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New norms for startups notified
New norms for startups notified. In a bid to create easy way to raise funds for startups, the capital market regulator, Sebi has notified a new set of listing norms for such entities, including e-commerce ventures, on a separate platform of domestic stock exchanges.
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They loosens disclosure norms, takeover, funding, de-listing rules
- Exclusive platform created for institutional investors and HNIs
- The move is aimed to encourage Indian startups to remain in the country
- No caps on money spent on publicity and advertisements
- Application size at Rs 10 lakh allowing only large investors to invest
- At least 25% of their pre-issue capital needs to be with institutional investors for technology start-ups, others it would be 50%
Mumbai: In a bid to create easy way to raise funds for startups, the capital market regulator, Sebi has notified a new set of listing norms for such entities, including e-commerce ventures, on a separate platform of domestic stock exchanges.
The new norms provide significant relaxations in the disclosure norms, while Sebi has relaxed its delisting, takeover and alternative investment fund regulations for such new-age entities engaged in IT, data analytics, intellectual property, bio-technology or nano-technology, etc.
The extensive changes in Sebi regulations would allow such entities to get listed on the separate ‘Institutional Trading Platform’ of the stock exchanges such as BSE and NSE and are aimed to encourage the Indian start-ups and entrepreneurs to remain within the country rather than moving abroad for funds.
The new platform will be open to only institutional investors and HNIs, as Sebi feels that small retail investors need to be safeguarded against a higher level of risks associated with this platform. Sebi has kept the minimum trading lot and the minimum application size at Rs 10 lakh so that only sophisticated and large investors come in.
The companies can, however, graduate to the main platform later and the small investors can also invest at that time. The relaxations include removal of caps on the money spent by such companies on publicity and advertisements as they need to spend much more for such purposes.
For their listing, Sebi has also relaxed the mandatory lock-in period for promoters and other pre-listing investors to six months, as against three years for other companies. Besides, the disclosure requirements for these companies have been relaxed.
At least 25 per cent of their pre-issue capital would need to be with institutional investors for technology start-ups, while this requirement would be 50 per cent for companies from other areas. Provisions relating to minimum public shareholding would not be applicable to entities listed on institutional trading platform without making a public issue.
With regard to exit rules, Sebi said the entity whose securities are listed on the ITP platform may exit from such platform in case its shareholders approve such exit by passing a special resolution via postal ballot where 90 per cent of the total votes and the majority of non-promoter votes should be in favor of such move.
