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SEBI (Alternative Investment Funds) (Fourth Amendment) Regulations, 2021

The SEBI has notified a new set of regulations to amend the existing SEBI (Alternative Investment Funds) Regulations, 2012 which shall come into force as on the date of its publication in the Official Gazette except for amendments to Regulation 12 which shall come into force on the 91st day from the date of publication of these regulations in the Official Gazette.

Recent Amendments in SEBI Regulations

Sr. No.

Amendment

Comments

1

Substitution: Regulation 2(1)(i)

' debt fund' means an Alternative Investment Fund which invests primarily in debt securities of listed or unlisted investee companies or in securitized debt instruments as per the stated objectives of the Fund.

In the existing definition of debt fund, investment in debt other than debt funds was also included which is now removed and investment in securitized debt instruments is added in the ambit of debt fund.

2

Substitution: Regulation 2(1)(p)

' investable funds' means corpus of the scheme of Alternative Investment Fund net of expenditure for administration and management of the fund estimated for the tenure of the fund.

Explanation: For the purpose of this clause, the expression 'tenure' means the duration of scheme from the day of its launch till last day of the term as specified in the fund documents.

By this amendment it is provided that, investable funds mean corpus of the scheme of AIF net of expenditure for administration and management of the fund estimated for the tenure of the fund which was earlier corpus of theAIF net of expenditure for administration and management of the fund.

The investable fundsis now scheme of AIF specific.

3

Substitution: Regulation 2(1)(y)

' unit' means beneficial interest of the investors in the Alternative Investment Fund or a scheme of the Alternative Investment Fund and may be fully or partly paid up.

Explanation: For the purpose of this clause, partly paid-up units shall represent the portion of committed capital invested by the investor in Alternative Investment Fund or scheme of the Alternative Investment Fund.

The aim of this amendment is to exclude shares and partnership interestsfrom the ambit of term unitand to provide that unit may be fully or partly paid up.

4

Insertion:Regulation 12(2)

after the words ' the Board' and before the word ' atleast' , the words and symbol ' through a merchant banker,' shall be inserted.

By this amendment it is provided that the placement memorandum shall be filed with the Board through a merchant banker.

5

Substitution:Regulation 12(3)

The Board may communicate its comments, if any, to the merchant banker prior to launch of the scheme and the merchant banker shall ensure that the comments are incorporated in the placement memorandum prior to launch of the scheme.

To bring this sub-section in line with the amendments made in sub-section (2).

6

Insertion:Regulation 13(3)

before the words and symbol ' Category III' , thewords ' Schemes of' shall be inserted.

Amended provision:

Schemes of Category III Alternative Investment Fund maybe openended or close ended.

7

Substitution:Regulation 15(1)(f)

Un-invested portion of the investable funds and divestment proceeds pending distribution to investors may be invested in liquid mutual funds or bank deposits or other liquid assets of higher quality such as Treasury bills, Triparty Repo Dealing and Settlement, Commercial Papers, Certificates of Deposits, etc. till the deployment of funds as per the investment objective or the distribution of the funds to investors as per the terms of the fund documents, as applicable.

The intent of this amendment is to provide for investment of divestment proceeds pending distribution to investors in liquid mutual funds in addition to the existing un-invested portion of the investable funds.

8

Substitution, Insertion:Regulation 16(1)(a)

a. after the words ' limited liability partnerships' , the word ' or' shall besubstituted with the symbol ' ,' .

b. after the words ' sub category' , the words and symbol ' or in units ofCategory II Alternative Investment Funds as specified in this regulation' shallbe inserted.

Self-explanatory.

Amended provision:

(a )Category I Alternative Investment Fund shall invest in investee companies, venturecapital undertakings, special purpose vehicles, limited liability partnerships, in units of other Category I Alternative Investment Funds of the same sub categoryor in units of Category II Alternative Investment Funds as specified in this regulation.

9

Substitution:Regulation 16(2)(a)

at least seventy five percent of the investable funds shall be invested in unlistedequity shares or equity linked instruments of a venture capital undertaking or incompanies listed or proposed to be listed on a SME exchange or SME segment of an exchange:

Provided that the investment conditions specified in clause (a) shall be achieved bythe fund by the end of its life cycle.

The minimum investment as provided in Regulation 16(2)(a) has been increased from 2/3rd to 75%. Further is also provided that the investment conditions specified in clause (a) shall be achieved bythe fund by the end of its life cycle.

10

Omission:Regulation 16(2)(b)

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11

Substitution:Regulation 16(2)(c)

the words and symbols ' Chapter XB of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and the provisions of clause (a) and clause (b) of sub-regulation (2)' shall be substituted with the words and symbols ' Chapter IX of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 and the provisions of clause (a) of sub-regulation (2)' .

-

12

Substitution: Regulation 16(2)(d)

such funds shall be exempt from sub-regulations (1) and (2) of regulation 3 and sub-regulation (1) of regulation 4 of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 in respect of investment in companies listed on the SME exchange or SME segment of an exchange pursuant to due diligence of such companies subject to the following conditions:

(i) the fund shall disclose any trading in securities pursuant to such due diligence,within two trading days of such trading, to the stock exchanges where the investee company is listed;

(ii) such investment shall be locked in for a period of one year from the date of investment.

Self-explanatory.

13

Insertion:Regulation 16(3)(a)

after the words ' of an exchange', the words and symbol ' or in units of Category II Alternative Investment Funds which invest primarily in such venture capital undertakings or investee companies' shall be inserted.

Self-explanatory.

Amended provision:

(a) atleast seventy five percent of the investable funds shall be invested in unlisted securities or partnership interest of venture capital undertakings or investee companies which are SMEs or in companies listed or proposed to be listed on SME exchange or SME segment of an exchange or in units of Category II Alternative Investment Funds which invest primarily in such venture capital undertakings or investee companies.

14

Substitution: Regulation 16(3)(b)

the words and symbols ' Chapter XB of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009' shall be substituted with the words and symbols

' Chapter IX of the Securities and Exchange Board of India (Issue of Capitaland Disclosure Requirements) Regulations, 2018' .

-

15

Substitution: Regulation 16(3)(c)

such funds shall be exempt from sub-regulations (1) and (2) of regulation 3 and sub-regulation (1) of regulation 4 of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 in respect of investment in companies listed on the SME exchange or SME segment of an exchange pursuant to due diligence of such companies subject to the following conditions:

(i) the fund shall disclose any trading in securities pursuant to such due diligence,within two trading days of such trading, to the stock exchanges where the investee company is listed;

(ii) such investment shall be locked in for a period of one year from the dateof investment.

Self-explanatory.

16

Insertion: after first proviso to Regulation 16(4)(b)

Provided further that the minimum amount of grant shall not apply to accredited investors:

The minimum amount of grant of Rs. 25 Lakhs stipulated for Category I AIFs - Social Venture Funds shall not apply to grants received from Accredited Investors.

17

Insertion:Regulation 16(5)(a)

after the words ' infrastructure projects' , the words and symbol ' or in units of Category II Alternative Investment Funds which invest primarily in such venture capital undertakings or investee companies or special purpose vehicles' shall be inserted.

Self-explanatory.

Amended provision:

(a) atleast seventy five percent of the investable fundsshall be invested in unlisted securities or units or partnership interest of venture capital undertaking or investeecompanies or special purpose vehicles, which are engaged in or formed for the purpose of operating, developing or holding infrastructure projectsor in units of Category II Alternative Investment Funds which invest primarily in such venture capital undertakings or investee companies or special purpose vehicles.

18

Substitution:Regulation 17(e)

the words and symbols ' Chapter XB of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009' shall be substituted with the words and symbols

' Chapter IX of the Securities and Exchange Board of India (Issue of Capitaland Disclosure Requirements) Regulations, 2018' .

-

19

Substitution:Regulation 17(f)

Category II Alternative Investment Funds shall be exempt from sub-regulations (1) and (2) of regulation 3 and sub-regulation (1) of regulation 4 of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 in respect of investment in companies listed on the SME exchange or SME segment of an exchange pursuant to due diligence of such companies subject to the following conditions:

(i) the fund shall disclose any trading in securities pursuant to such due diligence,within two trading days of such trading, to the stock exchanges where the investee company is listed;

(ii) such investment shall be locked in for a period of one year from the dateof investment.

Self-explanatory.

 

SEBI (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2021

The SEBI has notified a new set of regulations to amend the existing SEBI (Issue of Capital and Disclosure Requirements)Regulations, 2018which shall come into force as on the date of its publication in the Official Gazette.

Sr. No.

Amendment

Comments

1

Omission: Regulation 2(1)(pp)(iii)(C)

The definition of promoter group is rationalized, in case where the promoter of the issuer company is corporate body, to exclude companies having common financial investors by omitting the following provision:

C) any body corporate in which a group of individuals or companies or combinations thereof acting in concert, which hold twenty percent. or more of the equity share capital in that body corporate and such group of individuals or companies or combinations thereof also holds twenty percent or more of the equity share capital of the issuer and are also acting in concert; and

2

Substitution:Regulation 16(1)(a)

the words 'three years from the date of commencement of commercial production or date of allotment in the initial public offer, whichever is later', shall be substituted with the words 'eighteen months from the date of allotment in the initial public offer' .

The aim of this amendment is to reduce the lock-in period of specified securities held by the promoters from 3 yearsfrom the date of commencement of commercial production or date of allotment in the IPO, whichever is later to 18 months from the date of allotment in the IPO.

3

Insertion:Regulation 16(1)(a) Proviso

Provided that in case the majority of the issue proceeds excluding the portion ofoffer for sale is proposed to be utilized for capital expenditure, then the lock-inperiod shall be three years from the date of allotment in the initial public offer.

Self-explanatory.

4

Substitution:Regulation 16(1)(b)

the words ' one year' shall be substituted with thewords ' six months' .

promoters' holding in excess of minimum promoters' contribution shall be locked-in for a period of 6 months from the date of allotment in the IPO instead of existing 1 year.

5

Insertion:Regulation 16(1)(b) Proviso

Provided that in case the majority of the issue proceeds excluding the portion ofoffer for sale is proposed to be utilized for capital expenditure, then the lock-inperiod shall be one year from the date of allotment in the initial public offer.

Self-explanatory.

6

Substitution:Regulation 16(1) Explanation

Explanation: For the purpose of this sub-regulation, ' capital expenditure' shallinclude civil work, miscellaneous fixed assets, purchase of land, building andplant and machinery, etc.

The concept of date of commencement of commercial production is completely removed from Regulation 16, consequently its meaning is also deleted from the explanation and the meaning of capital expenditure is added.

7

Substitution:Regulation 17

the words ' one year' shall be substituted with the words ' six months'.

The entire pre-issue capital held by persons other than the promoters shall be locked-in for a period of 6 months from the date of allotment in the IPO instead of existing 1 year.

8

Substitution:Regulation 17(c) proviso

the words ' one year' shall be substituted with the words ' six months'.

-

9

Substitution: Regulation 115(a)

the words 'three years from the date of commencement of commercial production or from the date of allotment in further public offer, whichever is later;' shall be substituted with the words ' eighteen months from the date of allotment of the further public offer:'

The aim of this amendment is to reduce the lock-in period of specified securities held by the promoters from 3 years from the date of commencement of commercial production or date of allotment in the FPO, whichever is later to 18 months from the date of allotment in the FPO.

10

Insertion:Regulation 115(a) Proviso

Provided that in case the majority of the issue proceeds excluding the portion ofoffer for sale is proposed to be utilized for capital expenditure, then the lock-inperiod shall be three years from the date of allotment in the initial public offer.

Self-explanatory.

11

Substitution: Regulation 115(b)

the words ' one year' shall be substituted with thewords ' six months' .

promoters' holding in excess of minimum promoters' contribution shall be locked-infora period of 6 months instead of existing 1 year.

12

Insertion:Regulation 115(b) Proviso

Provided that in case the majority of the issue proceeds excluding the portion ofoffer for sale is proposed to be utilized for capital expenditure, then the lock-inperiod shall be one year from the date of allotment in the initial public offer.

Self-explanatory.

13

Substitution:Regulation 115 Explanation

Explanation: For the purpose of this sub-regulation, ' capital expenditure' shallinclude civil work, miscellaneous fixed assets, purchase of land, building andplant and machinery, etc.

The concept of date ofcommencement of commercial production is completely removed from Regulation 115, consequently its meaning is also deleted from the explanation and the meaning of capital expenditure is added.

14

Substitution:Regulation 117

the words ' three years' shall be substituted with the words ' eighteen months' .

Where the specified securities which are subject to lock-in are partly paid-up and the amount called-up on such specified securities is less than the amount called-up on the specified securities issued to the public, the lock-in shall end only on the expiry of 18 months (instead of 3 years) after such specified securities have become pari passu with the specified securities issued to the public.

15

Omission, Substitution:Schedule VI clause (5)(G)

i. in point (9), the words ' or group companies' shall beomitted.

ii. in point (10), the words ' or group companies' shall beomitted.

iii. in point (30), the symbol ' ,' shall be substituted withthe word ' and' and the words ' and top 5 listed group companies by market capitalization' shall be omitted.

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16

Substitution:Schedule VI clause (13)(A)

In case of an issuer not being a government company, statutory authority orcorporation or any special purpose vehicle set up by any of them, the names andregistered office address of all the group companies shall be disclosed in the OfferDocument.The following information based on the audited statements in respect of top five group companies (based on market capitalization for listed/ based on turnover in caseof unlisted) for the preceding three years shall be hosted on the website of the respective group company (listed/ unlisted):

(i) reserves (excluding revaluation reserve);

(ii) sales;

(iii) profit after tax;

(iv) earnings per share;

(v) diluted earnings per share; and

(vi) net asset value.

The offer document shall refer the website where the details of the group companiesshall be available.

Self-explanatory.

17

Omission: Schedule VI clause (13)

sub-clause (B), (C), (E) and (F) shall be omitted and sub-clause (D) and (G) shall be re-numbered accordingly.

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SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2021

The SEBI has notified a new set of regulations to amend the existing SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011which shall come into force from 1st April, 2022.

Sr. No.

Amendment

Comments

1

Substitution:Regulation 29(1)

Any acquirer, together with persons acting in concert with him acquiring shares orvoting rights in a target company, which taken together aggregates to five per cent ormore of the shares of such target company, shall disclose their aggregateshareholding and voting rights in such target company in such form as may bespecified.

The Board has removed certain disclosure obligations for the acquirers/promoters, etc. pertaining to acquisition or disposal of shares aggregating to 5% and any change of 2% thereafter, annual shareholding disclosure and creation/invocation/release of encumbrance registered in depository systems under Takeover Regulations. These relaxations have been given on account of implementation of the System Driven Disclosures (SDD).

2

Substitution: Regulation 29(2)

the words ' Any person, who together' shall be substituted with thewords, ' Any person together' .

3

Omission:Regulation 30 (Continual Disclosure)

4

Insertion:Regulation 31(1) proviso

Provided that the aforesaid disclosure requirement shall not be applicable where suchencumbrance is undertaken in a depository.

5

Insertion:Regulation 31(2) proviso

Provided that the aforesaid disclosure requirement shall not be applicable where suchencumbrance is undertaken in a depository.

SEBI (Depositories and Participants) (Amendment) Regulations, 2021

The SEBI has notified a new set of regulations to amend the existing SEBI (Depositories and Participants) Regulations, 2018which shall come into force as on the date of its publication in the Official Gazette. The amendmentsrelate to Regulation 22- Eligibility for acquiring or holding shares in a depository.

Sr. No.

Amendment

Comments

1

Omission:Regulation 22(1) proviso

the word ' listed' shall be omitted.

Self-explanatory.

(1) No person shall, directly or indirectly, acquire or hold equity shares or voting rightsof a depository unless he is a fit and proper person. The depository shall ensure that allits shareholders are fit and proper persons:

Provided that such a requirement to ensure that all its shareholders are fit and proper personsshall not be applicable to a listed depository for shareholding of a person who directly or indirectly, acquires or holds less than two percent equity sharesorvoting rights of such listed depository.

2

Omission:Regulation 22(2)

Omitted provision:

Any person(s) who acquires equity shares or voting rights, in a depository, directly or indirectly, either individually or together with persons acting in concert, that entitles the person(s) so acquiring toexercise voting rights of two percent uptofive percent, shall seek approval of the Board within fifteen days of suchacquisition.

The requirement of prior approval of Board in case of acquiring voting rights from 2% to 5% is removed.

3

Omission:Regulation 22(4)

the words and symbol ' sub-regulation (2) or' shall be omitted.

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4

Omission:Regulation 22(6)

Omitted provision:

If approval under sub-regulation (2) is not granted by the Boardto any person, such person shall forthwith divest his entire shareholding in the depository.

As sub-section (2) is removed, sub-section (6) holds no relevance, hence omitted.

SEBI (LODR) (Fourth Amendment) Regulations, 2021

The SEBI has notified a new set of regulations to amend the existing SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 which shall come into force as on the date of its publication in the Official Gazette.

Sr. No.

Amendment

Comments

1

Omission:Regulation 52(4)(a), (b), (d) & (e)

The Board has amended the provisions of SEBI (LODR) Regulations, 2015 pertaining to issuers who have listed Non-Convertible Debt Securities, Non- Convertible Redeemable Preference Shares, Perpetual Debt Instruments and/ or Perpetual Non-Cumulative Preference Shares.

2

Insertion, Omission:Regulation 57

a. in the heading, the word and symbol' Intimations/' shall be inserted before theword ' Other' .

b. sub-regulation (2) shall be omitted.

3

Omission, Substitution:Regulation 58

a. in the heading, the words ' debt' and' and non-convertible preference shares' shall be omitted.

b. in sub-regulation (1), clause (a) shall be substituted with the following,namely-

' (a) Soft copies of the full annual reports to all the holders of non- convertible securities who have registered their email address(es) either with the listed entity or with any depository;'

c. in sub-regulation (1), in clause (b), the words ' preference share' shall be substitutedwith the word ' securities' .

d. in sub-regulation (1), in clause (c), the words ' debt' and ' and non-convertible preference share' shall be omitted.

e. in sub-regulation (1), clause (d) shall be omitted.

4

Insertion, Omission:Regulation 61

a. in sub-regulation (1), the words ' non-convertible debt securities and/or' shall be inserted after the words ' dividend of' .

b. in sub-regulation (1), the second proviso shall be omitted.

Securities Contracts (Regulation) (Stock Exchanges And Clearing Corporations) (Second Amendment) Regulations, 2021

The SEBI has notified a new set of regulations to amend the existing Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 which shall come into force on the date of its publication in the Official Gazette. The amendments relate to Regulation 19- Eligibility for acquiring or holding shares.

Sr. No.

Amendment

Comments

1

Omission:Regulation 19(1) second proviso

the word ' listed' shall be omitted.

Self-explanatory.

No person shall, directly or indirectly, acquire or hold any equity sharesorvoting rightsof a recognised stock exchange or recognized clearingcorporation unless he is a fit and proper person:

Provided that the onus shall be on the recognised stock exchange/recognised clearing corporationto ensure that all its shareholders are fit and proper persons:

Provided further that such a requirement to ensure that all its shareholders are fit and proper persons shall not be applicable to a listed recognized stock exchange for shareholding of a person who directly o rindirectly, acquires or holds less than two percent equity shares or voting rights of such listed recognized stock exchange.

2

Omission: Regulation 19(2)

Omitted provision:

Any person(s) who acquires equity shares or voting rights, in a recognisedstock exchange or recognized clearing corporation, directly or indirectly, either individually or together with persons acting in concert, that entitles the person(s) so acquiring toexercise voting rights of two percent upto five percent, shall seek approval of the Board within fifteen days of such acquisition.

The requirement of prior approval of Board in case of acquiring voting rights from 2% to 5% is removed.

3

Omission: Regulation 19(4)

the words and symbol ' sub-regulation (2) or' shall be omitted.

-

4

Omission:Regulation 19(6)

Omitted provision:

If approval under sub-regulation (2) is not granted by the Boardto any person, such person shall forthwith divest his entire shareholding in the depository.

As sub-section (2) is removed, sub-section (6) holds no relevance, hence omitted.

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