The Securities and Exchange Board of India (SEBI) has now permitted non-promoter shareholders to contribute towards fulfilling the minimum promoters' contribution without being designated as a promoter, in an effort to lessen regulatory obstacles for firms considering an initial public offering.
Before this change, at least 20% of promoters' shares had to be locked in for a set amount of time following an IPO's listing under SEBI's minimum promoter contribution standards.
The modern technology businesses that were most negatively impacted by the previous regulations were given a reprieve by these amendments since, in most cases, their promoters and founders had already diluting a large portion of their ownership in earlier investment rounds.
According to the modifications, non-promoter shareholders—that is, those who do not own more than 5% of the post-offer equity share capital—may make contributions to make up the difference. The promoters must still retain at least 10% of the shares after the offering, though.
Before this change, at least 20% of promoters' shares had to be locked in for a set amount of time following an IPO's listing under SEBI's minimum promoter contribution standards.
The modern technology businesses that were most negatively impacted by the previous regulations were given a reprieve by these amendments since, in most cases, their promoters and founders had already diluting a large portion of their ownership in earlier investment rounds.
According to the modifications, non-promoter shareholders—that is, those who do not own more than 5% of the post-offer equity share capital—may make contributions to make up the difference. The promoters must still retain at least 10% of the shares after the offering, though.
An expert group headed by former SEBI whole-time member suggested these modifications back in January.
