Sebi amends rights issue norms
Earlier, the issuer company was allowed to utilise the rights issue proceeds after satisfying the designated stock exchange that its ‘rights offer had received minimum 90% subscription’. The new amendment that has been brought in follows Sebi’s decision of late last year to cut short the time period for allotment of shares in rights issue to 15 days from the previous 45 days. The Sebi circular said, “In view of this it has been decided to amend clause 8.19 of the Sebi (DIP) guidelines to provide that the issuer company can utilise the issue proceeds only after the basis of allotment is finalised.”
“The amendment has brought more sanity to the rights issue norms”, said Prithvi Haldea, managing director, Prime Database. An issue is considered ‘complete’ only when the final allotment of shares is done. A company using issue proceeds before the allotment process could land in trouble as any adverse development could happen in the issuer company. Thus by amending the ‘rights issue’ Sebi has actually set the process right in a rights issue process, he said.
Further, Sebi has extended the facility of ‘application supported by blocked amount’ (ASBA) to all rights issue which enables an investor to apply for an issue without making payment. Instead, the amount is blocked in investor’s personal account with the designated
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