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SEBI Guidelines for Draft Offer Documents: Return and Resubmission Process

SEBI’s Guidelines for Draft Offer Documents: Return and Resubmission Process

Introduction

The Securities and Exchange Board of India (SEBI) is instrumental in regulating the securities market and protecting investor interests. One of its key responsibilities is overseeing the issuance of offer documents from companies that seek to raise funds via public offers.

SEBI ensures that the offer documents submitted by issuers and Lead Managers comply with Schedule VI of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”). This schedule outlines the essential information required for disclosure in draft offer documents or letters of offer.

Requirements for Draft Offer Document Presentation

According to Schedule VI of the ICDR Regulations, the draft offer document must adhere to certain presentation standards for optimal clarity and comprehension:

  • Language and Clarity:

    • Utilize short and straightforward sentences.
    • Prefer definite and unambiguous terminology.
    • Employ active voice.
    • Include bullet points or tables as necessary.
    • Avoid multiple negatives.

  • Structure and Readability:

    • Maintain clear sections, paragraphs, and sentences.
    • Use descriptive headings and subheadings where appropriate.
    • Minimize legal and technical jargon, providing simple explanations for complex terms.

  • Avoid Complexity:

    • Refrain from presenting complex information that may obscure the intended disclosures.
    • Do not include complex legal terminology without adequate explanation.
    • Avoid vague descriptions that could lead to multiple interpretations.
    • Prevent repetition of information across sections unless contextually justified.
    • Ensure consistency in numbers, data, and facts across the document to avoid discrepancies.

The draft offer document should also be open to significant revisions based on clarifications sought during the review process or necessitated by regulatory interpretation.

Guidelines for Returning Draft Offer Documents and Resubmission

On February 6, 2024, SEBI issued a circular establishing guidelines for the return and resubmission of draft offer documents, effective immediately.

  • Communication of Guidelines: Recognized Stock Exchanges are required to notify listed entities of these provisions and make the information available on their websites.

  • Legal Basis: This circular was issued under the authority of Section 11(1) of the Securities and Exchange Board of India Act, 1992, and Regulation 299 of the ICDR Regulations to safeguard investor interests and regulate the securities market.

  • Return Process:

    • Draft offer documents will be scrutinized against SEBI’s guidelines.
    • Documents that fail to meet the provisions outlined in Schedule VI of the ICDR Regulations will be returned to the issuer.

  • Clarification and Compliance: SEBI emphasizes the importance of using clear language and provides guidance for clarifying technical terms within the document related to the issuer’s business.

Resubmission Process

Upon receiving a returned draft offer document, it is crucial for the issuer to address the identified deficiencies within the specified timeframe. Issuers should carefully review SEBI’s feedback, rectify any inconsistencies, and ensure all necessary information is correctly provided.

  • No Additional Fees for Resubmission: SEBI has clarified that there will be no fees required for the resubmission of the draft offer document. However, any applicable fees related to changes as per Schedule XVI of the ICDR Regulations remain enforced for updates to the offer document.

  • Public Announcement: After resubmitting the draft offer document, the issuer must make a public announcement within two days. This announcement should adhere to the prescribed modes and include a notification that the document is a resubmission. Additionally, issuers should inform their sectoral regulator, if relevant, about the draft's return and subsequent resubmission.

  • Compliance Assurance: Issuers and their Lead Managers must confirm that the resubmitted draft offer document addresses all previous insufficiencies and complies with the ICDR Regulations and applicable laws.

Conclusion

The guidelines issued by SEBI regarding the return and resubmission of draft offer documents aim to enhance transparency, protect investor interests, and uphold the integrity of the securities market. Issuers must diligently follow these guidelines, rectify any issues promptly, and ensure compliance with regulatory standards. By effectively navigating these requirements, issuers can streamline the public offering approval process, demonstrating their commitment to transparency and regulatory adherence.