Easier to list a Start-up after SEBI notifies new rules

By Aditya Pratap, Lawyer in Bombay High Court

Securities and Exchange Board of India (SEBI) has notified a set of changes to the framework of listing on the Innovators Growth Platform (IGP), a separate exchange venue for new age Start-ups. IGP which was previously named as Institutional trading Platform was introduced by SEBI in 2015. These changes will be effective from May 5. 

With the aim of boosting the listing of Start up these relaxations have been introduced. These changes will make the platform more accessible to companies in view of the evolving start-up ecosystem.

What are the changes introduced:

  • The regulator has reduced the period of holding of 25% of pre-issue capital of the issuer company by eligible investors-  to one year from the current requirement of two years. An investor with net worth of Rs.5 crore will be considered an eligible investor.
  • The term ‘Accredited Investor’-for the purpose of IGP is renamed as ‘Innovators Growth Platform Investors’. Such investor’s pre-issue shareholding would be considered for the entire 25% of the pre-issue capital of the issuer company against the present limit of only 10%.
  • The issuer company on the IGP would be allowed to allocate up to 60 per cent of the issue size on a discretionary basis prior to issue opening for subscription to eligible investors with a lock in of 30 days on such shares. This was done on the lines of provisions of listing of companies on the main Board.

This is subject to that the price of the specified securities offered to eligible investors would not be lower than the price offered to other applicants and eligible investors would make an application of a value of at least Rs.50 lakh.

The issuer company was not permitted to make discretionary allotment before the notification.

Superior Voting Rights and Differential voting Rights:

Issuer companies which have issued superior voting rights (SR) equity shares to promoters and founders will be allowed to do listing under IGP framework.

SEBI notified on 29th July 2019 a new type of Share called ‘Special Voting Rights Equity Shares’. The issuer can have only one class of SR equity Share. The SR equity shares shall have voting rights in the ratio of a minimum of 2:1 up to a maximum of 10:1 compared to ordinary shares and such ratio shall be in whole numbers only;

For SR Shareholder should not be a part of a promoter group whose collective net worth is more than 500 crore.

Unlisted companies are permitted to issue Differential Voting Rights subject to conditions and restrictions provided in Companies Act, 2013. However, SEBI Regulations prohibit issuance of shares with superior voting rights by listed companies.

Open Offer:

  • The threshold trigger for open offer has been relaxed from the existing 25% to 49%.However, irrespective of acquisition or holding of shares or voting rights in a target company, any change in control directly or indirectly over target company will trigger open offer, SEBI said.

Exiting the platform:

  • An issuer company whose specified securities are traded on the IGP pursuant to an initial public offer may exit from the platform, if such an exit is approved by the board of directors of the company in its meeting, SEBI said.
  • Further, the regulator said that such an exit is approved by the shareholders of the company by a special resolution passed through postal ballot or e-voting, after disclosure of all material facts in the explanatory statement sent to the shareholders in relation to such resolution.


  • The delisting would be considered successful if the post offer acquirer or promoter shareholding, taken together with the shares tendered and accepted, reaches 75% of the total issued shares of that class; and at least 50% shares of the public shareholders are tendered and accepted.
  • The delisting would be considered successful if the post offer acquirer or promoter shareholding, taken together with the shares tendered and accepted, reaches 75% of the total issued shares of that class; and at least 50% shares of the public shareholders are tendered and accepted.

In addition, SEBI has eased the framework for companies seeking to migrate to the main board.

Qualified Institutional Buyers:

Currently, for a company not satisfying the conditions of profitability, net assets, net worth among others for migration from IGP to main board requires a company to have 75% of its capital held by QIBs as on date of application for migration. This requirement has now been reduced to 50%.

A QIB or a Qualified Institutional Buyer are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets. In terms of clause 2.2.2B (v) of DIP Guidelines, a ‘Qualified Institutional Buyer’ shall mean:

  • Scheduled commercial banks;
  • Mutual funds;
  • Foreign institutional investor registered with SEBI;
  • Multilateral and bilateral development financial institutions;
  • Venture capital funds registered with SEBI.
  • Foreign Venture capital investors registered with SEBI.
  • State Industrial Development Corporations.
  • Insurance Companies registered with the Insurance Regulatory and Development Authority (IRDA).
  • Provident Funds with minimum corpus of Rs.25 crores
  • Pension Funds with minimum corpus of Rs. 25 crores
  • Public financial institution as defined in Companies Act, 2013;

To give effect to this, SEBI has amended ICDR (Issue of Capital and Disclosure Requirements) Regulation and SAST (Substantial Acquisition of Shares and Takeovers) norms.

About the Author – Aditya Pratap

Aditya Pratap is a lawyer practising in Mumbai. He argues cases in the Bombay High Court, Sessions and Magistrate Courts, along with appearances before RERA, NCLT and the Family Court. For further information one may visit his website adityapratap.in or view his YouTube Channel to see his interviews. Questions can be emailed to him at aditya@adityapratap.com.

This Article is made by Aditya Pratap in assistance with Aditi Dixit.

Cases argued by Aditya Pratap can be viewed here.

Disclaimer: Every effort has been made to ensure the accuracy of this publication at the time it was written. It is not intended to provide legal advice or suggest a guaranteed outcome as individual situations will differ and the law may have changed since publication. Readers considering legal action should consult with an experienced lawyer to understand current laws and how they may affect a case.

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