The market regulator has done away with the requirement to submit a no-objection certificate (NOC) for the release of the security deposit made by companies at the time of listing.
The circular from the Securities and Exchange Board of India (SEBI) was issued on November 21.
Earlier companies looking to be listed had to deposit one percent of the issue size available for public subscription to the stock exchanges, as a form of security deposit. On May 17, 2024, the regulator amended the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) to do away with this requirement.
In the latest circular, SEBI has said that the NOC needed to release this deposit amount has been done away with. Until now, the companies had to submit the NOC issued by SEBI to the stock exchanges to release the money. The SEBI circular stated, "Consequent to amendment of ICDR Regulations vide gazette notification dated May 17th 2024, the Master Circular no. SEBI/HO/OIAE/IGRD/P/CIR/2022/0151 dated November 07, 2022 on Issuance of No Objection Certificate for release of 1% of Issue Amount stands withdrawn".
It has also asked stock exchanges to jointly frame a a joint standard operating procedure (SoP) for release of 1 percent security deposit that were deposited with stock exchanges by the issuer prior to amendments in ICDR Regulations, 2018.
The circular issued further directions to the stock exchanges:
1.bring the provisions of this circular to the notice of all the companies whose securities are listed in the exchange and also to disseminate the same on the website of the stock exchange.
2.make amendments to the relevant bye-laws, rules and regulations for the implementation of the terms of this circular, if necessary.
The circular comes into effect with immediate effect.
After the May 2024 amendment to ICDR Regulations, IndusLaw's lawyers had released a summary of the amendments, which included doing away with the security deposit requirement. The lawyers had called doing away with this deposit requirement a "welcome change".
The law firm's article said, "Prior to the amendment, the issuer company was required to place a refundable security deposit amounting to 1% (one percent) of the issue size, with the designated stock exchange. Pursuant to the amendment, such requirement has been omitted. As investor complaints in relation to refund of application money have significantly minimized, and major complaints are now linked to the delay in unblocking Application Supported by Blocked Amount funds, doing away with the requirement is a welcome change."
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