Wednesday, March 16, 2016

Startups Funding to Get Boost From SEBI (Listing of Specified Securities on Institutional Trading Platform) Regulations, 2013

Securities & Exchange Board of India or SEBI  had issued Institutional Trading Platform exclusively for SME that includes startups vide the SEBI (Listing of Specified Securities on Institutional Trading Platform) Regulations, 2013 (ITP Regulations) vide Gazette Notification No. LAD-NRO/GN/2013-14/27/6720, dated October 8, 2013 to make it easier for technological start-ups to list and raise funds through a dedicated platform on the domestic stock exchanges instead of going overseas for such listings.  The new rules will create an easy route for the investors in Startups in India to exit as there maybe opportunities to buy and sale shares through the new platform.  Until , now investor had to wait for an IPO by the startup company for exiting the company . 

ITP Regulations have also made consequential amendments  to SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and SEBI (Delisting of Equity Shares) Regulations, 2009.  SEBI has formulated quite easy terms for the trade of shares as the listing requirement has no promoter's concept or  a very harsh lock-in period of shareholdings

FAQ on SEBI ITP Regulations

What is The Institutional Trading Platform (ITP) ?
(i) The The Institutional Trading Platform (ITP)  is  a platform for listing and trading of specified securities of SME, including start-up companies in a 'SME Exchange' as defined under regulation 106N(1)(c) of the ICDR Regulations;
(ii) This trading platform is exclusively for investors who are either individuals or institutions ;
(iii) Companies listed on ITP shall not make a public issue of their securities.
  (iv) The the minimum trading lot shall be ten lakh rupees on this platform.
Who are eligible to be listed on this trading platform ?
Following are the conditions for a public company which falls under SME category to be fulfilled for being listed on  ITP
(i) the company, its promoter, group company or director should not be in the wilful defaulters list of the Reserve Bank of India as maintained by Credit Information Bureau (India) Limited;
(ii) Any company having a  winding up petition against the company  admitted by a court is not eligible to list;
(iii) the company, group companies or subsidiaries have not been referred to the Board for Industrial and Financial Reconstruction within a period of five years prior to the date of application for listing;
(iv) no regulatory action has been taken against the company, its promoter or director by SEBI, Reserve Bank of India, Insurance Regulatory and Development Authority or Ministry of Corporate Affairs within a period of five years prior to the date of application for listing;
(v) the company has at least one full year's audited financial statements, for the immediately preceding financial year at the time of making listing application;
(vi) the company has not completed a period of more than 10 years after incorporation and its revenues have not exceeded one hundred crore rupees in any of the previous financial years;
(vii) the paid up capital of the company has not exceeded twenty five crore rupees;
(viii) in addition to the above requirements, the company should have received certain minimum investment from the prescribed categories of investors.
What is process of listing ?
(i) An eligible  company may apply to the recognised stock exchange for listing along with the information document containing disclosures as specified under Schedule XIX A of ICDR Regulations.
(ii) The concerned recognised stock exchange may issue an in-principle approval to companies eligible for listing on ITP.

(iii) A company which has received in-principle approval from a recognised stock exchange for listing of its specified securities on ITP shall be deemed to have been exempted by SEBI from rule 19(2)(b) of the Securities Contracts (Regulation)Rules, 1957 for the limited purpose of listing on ITP.

Can a ITP listed company raise money through private placements ?
Yes, the listed entity can raise the capital through private placements or rights issue but not through public issue.

 Is there  Minimum promoter shareholding and lock-in period clause ?

 Yes, it has been provided that nNot less than 25%   of the post listing capital of the company shall be held by the promoters at the time of listing  with a locked-in for a period of three years from date of listing.

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