Capital markets regulator Securities and Exchange Board of India (SEBI) has introduced a mechanism for the lock-in of pledged shares in a bid to streamline requirements related to public issues, PTI reported.
Under the new framework, Sebi has allowed depositories to mark certain securities as “non-transferable” for the duration of the lock-in period in cases where a conventional lock-in cannot be created, according to a circular issued on Wednesday. The move follows an amendment to the Sebi (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) through a notification dated March 21.
To operationalise the mechanism, depositories have put in place a framework requiring issuers to incorporate suitable provisions in their Articles of Association, inform lenders or pledgees, and make appropriate disclosures in offer documents, Sebi said. Depositories have also updated their systems and processes to facilitate the implementation, according to PTI.
However, issuers have faced challenges in complying with these requirements, particularly in cases where shares held by non-promoters were already pledged prior to the public issue. To address this, Sebi’s board had, in December, approved amendments to provide that where lock-in cannot be created on such securities, depositories may record them as “non-transferable” for the applicable lock-in period, as per PTI.
