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SEBI Amendment Notification: Expanded Eligibility for Promoter Contributions in Post-Issue Capital


The Securities and Exchange Board of India (‘SEBI’) has issued a crucial notification[i], amending regulations regarding the Issue of Capital and Disclosure Requirements (‘ICDR’) on 17.05.2024. This amendment is significant as it updates the rules pertaining to the promoter’s contribution to post-issue capital (‘PIC’). The key amendments introduced by SEBI are outlined in this update, highlighting their implications on capital structure and regulatory compliance for issuers in the securities market. Importantly, the amendments expand the scope of eligible contributors beyond traditional financial institutions, now including non-individual public shareholders holding a minimum of 5% of the PIC.


In the exercise of the powers conferred under s. 30 of the SEBI, 1992 (‘Act’), the Board hereby makes the following regulations to amend further the SEBI (ICDR) (Amendment) Regulations, 2018, namely: -

  • Introducing the SEBI (ICDR) (Amendment) Regulations, 2024.

  • Effective immediately upon publication in the Official Gazette.

  • In the SEBI (ICDR) Regulations, 2018.

  1. In reg. 14(1), in the first proviso, the words ‘Or any non-individual public shareholder holding at least five per cent of the post-issue capital or any entity (individual or non-individual) forming part of promoter group other than the promoter(s)’ shall be inserted.  

  2. The amendment in this regulation is significant as it expands the scope of entities eligible to contribute towards the minimum promoter contribution. Unlike the existing provisions, which limit contributions to specific financial entities, the amendment now includes non-individual public shareholders holding at least five per cent of the post-issue capital. This change broadens the diversification of funding sources for issuers. It empowers non-individual public shareholders and entities forming part of the promoter group, making them feel more included in the regulatory changes. This is a significant shift that all stakeholders need to be aware of.

  3. It was recommended that any non-individual shareholder that would hold 5% or more of the post-offer equity share capital should be permitted to contribute towards the shortfall in minimum promoters’ contribution, subject to the existing maximum of 10%, without being identified as a promoter. Such equity shares contributing to the shortfall in minimum promoters’ contribution should be eligible under r. 15. Hence, the amendment is also done in r. 15. In reg. 15(1)(b), in the proviso, in clause (i), the words ‘Or any non-individual public shareholder holding at least five per cent of the post-issue capital or any entity (individual or non-individual) forming part of promoter group other than the promoter(s)’ shall be inserted.

  4. After clause (iii), the following new clause (iv) shall be inserted, namely ‘to equity shares arising from the conclusion or exchange of fully paid-up compulsorily convertible securities, including depository receipts, that have been held by the promoters and alternative investment funds or foreign venture capital investors or scheduled commercial banks or public financial institutions or insurance companies registered with Insurance Regulatory and Development Authority of India or any non-individual public shareholder holding at least five percent of the post-issue capital or any entity (individual or non-individual) forming part of promoter group other than the promoter(s), as applicable, for a period of at least one year prior to the filing of the draft offer document and such fully paid-up compulsorily convertible securities are covered or exchanged into equity shares prior to the filing of the offer document (i.e., red herring prospectus in case of a book built issue and prospectus in case of a fixed price issue), provided that full disclosures of the terms of conversion or exchange are made in such draft offer document.’

  5. The relevance of the inserted paragraph broadens the scope of eligible entities beyond promoters to include alternative investment funds, foreign venture capital investors, scheduled commercial banks, public financial institutions, insurance companies, and non-individual public shareholders with a minimum of five per cent PIC. It extends to any entity within the promoter group other than the promoter(s), provided specific criteria are met. By enabling such transactions, SEBI aims to promote market liquidity, enhance capital accessibility, and foster investor confidence in the equity market.

  6. It is noted that similar amendments are made in regs. 16, 113, 114, 115, 236, 237, 238 and 292 of the ICDR.

Our Analysis

The recent SEBI amendments significantly impact issuers and securities market participants, primarily by broadening eligible contributors to PIC. Including non-individual public shareholders with at least five per cent holding introduces greater diversity in funding sources and investment dynamics. Issuers must carefully assess these changes to ensure compliance, potentially revising capital structures and shareholder agreements. Legal and financial consultations will be crucial for adapting to these regulations. In the long term, these amendments could enhance market liquidity and strategic flexibility, making it essential for companies to consider these factors in their strategic planning. Adhering to these regulations is vital for effectively navigating the evolving securities market landscape.

End Notes

[i] SEBI/LAD-NRO/GN/2024/178 dated 17.05.2024.

Authored by Onam Singhal, Chartered Accountant at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.


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