the committee.

The expert committee was formed by the regulator to facilitate ease of doing business and harmonization of the provisions of ICDR (Issue of Capital and Disclosure Requirements) and LODR (Listing Obligations and Disclosure Requirements) rules.

The ICDR Regulation governs norms for maiden public issues, while the LODR Regulations provide the regulatory framework for all listed entities, ensuring compliance and disclosure requirements.

Additionally, the expert panel has given suggestions on several provisions of ICDR rules. It suggested the inclusion of equity shares received on conversion or exchange of fully paid-up compulsory convertible securities and depository receipts for minimum promoters' contribution.

The compulsorily convertible securities should be converted into equity shares before the filing of the red herring prospectus.

Further, non-individual shareholders, who would hold 5 per cent or more of the post-offer equity share capital, should be permitted to contribute towards the shortfall in minimum promoters' contribution without being identified as a promoter. This should be subject to the existing maximum of 10 per cent limit.

The panel suggested allowing flexibility to extend bid/offer closing dates 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.

"In order to provide ease of doing business and to provide greater flexibility, the offer for sale size can be based on either the estimated issue size (in Rupee value) or the number of shares, as disclosed in the DRHP, and not on both criteria," the committee suggested.

The committee suggested that "a director can be a member of a maximum 7 Audit Committees in listed entities... The limit of chairmanship of not more than 5 committees (which would now be chairmanship of a maximum 5 Audit Committees at listed entities) across listed entities may continue".

With regards to filling up vacancies for managerial personnel, the committee suggested that the time limit for filling up of vacancy of key managerial personnel which involves obtaining approvals of regulatory or government, should be increased from three months to a maximum of six months.

For maintaining uniformity, the timeline for prior intimation of board meetings under LODR rules should be harmonized to two working days for all types of proposals that are to be considered by the board of a listed company.

At present, the timeline for giving prior intimation varies from 2 to a maximum of 11 working days.

The maximum gap between the meetings of the risk management committee should be increased to 210 days from the present 180 days.

For the applicability of LODR rules based on market capitalization, it has been suggested to consider the average market capitalization of 6 months (July-December) and determine the ranking on December 31.