SEBI ICDR (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS), 2009

SEBI or the securities and exchange board of India is the regulatory body for the securities
market in India. SEBI was first established in the year 1988 and was a non-statutory body
then. On May 12th, 1992, through the SEBI act 1992, SEBI was given autonomous body status
by the government of India and was also given statutory powers.
SEBI has its headquarters at Mumbai and has Northern, Eastern, Western and Southern
regional offices in Delhi, Kolkata, Ahmedabad, and Chennai respectively. The main objective
of SEBI is to safeguard the interest of the investors in the securities market by making all the
companies to produce true information of their business to the investors, so that they can
invest correctly.

SEBI ICDR REGULATION, 2009

The SEBI act of 1992 gives SEBI statutory powers to make regulations and laws for making
the securities market of India highly transparent and liquid, under its section 30 and many
other sections. These regulations and laws hold maximum importance to all the listed
companies, investors and any firm directly or indirectly connected to the securities market.
All the regulations by SEBI has helped the Indian Equity Market to become highly
transparent and liquid; attracting investors from not just from India but all around the
world. The National Stock Exchange (NSE) is now the third largest in the world in terms of
transactions1. Some of the regulations are-
1. SEBI ICDR (issue of capital and disclosure requirements) regulations 2009,
2. SEBI SAST (substantial acquisition of shares and takeovers) regulations 2011,
3. SEBI (Prohibition of insider trading) regulations 2015,
4. The equity listing agreement
On August 26, 2009 SEBI rescinded the SEBI Disclosure and Investor Protection (DIP)
Guidelines, 2000 and notified SEBI (Issue of Capital and Disclosure Requirements)
Regulations, 20092. SEBI ICDR regulation 2009, or issue of capital disclosure requirements
includes all the directions for the companies wanting to enter the securities market of India
by issuing IPOs (initial public offering). These regulations mainly govern all the matters
related to the IPOs. ICDR regulations lists out all the conditions for public issues and rights
issues, provisions to public issue, pricing in public issues and so on, which are described well
in the chapters of the regulation. Along with these provisions, the regulations also list out all
the procedural requirements that a company shall fulfil before issuing an IPO to the public
and includes various forms which shall be required to follow those procedures. It lists out all
the necessary information to be made available to the investors so that they can make a
known decision, thus safeguarding the interests of the investors.3

1
https://simple.wikipedia.org/wiki/National_Stock_Exchange_of_India under the heading Introduction
2
https://www.icsi.edu/media/webmodules/SLCM_June_2019.pdf under the heading Background
3
ICDR regulations 2009/2018
ICDR regulations are amended from time to time. SEBI constituted the Issue of Capital &
Disclosure Requirements Committee (“ICDR Committee”) under the Chairmanship of Shri
Prithvi Haldea in June, 2017, to review the ICDR Regulations. The recent amendment in the
regulations was on September 2018 which came into effect from November 10, 2018. 4
This amendment was made in order to simplify the language of capital disclosure
requirements and simplify the complexities in the regulation so that it is easy to understand
and follow the regulations. As the securities market is developing every day and new
practices are being introduced, it is important for the regulations to update too, thus the
new amendments incorporate these changes and new requirements which have happened
from the change of market practices.5 The PMAC (Primary Market Advisory Committee)
recommended certain changes and modifications to the existing ICDR regulations which
were very much incorporated in the drafting of the proposal of the amendment of the
regulation. Suggestions from the Ministry of Finance, Ministry of Corporate affairs and the
RBI were also taken into consideration. Also, in addition in order to satisfy the needs of the
new provisions of the companies act 2013, it was important to amend the ICDR regulation
and thus the proposal of replacing the SEBI ICDR (Issue of Capital Disclosure Requirements)
regulation was approved and the 2009 ICDR regulation was replaced with the new SEBI
(Issue of Capital Disclosure) ICDR regulations 2018.6

RECENT AMENDMENT IN SEBI ICDR (issue of capital disclosure requirement)

REGULATIONS 2009

As mentioned above, the ICDR regulation 2009 was replaced by the new regulations of
2018, in order to satisfy the various provisions of companies act 2013. There are many key
changes brought to the previous regulation. For instance, the chapters of the 2009
regulations have been more specified and separated from each other in the new 2018
regulations. Chapters such as Preliminary, Initial Public Offer (IPO) on main board, Rights
issue, Further Public Offer, have been given separate dedication, which was not the case in
the 2009 regulations. The above chapters have been described in detail.

There were changes in the applicability of the regulations too. Earlier, according to the 2009
regulations, in the case of rights issue, the regulations was to be applied to rights issued by a
listed issuer where the aggregate value of the issue was 50 lakhs; now this amount has been
raised up to 10 Cr rupees. Similarly, the list provided in the regulation 3 has been reviewed
by the board and made more comprehensive and detailed. There were three new provisions
introduced in the regulation which stated that the public issue has to be split into IPO by
unlisted issuer and FPO by listed issuer, and IPO by SME. The issue of IDRs (Indian
Depository Receipt) has also been split into IPO of IDR and rights issue of IDRs. And lastly,
listing of the ITP through an issue or without an issue has also been added.

KEY CHANGES IN CHAPTER I (PRELIMINARY)

4
https://taxguru.in/sebi/sebi-issues-consultation-paper-onreview-sebi-issue-capital-disclosure-requirements-
regulations-2009.html under the heading- Background
5
https://taxguru.in/sebi/sebi-issues-consultation-paper-onreview-sebi-issue-capital-disclosure-requirements-
regulations-2009.html under the heading Approach adopted in the process
6
Ibid
There are many definitions which were modified and included in the new regulation.
Following are some of the definitions which were modified and newly added to the
regulation-
1- Advertisement- the previous definition was deleted and new definition was
introduced. The earlier definition included only cover pages of offer documents
which was deleted. The new definition includes notices, brochures, pamphlets, show
cards, catalogues, hoardings, placards, posters, insertions in newspaper, cover pages
of offer documents, pictures and films in any print media or electronic media, radio,
television programme
2- Anchor investor- the new definition was made more wide-ranging by including the
application made by anchor investors in the public issue of SMEs which could be of a
value of 10 crore rupees or more through the book of building process.
3- Employee- the definition of employee was modified in the new regulations. In the
2009 regulation the requirement of employees being ‘full-time’ was necessary. 7
4- Associate- the 2018 regulation introduced the term associate for the first time. It has
the same meaning as defined in the companies act 2013. The ICDR 2018 provides the
definition of associate only in context of an issuer.
5- Fugitive economic offender8- this term was also introduced and defined in the 2018
regulations. It means any individual who is declared a fugitive economic offender
under section 12 if fugitive economic offenders act,2018. This definition was brought
after the increasing numbers of fugitive offenders in India.

The definition of book runner and convertible security was deleted from the regulation.

KEY CHANGES IN CHAPTER II (INITIAL PUBLIC OFFER ON MAIN BOARD)

There were many changes made in this chapter. Following are the changes-
 Section 5(1)(a) provides conditions for eligibility for issuing public offer. This was
originally in the 2009 regulation and was modified in the 2018 regulations. according to the
modification, the restriction did not apply to the persons which were debarred in the past
and the period of debarment is already over as on the date of filing of the draft offer
document.
 New provisions were introduced in relation to the eligibility to make a public offer.
Section 5 of 2018 regulations lists all of them. The new 2018 regulations have introduced
“fugitive economic offender” as a subject to eligibility for issuing securities. According to this
section if any of its promoters or directors is a fugitive economic offender then he or she is
not eligible to make an initial public offer.9 The 2009 regulations had no mention of such
provision.
 Section 6 (1)(a) of 2018 regulations provides the eligibility requirements for an initial
public offer with relation to the net tangible assets. Thus, according to this, an issuer is
eligible if and only if it has net tangible assets of at least three crore rupees, calculated on a

7
ICDR regulations 2009 S.2(1)(m)
8
ICDR regulations 2018 S.2(1)(p)
9
ICDR regulations 2018 S.5(1)(d)
restated and consolidated basis, in each of the preceding three full years, of which not more
than fifty percent are held in monetary assets. Earlier in 2009 regulations 10 had not
mentioned the calculation of the net tangible assets and did not stated that it should be
calculated.
 Section 26 (1)(d) of 2009 regulations was removed from the regulations. The section
stated the aggregate of the proposed issue and all previous issues made in the same
financial year in terms of issue size does not exceed five times its pre-issue net worth as per
the audited balance sheet of the preceding financial year. As this was removed, the 2018
regulations do not have any relation between the issue size and net worth for issuing IPO.
 The 2018 regulation states that “in the event of non-receipt of minimum subscription
referred to in sub-regulation (1), all application monies received shall be refunded to the
applicants forthwith, but not later than fifteen days from the closure of the issue” 11. This
was a modification of the 2009 regulations. This was so in order to satisfy the rule 11 of
companies (prospectus and allotment of securities) rule 2014.
 The 2018 regulations have no provisions for the face value of equity shares. Earlier, in the
2009 regulations, under section 31(1) was the provision for the face value of the equity
shares. The provision was deleted as it was noticed that the face value has no bearing on
the valuation of securities or PPS (price per share).

KEY CHANGES IN CHAPTER III (RIGHTS ISSUE)

 In 2009, the limit for roll over of non-convertible was more than 50 lakh rupees. 12 But,
this was changed to rupees 10 Cr in the 2018 regulations. This meant that the non-
convertible portion of partly convertible debt instruments issued by a listed issuer, the value
of which exceeds ten crore rupees, may be rolled over.13 This change was done to align the
regulations with the Companies Act 2013.
 Section 67 of the ICDR regulation 2018 was modified provision of the earlier ICDR
regulation. This section deals with the eligibility of an issuer to issue warrants.
 In 2009, provision related to Record Date was under the section 52(1), which was –[in
accordance with the SEBI LODR (listing obligation and disclosure requirements) 2015.

KEY CHANGES IN CHAPTER IV (FURTHER PUBLIC OFFER)

 There were new provisions added to the 2018 regulations which mentioned eligibility
criteria for issuing FPOs. Section 102 and 103 governs which entities can make further public

10
ICDR regulations 2009 S.26(1)(a)
11
ICDR regulation 2018 S.45(2)
12
ICDR regulation 2009 S.21(1)
13
ICDR regulation 2018 S.64(1)
offer and eligibility criteria for making FPOs respectively. Earlier in the 2009 regulations,
these provisions were not segregated and were same for issuing IPOs and FPOs. 14
 According to the section 108 of the new 2018 regulations, the limit of roll over of non-
convertible portion of partly convertible debt instruments was increased to Rs 10 Cr. Earlier
in the 2009 regulations, this amount was 50 lakh rupees.

KEY CHANGES IN CHAPTER V (PREFRENTIAL ISSUE)

In the previous ICDR regulation there were no specific parts which segregated the various
provisions to make it look easy to understand. This was modified in the 2018 regulations
and the various provisions were put into a well segregated manner. The new regulation
contains six parts. The new provision also introduced some new provisions into this chapter.
 Regulation 159 (1) was newly introduced into the chapter. This was not present in the
ICDR regulations 2009. This section lists the which issuers are ineligible to make preferential
issue. This means that preferential issue of specified securities shall not be made to any
person who has sold or transferred any equity shares of the issuer during the six months
preceding the relevant date with subject to the regulation 11 of SEBI (Substantial Acquisition
of Shares and Takeovers) Regulations, 2011.

KEY CHANGES IN CHAPTER VI (QUALIFIED INSTITUTIONS PLACEMENT) AND CHAPTER VII (IPO
OF INDIAN DEPOSITORY RECEIPTS)
 New conditions were added to the ICDR regulation 2018. Section 172 lists out eligibility
conditions for qualified institutions placements. This regulation was not present in the 2009
regulations. According to this regulation, an issuer shall be eligible to make a qualified
institutions placement if any of its promoters or directors is not a fugitive economic
offender. In addition to that, the issuer shall not make any subsequent qualified institutions
placement until the expiry of six months from the date of the prior qualified institutions
placement made pursuant to one or more special resolutions.

 Regulation 89 of the 2009 regulations was removed from the regulations. It stated that
the aggregate of the proposed qualified institutions placement and all previous qualified
institutions placements made by the issuer in the same financial year shall not exceed five
times the net worth of the issuer as per the audited balance sheet of the previous financial
year.

 Regulation 182 (a) and (d) was added to chapter VII (initial public offer of Indian
depository receipts).

Chapter VIII-A was deleted from the ICDR regulations.

14
ICDR regulation 2009 S.27
KEY CHANGES IN CHAPTER VIII (RIGHTS ISSUE OF IDR), CHAPTER IX (IPO BY SMEs) AND
CHAPTER XI (BONUS ISSUE)
 Regulation 213 of ICDR regulations listed out the eligibility conditions to make a rights
issue of IDRs (Indian depository receipts). This was newly added into the 2018 regulations.
Earlier in the 2009 regulations, there were provisions which listed out eligibility conditions
but it never mentioned non-eligibility provisions.
 Chapter XI was drafted to satisfy the various provisions of the companies act 2013.

CONCLUSION

Thus, on comparing the recent amendment of ICDR regulations 2018 and the original 2009
regulations, there were many structural changes. The chapters were more segregated than
in the previous regulations. This made the new regulations easy to understand and read.
The regulation was made in accordance to the companies act 2013. These regulations are
amended from time to time to update it with the various developing market practices.