Mint Explainer: What did Sebi decide at its 210th board meeting?

Sebi's Sweeping Reforms: A New Era for India's Capital Markets

In his second board meeting as chairperson, Tuhin Kanta Pandey spearheaded a significant overhaul of India's capital market regulations, aiming to boost ease of doing business and foster growth.

Key Decisions Impacting Investors and Businesses

• Startup Promoter Relief: Founders can now retain Employee Stock Options (ESOPs) granted at least a year before filing the DRHP. This eliminates a major hurdle for startups preparing for IPOs.
  • Archana Balasubramanian (Agama Law Associates): "This move eases the burden on promoters transitioning from entrepreneurs to employees."
  • Ketan Mukhija (Burgeon Law): Highlights the need for careful documentation to avoid potential grey areas regarding the cooling-off period.
• Streamlined PSU Delisting: PSUs with at least 90% government and PSU ownership can delist using a fixed-price method with a 15% premium. This simplifies the process, removing the need for two-thirds public shareholder approval.
  • Prashant Mishra (Agnam Advisors): Provides a clearer exit path for government-owned companies.
  • Abhishek Dadoo (Khaitan & Co): Raises concerns about the potential dilution of minority shareholder protections.
• Enhanced Co-Investment Opportunities for AIFs: Category I and II AIFs can now offer co-investment schemes (CIVs), allowing accredited investors to participate alongside the AIF in unlisted companies.
  • Gopal Srinivasan (TVS Capital Funds): This is a breakthrough that will significantly expand private capital participation.
  • Nandini Pathak (Bombay Law Chambers): Emphasizes caution regarding investor eligibility and exit terms.
• Revised Angel Fund Norms: Only accredited investors can invest, with investment limits increased to ₹25 crore and the 25% concentration cap removed. Fund managers must maintain a minimum "skin in the game" of 0.5% or ₹50,000 per deal.
  • Kush Gupta (SKG Investment & Advisory): Provides greater flexibility for angel funds to choose investments.
• Easing Compliance for GS-FPIs: Sebi has relaxed compliance norms for Foreign Portfolio Investors (FPIs) investing solely in government securities, including longer KYC review cycles and relaxed disclosure requirements.
  • Manisha Shroff (Khaitan & Co): Highlights the reduced risk profile but points out legal ambiguities regarding long-term implications.
• Settlement Scheme for NSEL Brokers: A one-time monetary settlement plan is introduced for brokers facing enforcement actions related to the NSEL case, but not named in charge sheets or declared defaulters.
  • Amit Tungare (Asahi Legal): A bold move to resolve legacy issues, but emphasizes the need to maintain accountability.

These changes represent a significant step towards modernizing India's regulatory framework and fostering a more dynamic and inclusive capital market.