SEBI’s new norms for startups allow moving from IGP to regular trading after one year

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SEBI (Securities and Exchange Board of India), on Wednesday, released a new set of rules for startups in order to give them permission to shift at regular trading after one year and to expand their shareholder base to at least 200, reported yourstory.

The fresh norms will help startups to move from the Innovators Growth Platform (IGP) of stock exchanges to the main board.

According to the fresh norms, the startups will need to have a profitability or net-worth track record of three years or at least 75 per cent of its shareholding should be with qualified institutional investors.

Sebi said that the minimum promoter contribution would need to be 20 per cent, which would be locked in for three years.

The period of earlier six-month lock-in served at the time of listing on the startup platform would be deduced from the overall three-year lock-in requirement.

While, according to the officials, the regulator is of the view that if companies listed on the IGP are allowed to be traded in the regular category of main board without following a stringent criteria, it may be misused to bypass the rigorous route of coming up with a main board IPO.

Any company desirous of getting listed on the main board of stock exchange for regular trading of their shares need to follow stringent disclosure and eligibility norms and launch an initial public offer (IPO). But, the rules are much more relaxed for the startups looking to list their shares on the new IGP, where trading activities are relatively restricted.

Furthermore, a detailed set of norms for listing on IGP were finalised by SEBI’s board in December 2018.

SEBI discussed the draft norms with its own Primary Market Advisory Committee as well as the two leading non-english stock market BSE and NSE, pursuant to which a discussion paper was issued for public comments in May 2019.

After taking into account comments received from merchant bankers, industry bodies, stock exchanges and others, SEBI finalised a detailed set of draft norms which was presented for its board’s approval on Wednesday.

Sebi also said that the minimum promoter contribution and lock-in provisions are in line with those prescribed for the main board IPOs.

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