SEBI eases IPO compliance with abridged prospectus, automated pre-issue share lock-in

The Securities and Exchange Board of India (SEBI) on Wednesday (December 17) approved key amendments to IPO regulations aimed at simplifying compliance and improving investor accessibility to information. The changes focus on operational challenges around lock-in requirements and the presentation of IPO documents.

Under the new framework, IPO-bound companies will now provide an abridged prospectus, renamed the Offer Document Summary, at the draft stage itself. The concise document will include key information, helping investors quickly assess the IPO without navigating lengthy drafts. A QR code will accompany the draft, allowing investors to access all announcements and essential details conveniently.

"One key concern is that IPO documents, particularly DRHPs, are often very lengthy, making it difficult for investors to focus on the most important information. During the consultation, it was suggested that a summary document be provided. The board has now decided that this objective can be better achieved through an abridged prospectus. An abridged prospectus is already a legal requirement under Section 33 of the Companies Act, so it cannot be removed," SEBI said.

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Additionally, the regulator clarified that shares pledged by non-promoters of IPO-bound companies will be treated as "non-transferable."

SEBI also approved a technology-enabled mechanism for the automatic lock-in of pre-issue shares. Currently, promoters’ shares are locked in for six months, with a similar lock-in for non-promoter shares. The amendments allow depositories to directly manage pledged shares, ensuring that shares remain locked in even when pledged and simplifying compliance for issuers and intermediaries.

"To address this, provisions in the ICDR have been amended to allow depositories to handle pledges directly. This will enable automatic lock-in of shares even when they are pledged, simplifying compliance for companies," said SEBI Chairman Tuhin Kanta Pandey.

The regulatory changes aim to balance comprehensive disclosure with investor convenience, while easing operational burdens on companies planning to go public.

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