Good news for startups, SEBI relaxes listings, fund-raising norms for them

Now, startups will not have to look overseas for funding as the Securities and Exchange Board of India (SEBI) on Tuesday relaxed its norms for startups to list and raise funds through a platform on domestic stock exchanges.

Under the new norms approved by SEBI’s board, the stock exchanges would have a dedicated institutional trading platform for listing of startups from the new age sectors, including e-Commerce firms, while the minimum investment requirement would be Rs 10 lakh.

For startups, SEBI has relaxed the mandatory lock-in period for the promoters and other pre-listing investors to six months, as against three years for other companies

Addressing mediapersons after the board meeting, SEBI Chairman U.K Sinha said the disclosure requirements for these companies have also been relaxed.

At least 25% of their pre-issue capital would need to be with institutional investors for technology start-ups, while this requirement would be 50% for companies from other areas.

“Indian start-up space is very vibrant and the country is ranked number five as far as start-ups are concerned. More than 3,100 start-ups are there in the country and a large number of M&As have also happened,” said the chairman.

Under the new norms, 75% shares can be reserved for institutional investors, while allocation can be on discretionary basis for such investors.
For non-institutional categories, it will be on proportional basis.

SEBI has also provided for reclassification of promoters as public investors provided they let go all their special rights, including voting powers, and do not own more than 10% stake.

However, an outgoing promoter can serve as a CEO or hold other senior positions for up to three years if the same is approved by the company's board.

(Image: Indiatimes)