SEBI board approves changes to IPO lock-in norms, disclosure framework

Under the current rules, the entire pre-issue capital held by persons other than promoters; except for certain specified shareholders—must be locked-in for six months from the date of allotment in an IPO. However, depositories are currently unable to mark pledged shares as locked-in, creating compliance challenges for issuers preparing to list.

SEBI’s board approved amendments to IPO regulations to address operational challenges around lock-in requirements. The regulator announced a technology-enabled mechanism to appropriately mark pledged pre-issue shares as locked-in, easing compliance for issuers and intermediaries. The board also cleared a proposal to replace the abridged prospectus with a concise Offer Document Summary, limited to key information, to make IPO disclosures more investor-friendly.

IPO-bound companies must give summary of offer documents while filing DRHP, said SEBI. Also, shares pledged by non-promoters of IPO-bound company are "non-transferable".

"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.

"At the draft stage, a draft abridged prospectus will also be made available along with a QR code. This was a suggestion from public feedback, and it will allow investors to easily access all announcements and key information related to the IPO. The goal is to help investors quickly assess relevant information without having to go through the voluminous full document, while still providing complete information for those conducting detailed research.

"The only change from the consultation paper is that, instead of highlighting a separate summary, the abridged prospectus will now be provided at the draft stage itself. On automatic lock-in for pre-issue capital. Currently, promoters’ shares are locked in for six months, and there is also a requirement for non-promoter shares to be locked in for six months.

"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.

Moneycontrol had previously reported that in a November 2025 consultation paper, SEBI has proposed an amendment to the regulation related to IPOs, the Issue of Capital and Disclosure Requirements (ICDR) Regulations to allow pledged shares to be locked-in through a new, technology-enabled framework.

Under the current rules, the entire pre-issue capital held by persons other than promoters; except for certain specified shareholders—must be locked-in for six months from the date of allotment in an IPO. However, depositories are currently unable to mark pledged shares as locked-in, creating compliance challenges for issuers preparing to list.

SEBI said it has received multiple representations from market participants pointing out that issuers face difficulties when some of their pre-issue shares are pledged before filing for an IPO. Because such shares are freely transferable, shareholders may create pledges any time before the issue, and issuers often find it difficult to trace or coordinate with them during the tight IPO timelines. In some cases, issuers have also reported non-cooperation or untraceable shareholders.

Also, it was reported that companies coming up with the IPO will be required to amend their internal rule book, called Article of Association or AoA to ensure that pledged shares are locked-in for the prescribed period, and that, upon invocation or release of the pledge, the shares continue to remain locked-in in the respective account of the pledger or pledgee. It  was also proposed that companies coming up with IPO, must notify all lenders and pledgees of the changes made to their AoA and include these details prominently in their draft and final offer documents (DRHP and RHP).