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Authored by Padma Akila

Recent growth in the startup sector, with the local modern ventures going overseas, the government through the Department for Promotion of Industry and Internal Trade (DPIIT), had made startup friendly amendments to the various intellectual property rules. In our previous articles we had summarized the amendments featuring provisions and rules for startups under the Draft Patents (Amendment) Rules, 2021 and the Designs (Amendment) Rules, 2021 in our intellectual property blog. SEBI has followed these footsteps to approve the certain startup friendly decisions in its board meeting dated 25thMarch, with respect to SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, and SEBI (Alternative Investment Funds) Regulations, 2012

Note: To address the availability of capital from the public market for startups and for their listing, SEBI had introduced the Innovators Growth Platform (IGP).

Approvals under   SEBI (Issue   of   Capital   and   Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”):

1. Eligibility: At present eligibility requirement under IGP is for an issuer to have 25% of pre-issue capital held by eligible investors for two years period, is reduced to one year as per rule 283 of ICDR Regulations.

2. IGP Investors: The term ‘Accredited Investor’ for the purpose of IGP under rule 283 is renamed as ‘Innovators Growth Platform Investors’.

3. Pre-issue shareholding percentage: At present, pre-issue shareholding of such investors for meeting eligibility, is considered for only 10%, (as given in the explanation to rule 283) which is now increased and shall be considered for the entire 25% required for meeting eligibility norms.

4. Discretionary allotment: In terms of present IGP provisions, Issuer Company is not permitted to make discretionary allotment. Post amendment, Issuer Company can allocate up to 60% of the issue size on a discretionary basis, prior to issue opening, to eligible investors with a lock in of 30 days on such shares.

5. Superior Voting Rights: Companies with Superior Voting Rights (SR) equity shares for promoters/ founders shall be allowed to do listing. This is in line with the mainboard IPO.

6. Triggering open offer: Stipulation for triggering open offer requirement for companies listed under IGP has been increased from 25% to 49% of the total equity. However, an open offer will still be triggered if there is a direct or an indirect change in control.

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