The Securities and Exchange Board of India (SEBI) has proposed amendments to its Issue of Capital and Disclosure Requirements (ICDR) Regulations, 2018, including a new framework to resolve lock-in issues for pledged pre-IPO shares and the replacement of the abridged prospectus with a concise, retail-friendly offer document summary.
Currently, pre-issue capital held by persons other than promoters is required to be locked in for six months post-listing. However, depositories are unable to create lock-in for shares that have been pledged, leading to compliance difficulties at the time of the IPO — particularly in companies with a large or untraceable shareholder base.
To address this, SEBI has proposed allowing depositories to record such pledged shares as “non-transferable” for the applicable lock-in period, based on instructions from the issuer. Issuers will also need to amend their Articles of Association to ensure that, in the event of pledge invocation or release, the shares automatically remain under lock-in in the account of either the pledgee or pledger.
The regulator said that non-banking financial companies lending against unlisted shares have expressed agreement with this proposed mechanism, which is expected to simplify IPO execution while protecting lenders’ interests.
Simplified disclosures
SEBI has also proposed doing away with the requirement for an abridged prospectus to accompany every IPO application. Instead, issuers will provide a standardised “offer document summary” — a concise and easy-to-understand version of the offer document, containing key business, financial and risk disclosures.
“The voluminous nature of the offer document may deter retail investors from reviewing such documents, thereby leading to a lack of engagement and participation in the IPO process, including providing comments on the disclosures,” SEBI said in a draft paper, inviting public comments by December 4.
This summary will be submitted along with the draft offer document and made available on the websites of SEBI, stock exchanges, the issuer, and lead managers. The regulator said the move is intended to make disclosures more accessible to retail investors, many of whom currently rely on informal or unverified sources such as social media or grey-market discussions