**Summary:**
SEBI Circular SEBI/HO/CFD/DIL2/CIR/P/2022/66, dated May 19, 2022, modifies the procedural requirements for Rights Issues, specifically regarding the timeline between the closure of trading in Right Entitlements (REs) and the closure of the Rights Issue.
The circular amends paragraph 1.4.1 and Annexure I, paragraph C e of Circular No. SEBI/HO/CFD/DIL2/CIR/P/2020/13 dated January 22, 2020. Previously, these sections mandated a minimum gap of four days between the closure of RE trading and the closure of the Rights Issue. This has been revised to "at least three working days."
This change addresses market representations that the original four-day period did not consistently ensure adequate settlement time, particularly when trading holidays occurred between the last RE trading date and the issue closure. The revised timeframe accounts for a minimum of two working days for settlement of REs traded on the last day of the RE trading window (T+2 rolling settlement) and one additional working day for investors to apply in the Rights Issue.
The circular is effective immediately for all rights issues and fast-track rights issues. All entities involved in the Rights Issue process must ensure compliance. Recognized stock exchanges are directed to inform listed companies of these provisions and disseminate the information on their websites.
This circular is issued under the powers granted by section 11 read with section 11A of the Securities and Exchange Board of India Act, 1992.
For further information, contact Vandana Joglekar, Deputy General Manager, Corporation Finance Department, at 91 22 2644 9639 or vandanaj@sebi.gov.in. The circular is available on the SEBI website (www.sebi.gov.in) under the categories "Legal Framework" and "Circulars."
Key Entities Referenced
Securities and Exchange Board of India (SEBI): Regulatory body for securities market in India, responsible for issuing the circular.
Rights Issue: A method by which a company raises capital by offering existing shareholders the right to buy additional shares.
SEBI Act, 1992: The law under which SEBI derives its powers to issue regulations and circulars.
Recognized Stock Exchanges: Stock exchanges recognized by SEBI, excluding commodity exchanges, to whom the circular is addressed.
Registered Merchant Bankers: Entities registered with SEBI who manage public offerings of securities.
Registered Stock Brokers: Brokers registered with SEBI who trade in securities.
Registered Depositories: Organizations registered with SEBI that hold securities in electronic form.
SEBI Circular No. SEBI/HO/CFD/DIL2/CIR/P/2020/13: Previous SEBI circular dated January 22, 2020, which is being amended by the current circular.
CIRCULAR
SEBI/HO/CFD/SSEP/CIR/P/2022/66 May 19, 2022
To
All Recognized Stock Exchanges (except Commodity Exchanges)
All Recognized Depositories
Issuer Companies
Registered Stock Brokers
Registered Merchant Bankers
Registered Registrars to an Issue and Share Transfer Agents
Registered Depository Participants
Registered Bankers to an Issue
Dear Sir / Madam,
Sub: Streamlining the Process of Rights Issue
1. SEBI vide Circular No. SEBI/HO/CFD/DIL2/CIR/P/2020/13 dated January 22, 2020, had
stipulated procedures streamlining the Rights Issue process (‘the circular’).
2. In respect of the aforesaid circular, para 1.4.1 and at Annexure I para C (e) of the Circular, deal
with the requirement regarding minimum time period between closure of trading in Right
Entitlements on stock exchange platform and closure of the rights issue, which requires trading
in REs on the secondary market platform of stock exchanges commence along with the opening
of the rights issue and has to be closed at least four days prior to the closure of the rights issue.
3. SEBI received market representation that in case there are trading holidays between last date of
REs trading date and issue closure, provision of minimum gap of four days may not always
ensure that there are adequate days for settlement, as minimum 2 working days are required for
settlement of REs traded on last day of REs trading window (REs traded on exchange platform
have T+2 rolling settlement). It was further represented that there should be a minimum gap of
three working days considering two days for settlement and one additional day for investor to
make application in Rights Issue.
Page 1 of 24. Therefore, in view of above it has been decided that para 1.4.1 and at Annexure I para C (e) of
the Circular paragraphs are amended as under:
The words ‘at least four days’ are replaced with ‘at least three working days’.
5. Applicability of this Circular: This circular shall be applicable for all rights issues and fast track
rights issue with immediate effect.
6. All entities involved in the Rights Issue process are advised to take necessary steps to ensure
compliance with this circular.
7. The recognized stock exchanges are directed to bring the provisions of this circular to the notice
of the listed companies and also to disseminate the same on their website
8. This circular is being issued in exercise of the powers under section 11 read with section 11A of
the Securities and Exchange Board of India Act, 1992.
9. A copy of this circular is available on SEBI website at www.sebi.gov.in under the categories
“Legal Framework/Circulars”.
Yours faithfully,
Vandana Joglekar
Deputy General Manager
Corporation Finance Department
+91 22 2644 9639
Email - vandanaj@sebi.gov.in
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