In April 2019, SEBI amended Chapter X of the SEBI ICDR Regulations relating to Innovators Growth Platform (IGP) to broad base the eligibility criteria for investment in start-up companies who seek to list their securities pursuant to a public offer or trade their securities without making a public offer (Refer KM update of 8 April 2019 below). In a consultation Paper, SEBI has now proposed a review of this framework to encourage listing by start-ups, as, despite the amendments there has so far been no listing by issuers on this platform. The following recommendations have been proposed :

1. The requirement of holding 25 per cent. of pre-issue capital by eligible investors for 2 years may be relaxed to 1 year.
2. AIF Category II investors may be exempted from post issue lock-in requirement of six months subject to certain conditions, as are exempted on the main board.
3. In line with listing of companies on the main board, the issuer company on the IGP may be allowed to allocate up to 60 per cent. of the issue size on a discretionary basis prior to issue opening. Such discretionary allotment may be allowed to all eligible investors under the IGP framework.
4. With respect to the holding of pre-issue capital of 25 per cent. of the issuer by eligible entities, the Accredited Investors’ (AIs) shareholding may be considered for the entire 25 per cent. and the existing limit of 10 per cent. of the pre-issue capital may be removed for AIs.
5. The net worth requirement of Rs. 500 crores for a family trust to be an eligible investor may be brought down to Rs. 25 crores. Since body corporates with a net worth of Rs. 25 crores are also considered eligible as accredited investors, family trusts with net worth of Rs. 25 crores may be included as a part of AIs and deleted as a separate sub-category under the list of prescribed eligible investors.
6. Issuer companies seeking listing under IGP may be allowed to issue differential voting rights (DVRs) / Superior Voting Rights (SRs) equity shares to promoters/founders.
7. For existing institutional investors holding in excess of 10 per cent. of capital, continuation of special rights (such as Board Seat and veto / affirmative voting rights) may be considered. However, such rights would need to be close-ended with adequate checks and balances in terms of coat-tail provisions and a sunset clause.
8. The trigger for open offer under SEBI Takeover Regulations may be increased from existing 25 per cent. shareholding to 49 per cent. Similarly, the threshold for disclosure of the aggregate shareholding may be increased from the present 5 per cent. to 10 per cent. and whenever there is a subsequent change of ± 5 per cent. (instead of present ± 2 per cent.) in the shareholding.
9. Delisting may be considered if 75 per cent. of the total shareholding / voting rights are acquired, as against the present requirement of 90 per cent. The success of the shareholder resolution while delisting, which is currently stipulated at 2/3rd of the minority holding, may be changed to majority of the minority. This will provide sufficient protection to the non-promoter shareholders who are all sophisticated investors in IGP.
10. An IGP company may migrate to the main board if 40 per cent. of its total capital (instead of 75 per cent.), as on the date of application of migration, is held by QIBs.

To refer to the SEBI consultation paper dated 14 December 2020, click here. Public comments are invited on its recommendations latest by 11 January 2021.