Home >> Blog >> SEBI’s proposed alternative capital raising platform: is your start-up eligible? (Part II)
10 Apr 2015

SEBI’s proposed alternative capital raising platform: is your start-up eligible? (Part II)

Congratulations if your start-up’s fund raising plan has met all the six qualifiers necessary under SEBI’s proposed alternative capital raising platform for start-ups/ “new-age” companies (see previous blog that contains Part 1). Now is probably a good time to take stock of the other regulatory requirements that SEBI is looking to impose under the alternative platform. Relax- the new requirements are less stringent! This blog compares the proposed requirements for raising capital under the alternative capital raising platform with those that apply under the normal route, i.e. in accordance with SEBI (ICDR) Regulations, 2009.


S.No. Requirement What is applicable under the ICDR Regulations, 2009 What is being proposed under the alternative capital raising platform for start-ups and “new age” companies
 1  Need to file draft offer document to SEBI for comments  

Yes

 

Yes

 2  Disclosure of the objects of the issue  Detailed disclosure with information on the purpose, means of financing the project, proposed deployment status of the proceeds at each stage of the project, interest of promoters and directors, etc.  

Restricted for broad objects only

 3  

Minimum Promoter contribution

 

20% of post-issue capital

 

No such minimum requirement

 4  

Post Issue lock-in for Promoters & other shareholders

 

  1. A minimum of 20% of Promoter Shares are locked in for 3 years.
  2. Promoter shareholding in excess of 20%) & other pre-issue capital are locked-in for 1 year
Entire pre-issue capital locked in for 6 months.
5 Basis of issue price Disclosure on the basis of Issue Price including disclosure on EPS, Diluted EPS, PE Ratio etc. Disclosure other than projections as may be deemed fit by the Company.

Apart from the less stringent major regulatory norms mentioned above, the proposal also provides for less disclosure on outstanding litigations, material developments & creditors.

In a nutshell, the discussion paper does seem to suggest that SEBI is serious about its stated intent to make it easier for “new age companies” and start-ups to access risk capital from the capital market.

Now it’s time for entrepreneurs and indeed, everybody connected with India’s start-up ecosystem to come forward and offer their suggestions to help SEBI to frame robust regulations that will encourage companies to raise capital in India at better valuations.

Page 9 of the discussion paper specifies the format for providing comments and suggestions.  For details, refer to this URL:

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1427713523817.pdf

Suggestions must reach SEBI on or before April 20, 2015. If you have any questions, concerns or suggestions, you may send them by email to capitalraising@sebi.gov.in. You can also email me your suggestions at rajnish.pal@foxmandal.com.  I will compile them and send them to SEBI for its consideration.

Disclaimer:

This write-up is meant for general informational purposes only. It is the author’s personal view and should not be considered as the firm’s view.

Related Post

Share this:
 

Leave a Reply

Your Email address will not be published. Required fields are marked *

*