SEBI Rolls Out Comprehensive Guidelines For Returning And Resubmitting Draft Offer Documents

Introduction:

SEBI unveiled detailed guidelines on February 6, 2024, through a circular.[1] The aim is to refine the process of returning and resubmitting draft offer documents which are essential for maintaining vibrancy in India’s primary market; it also ensures greater clarity, consistency in disclosures, and crucial elements that underpin expeditious processing of these vital components.

Key Provisions:

1. Requirements for Presentation of Information:

The circular emphasizes drafting offer documents in a way that ensures investors can easily comprehend them is of paramount importance; it necessitates using simple language, employing visual aids for data representation, and formulating clear, concise statements.

Issuers and lead managers must adhere to specific criteria outlined which suggests that they should favour short sentences; avoid complex presentations, most importantly, ensure absolute clarity in risk factor disclosures.

The circular vehemently argues for a communication approach that excludes legal and technical jargon; it underscores the vital importance of presenting information in an accessible manner to all stakeholders.

2. Cost and Time Factors:

The circular notably addresses concerns related to financial implications which stipulates, without question, that no additional fees will be imposed for the resubmission of draft offer documents.

The SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations), however, make it clear, that fees pertaining to essential updates or revisions on the document will remain applicable; this is a crucial stipulation, an active reminder, that ongoing charges are part of the transaction.

3. Additional Guidelines:

The circular maps out further criteria, these include the return of draft offer documents in cases involving substantial revisions; regulatory interpretations, and importantly corrective measures that are needed.

Emphasizing the need for draft offer documents to present information in a way that is readily understandable, without requiring extensive reference to general rules and regulations.

4. Public Announcement and Sectoral Regulator Intimation:

Within the parameters of the ICDR Regulations, issuers must adhere to the mandate, and are required to publicly announce their resubmission of a draft offer document within two days.

Additionally, the issuer must provide a written notification to sectoral regulators, this informs them of the return and subsequent resubmission of the draft offer document.

Comparison with Previous Regulations:

The Circular SEBI/2012/13, while not superseding the 2012 Order ‘Framework for Rejection of Draft Offer Documents‘ by augmenting and refining the existing framework; aligns with a recent practice of returning draft offer documents instead of outright rejection. This guideline underscores SEBI’s commitment to foster an environment conducive to business growth bolstering investor confidence in turn.

Implications for Issuers and Merchant Bankers:

These guidelines offer structured guidance that stands to benefit issuers and merchant bankers. The emphasis on simplicity, clarity, and adherence to disclosure requirements underscores a key imperative, robust and transparent documentation in the primary market ecosystem.

Conclusion:

SEBI’s issuance of the detailed guidelines is a significant stride towards enhancing transparency, efficiency and investor protection in India’s primary market. By delineating clear parameters for the drafting and submission of offer documents specifically. SEBI aims to achieve an essential objective, instilling confidence among not only investors but also all participants in the market.

[1]  Circular No.: SEBI/HO/CFD/PoD-1/P/CIR/2024/009