Streamlining the Process of Rights Issue
Summary
SEBI has streamlined the rights issue process by amending ICDR and LODR Regulations to enhance efficiency. Key changes include reducing advance notice periods, mandating dematerialized Rights Entitlements (REs), and requiring ASBA-only applications. The circular introduces specific procedures for trading REs, renunciation, and allotment effective from February 14, 2020.
Text
The period for advance notice to stock exchange(s) under Regulation 42(2) of LODR Regulations has been reduced from at least 7 working days to at least 3 working days (excluding the date of intimation and the record date), for the purpose of rights issue.
Issuance of newspaper advertisement disclosing date of completion of dispatch and intimation of same to the stock exchanges for dissemination on their websites, as per Regulation 84 (1) of ICDR Regulations, shall be completed by the issuer at least 2 days before the date of opening of the issue.
In the letter of offer and the abridged letter of offer, the issuer shall disclose the process of credit of REs in the demat account and renunciation thereof.
REs shall be credited to the demat account of eligible shareholders in dematerialized form.
In REs process, the REs with a separate ISIN shall be credited to the demat account of the shareholders before the date of opening of the issue, against the shares held by them as on the record date.
Physical shareholders shall be required to provide their demat account details to Issuer / Registrar to the Issue for credit of REs not later than two working days prior to the issue closing date, such that credit of REs in their demat account takes place at least one day before the issue closing date.
REs shall be traded on secondary market platform of Stock exchanges, with T+2 rolling settlement, similar to the equity shares. Trading in REs on the secondary market platform of stock exchanges shall commence along with the opening of the issue and shall be closed at least four days prior to the closure of the rights issue.
Investors holding REs in dematerialized mode shall be able to renounce their entitlements by trading on stock exchange platform or off-market transfer. Such trades will be settled by transferring dematerialized REs through depository mechanism, in the same manner as done for all other types of securities.
Application for a rights issue shall be made only through ASBA facility.
No withdrawal of application shall be permitted by any shareholder after the issue closing date.
The issuer shall dispatch a common application form to its shareholders as on the record date. Along with application form, the issuer shall also send the details of the rights entitlements of the shareholder separately.
A separate ISIN shall be obtained by the issuer for credit of REs.
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Source: SecMarx — Streamlining the Process of Rights Issue. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.