Background:

SEBI had earlier notified a new framework for Rights Issue process by notification of  SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2025, with Gazette ID CG-DL-E-08032025-261516 published in the Official Gazette on March 08, 2025.The same can be accessed at (https://www.sebi.gov.in/legal/regulations/mar-2025/securities-and-exchange-board-of-india-issue-of-capital-and-disclosure-requirements-amendment-regulations-2025_92539.html)

Important takeaways of current circular:

1. In terms of amended Regulation 85 of ICDR regulations, 2018,  SEBI has specified that Rights Issues shall be completed within 23 working days from the date of Board of Directors of the Issuer approving the Rights Issue.

2. Accordingly, the revised timelines for completion of the various activities involved in Rights Issue process from the date of Board of Directors of the Issuer approving the Rights Issue till the date of closure of Rights Issue are placed at Annexure I  of the attached Circular.

3. Where Rights Issue is being made of convertible debt instruments wherein shareholder’s approval is required, the timelines provided shall be adjusted  accordingly owing to shareholders’ approval as mentioned in Annexure I of the attached circular

4. In terms of Regulation 87 as amended, SEBI has specified  that Rights Issue shall be kept open for subscription for a minimum period of seven days and for a maximum period of thirty days.

System for validation of bids:

a) Validation of application bids received for subscribing to the shares in Rights Issue and finalization of basis of allotment shall also be carried out by the Stock Exchanges and Depositories along with the Registrar to the issue. 

b)  A system for automated validation of applications by the investors shall be developed by the Stock Exchanges and Depositories within a period of six months from the date of applicability of this Circular.  

 Consequential changes in Master Circular No. SEBI/HO/CFD/PoD2/P/CI/2024/0155:

Due to the new framework of Rights Issue, the following partial modification in the Master Circular No. SEBI/HO/CFD/PoD-1/P/CIR/2024/0154 on SEBI ICDR Regulations, dated November 11, 2024 shall be carried out:  

a)  Para 1.3.1 of Chapter 2 of Master Circular No. SEBI/HO/CFD/PoD1/P/CIR/2024/0154 shall read as under – “In the letter of offer the issuer shall disclose the process of credit of REs in the demat account and renunciation thereof.”

b)  Sub para (d) of para (A) of Annexure I of Chapter 2 of Master Circular No. SEBI/HO/CFD/PoD-1/P/CIR/2024/0154 shall read as under- “Applicants can use application form available on the website of registrar to the issue or printed forms sourced from the issuer or registrars to the issue.”

c)  Sub para (a) of para (E) of Annexure I of Chapter 2 of Master Circular No. SEBI/HO/CFD/PoD-1/P/CIR/2024/0154 shall read as under- “Correction of bid data as collated by the SCSB after issue closing shall be completed on the issue closure date itself.”

d)  Sub para 1.5 shall be inserted under Para 1 of Chapter 4 of Master Circular No. SEBI/HO/CFD/PoD-1/P/CIR/2024/0154. The text of the same shall read as under- “For rights issues the issuer shall file the letter of offer with SEBI through email at cfddil@sebi.gov.in and the payment of filing fees shall be made online through payment link provided on SEBI website under the fees category “Filing Fees”.

e)  Para 1 of Annexure IIIA of Chapter 4 of Master Circular No. SEBI/HO/CFD/PoD-1/P/CIR/2024/0154 shall read as under- “The draft offer document filed with the Board for public issue (hereinafter “draft offer document”) of securities shall be scrutinized based on the broad guidelines specified as under and accordingly, the draft offer document shall be returned to the issuer and the Lead Manager(s) for resubmission in accordance with the following guidelines- “

f)  Column under the head “Source of Information” of Table IV of Annexure VI of Chapter 8 of Master Circular No. SEBI/HO/CFD/PoD-1/P/CIR/2024/0154 shall read as under- “Issuer”

g)  Column under the head “Timelines for submission” of Table IV of Annexure VI of Chapter 8 of Master Circular No. SEBI/HO/CFD/PoD-1/P/CIR/2024/0154 shall read as under- “Data from 1 to 14 shall be submitted by the issuer before grant of in principle approval by the Exchange(s)”

h)  Para 5.6 of Chapter 9 of Master Circular No. SEBI/HO/CFD/PoD1/P/CIR/2024/0154 shall read as under- “ASBA facility in rights issue enables an investor / shareholder to apply through ASBA mode. ASBA process from the time of submission of application by the applicants till transfer of shares in the depository account of the investors, as specified for public issues, shall be followed in the case of rights issues also to the extent relevant for rights issue. The role and responsibilities of SCSBs, Stock Exchanges and RTAs for public issues, shall be applicable mutatis mutandis to rights issue also.”

Effective date :

The provisions of this circular shall come into force from April 07, 2025 and shall be applicable to the Rights Issues that are approved by the Board of Directors of the Issuer from the date of coming into force of this circular.