The Securities and Exchange Board of India (SEBI) has operationalised a mechanism to enable lock-in of pledged shares by allowing such securities to be marked as “non-transferable” during the lock-in period, plugging a key gap in the existing framework.
The move follows SEBI’s amendment to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, notified on March 21, 2026. The amendment provides that in cases where a lock-in cannot be created on specified securities, such securities may instead be recorded as non-transferable by depositories for the applicable duration.
Disclosure norms
The framework mandates issuers to incorporate suitable provisions in their Articles of Association, intimate concerned lenders or pledgees, and make appropriate disclosures in offer documents. Depositories, in turn, have made “necessary changes to their systems and processes” to implement the mechanism.
The change is expected to address a long-standing issue where pledged shares could effectively escape conventional lock-in restrictions. By rendering such shares non-transferable, the regulator aims to ensure that promoters and pre-IPO shareholders do not circumvent lock-in requirements through pledging arrangements.
Under ICDR regulations, the entire pre-issue capital held by persons other than promoters, barring certain specified categories, is required to be locked in for six months from the date of allotment in an initial public offering. However, issuers had raised practical challenges in complying with these norms, particularly where pledges had already been created by non-promoters prior to the IPO. The issue was taken up by the SEBI board and was approved in December 2025.
SEBI has directed stock exchanges, depositories, merchant bankers and issuers to ensure compliance with the new mechanism.