On April 8 2004 the Securities and Exchange Board of India (Sebi) approved certain amendments to the Sebi (Disclosure and Investor Protection) Guidelines 2000 (DIP) as part of its endeavor to ensure greater transparency in the market.
The main amendments to the DIP are:
Any preferential allotment made under the corporate debt restructuring (CDR) framework specified by the Reserve Bank of India will be locked in for one year from the date of allotment. In case of partly paid-up shares, the lock-in will commence from the date of allotment and continue for one year from the date shares become fully paid up.
The pre-preferential shareholding of allottees of shares or any other financial instruments issued on preferential basis will be locked in from the relevant date up to six months from the date of preferential allotment.
Shareholders who sold their shares in the six months before the relevant date will be ineligible for allotment of shares on a preferential basis.
The other criterion for preferential allotment to any individual is that the shareholding should be entirely in dematerialized form.
In keeping with Section 60A of the Companies Act 1956, the amendment permits public sector banks, scheduled banks and public financial institutions to issue debt securities pursuant to a shelf prospectus.
The period of allotment made pursuant to any resolution passed at a shareholders' meeting granting consent for preferential issuance of financial instruments has been reduced from three months to 15 days from the date of passing the resolution, except where an allotment is made pursuant to the CDR framework.
In case of advertisements on television, a statement advising the prospective investors to refer to the red herring prospectus/offer document for details must be displayed.
This amendment is a positive step towards greater market efficiency and furthers the interests of investors at large.