Context:
In a major step to enhance ease of doing business, investor access, and startup ecosystem participation, the Securities and Exchange Board of India (SEBI) approved several key reforms during its latest board meeting chaired by Tuhin Kanta Pandey. The reforms span ESOP eligibility, PSU delisting, AIF flexibility, and FPI norms for government securities.
Key Reforms Announced by SEBI
Founders Allowed to Retain ESOPs Post-IPO
- Founders can now retain employee stock options (ESOPs) after a company goes public.
- Applies to ESOPs granted at least one year prior to IPO filing.
- Aims to align founders’ incentives with long-term shareholder value.
- Recognizes founders’ contribution who often take lower salaries in return for equity.
Voluntary Delisting Framework for PSUs
- SEBI approved voluntary delisting of public sector undertakings (PSUs) where government shareholding exceeds 90%.
- This is a shift from earlier restrictive delisting rules.
- Expected to aid strategic disinvestment and improve disinvestment efficiency.
- Five PSUs are currently eligible.
Co-Investment Vehicle (CIV) Framework for AIFs
- Category I and II AIFs can now offer co-investment schemes through separate CIVs.
- Select investors can invest directly alongside AIFs in unlisted companies.
- Each co-investment must be structured as an independent scheme under the AIF framework.
- AIF managers can also offer advisory services across investor categories, boosting flexibility and professionalism.
Simplified FPI Framework for Government Bond Investors
- FPIs investing exclusively in Indian government securities (G-secs) will now benefit from a simplified registration and compliance regime.
- Resident Indians, NRIs, and OCIs can also invest in these funds.
- Aimed at attracting long-term foreign capital to India’s sovereign debt market.
One-Time Settlement Scheme for Delayed VCF Wind-Ups
- SEBI introduced a one-time settlement scheme for venture capital funds (VCFs) that failed to wind up schemes within prescribed timelines.
- Settlement includes:
- â‚ą1 lakh penalty for delay up to 1 year.
- â‚ą50,000 for each additional year.
- ₹1–6 lakh depending on the cost of unliquidated investments.
Relaxation for Merchant Bankers
- Merchant bankers may now undertake non-SEBI-regulated activities provided they are:
- Fee-based and non-fund-based.
- Related to the financial services sector.
- Within the jurisdiction of another financial sector regulator or outside SEBI’s purview.
- A relaxation from the December 2024 rule, which had mandated the hiving off of such functions.
Angel Investors Must Be Accredited Investors (AIs)
- Angel investors must now be accredited and will be classified as Qualified Institutional Buyers (QIBs) for investment in angel funds.
- This change aims to increase transparency and safeguard retail participants.
Settlement Scheme for NSEL Brokers
- SEBI approved a settlement scheme for brokers involved in the National Spot Exchange Ltd (NSEL) case, excluding those who are charge-sheeted or declared defaulters.
- Scheme allows for monetary and non-monetary settlements to conclude proceedings efficiently.
