Disclosures and Filing of Offer Documents

Written By BareMinLaw

PART VI: DISCLOSURES IN AND FILING OF OFFER DOCUMENTS

Regulation 24. Disclosures in the draft offer document and offer document

24(1).

  • The Draft Offer Document (DOD) and the Offer Document must contain all material disclosures.

  • Material disclosures are information that a reasonable investor would consider important while deciding whether to invest in the public issue.

    1. The disclosures must be true.

    2. The disclosures must be accurate, complete and not misleading.

    3. The disclosures must be adequate, meaning they should provide sufficient information for investors to properly understand the issuer and the public issue.

  • The issuer must not omit any material fact whose absence could mislead investors.

  • The purpose of the disclosures is to enable applicants to make an informed investment decision.

  • An informed investment decision means that investors should have enough information to evaluate matters such as:

    1. The issuer's business.

    2. Financial performance.

    3. Risks associated with the investment.

    4. Objects of the issue.

    5. Promoters and management.

    6. Capital structure.

    7. Litigation and regulatory actions.

    8. Any other material information that may influence an investment decision.

24(2).

  • The Red Herring Prospectus (RHP) and the Prospectus must contain the disclosures required under this provision.

  • These disclosures are in addition to the general requirement of making true, adequate and material disclosures.

  • Compliance with this provision does not replace or limit the broader disclosure obligation under sub-regulation (1).

(a).

  • The Red Herring Prospectus (RHP) and the Prospectus must contain all disclosures required under the Companies Act, 2013.

  • These include every disclosure that the Companies Act mandates for a prospectus or public issue.

  • The issuer must comply with the disclosure requirements under the Companies Act along with the ICDR Regulations.

(b).

  • The Red Herring Prospectus (RHP) and the Prospectus must also contain all disclosures specified in Part A of Schedule VI of the ICDR Regulations.

  • Part A of Schedule VI prescribes the detailed disclosure requirements specific to public issues under the ICDR Regulations.

  • These disclosures include information relating to matters such as:

    1. Risk factors.

    2. Business of the issuer.

    3. Financial information.

    4. Capital structure.

    5. Objects of the issue.

    6. Promoters and management.

    7. Outstanding litigation.

    8. Material contracts.

    9. Other information prescribed under Schedule VI.

  • The issuer must comply simultaneously with:

    1. The disclosure requirements under the Companies Act, 2013.

    2. The disclosure requirements under Part A of Schedule VI.

24(3).

  • The Lead Manager(s) must exercise due diligence before and during the public issue.

    1. Due diligence means conducting a thorough, independent and reasonable verification of the issuer and the public issue.

    2. The idea is to make sure that all information is accurate, complete and compliant with the applicable laws.

  • The Lead Manager(s) must satisfy themselves about all aspects of the issue.

  • Their responsibility is not limited to preparing or filing the offer documents.

  • The Lead Manager(s) must independently verify matters relating to the public issue, including:

    1. The business of the issuer.

    2. Financial statements.

    3. Legal and regulatory compliances.

    4. Material contracts.

    5. Objects of the issue.

    6. Risk factors.

    7. Pending litigation.

    8. Capital structure.

    9. Promoters and management.

    10. Any other material information relevant to the IPO.

  • The Lead Manager(s) must specifically verify the:

    1. Veracity of the disclosures; and

    2. Adequacy of the disclosures.

  • Veracity means the disclosures must be true, accurate and not false or misleading.

    1. Adequacy means the disclosures must be complete and sufficient to enable investors to understand the issuer and make an informed investment decision.

    2. The Lead Manager(s) cannot rely solely on information supplied by the issuer without conducting reasonable verification.

24(4).

  • The Lead Manager(s) must ensure that the persons responsible for the public issue perform the obligations undertaken by them.

  • The Lead Manager(s) may call upon the following persons to fulfil their obligations:

    1. The issuer.

    2. The promoters.

    3. The directors.

    4. In the case of an Offer for Sale (OFS), the selling shareholders as well.

  • Call upon means the Lead Manager(s) must require, insist or ensure that these persons comply with their commitments.

  • The obligations include those:

    1. Disclosed in the Draft Offer Document (DOD).

    2. Disclosed in the Offer Document.

    3. Required under the ICDR Regulations.

  • The Lead Manager(s) must monitor whether these obligations are actually performed and cannot merely rely on the issuer's assurances.

  • In an Offer for Sale, the selling shareholders are also accountable for complying with the obligations applicable to them, and the Lead Manager(s) must ensure such compliance.

24(5).

  • The Lead Manager(s) must ensure that the information contained in the:

    1. Draft Offer Document (DOD).

    2. Offer Document.

  • is not more than six months old as on the issue opening date.

  • The Lead Manager(s) must also ensure that:

    1. The particulars contained in the restated audited financial statements included in the Offer Document are not more than six months old from the issue opening date.

    2. The issue opening date is the date on which the IPO opens for subscription by investors.

    3. The six-month period is counted backwards from the issue opening date.

    4. If any information or financial particulars become older than six months, the issuer and the Lead Manager(s) must update the Offer Documents before the issue opens.

Regulation 25. Filing of the draft offer document and offer document

25(1).

  • Before making an Initial Public Offer (IPO), the issuer must file a Draft Offer Document (DOD) with SEBI.

    1. The Draft Offer Document must be filed through the Lead Manager(s).

    2. The issuer must file three copies of the Draft Offer Document.

    3. The filing must be made in accordance with Schedule IV of the ICDR Regulations.

    4. The issuer must also pay the prescribed filing fees.

    5. The filing fees must be paid as specified in Schedule III of the ICDR Regulations.

  • The Draft Offer Document is submitted to SEBI for its observations before the IPO proceeds.

25(2).

  • Along with the Draft Offer Document (DOD), the Lead Manager(s) must submit certain documents and certificates to SEBI.

  • These documents enable SEBI to verify that the issuer and the Lead Manager(s) have complied with the procedural and regulatory requirements before the IPO proceeds.

(a).

  • The Lead Manager(s) must submit a certificate confirming that an agreement has been executed between the issuer and the Lead Manager(s).

    1. The certificate confirms that the required Lead Manager Agreement has been entered into.

    2. The agreement must be the one required under the ICDR Regulations.

  • The objective is to assure SEBI that the contractual relationship governing the responsibilities of the issuer and the Lead Manager(s) is already in place.

(b).

  • The Lead Manager(s) must submit a Due Diligence Certificate.

  • The certificate must be in Form A of Schedule V.

  • Through this certificate, the Lead Manager(s) confirm that they have:

    1. Conducted the required due diligence.

    2. Verified the disclosures in the Draft Offer Document.

    3. Complied with the due diligence obligations prescribed under the ICDR Regulations.

  • The objective is to provide SEBI with a formal confirmation that the Lead Manager(s) have independently examined the issuer and the public issue.

(c).

  • This requirement applies only where the public issue involves Convertible Debt Instruments.

    1. The Debenture Trustee must submit a Due Diligence Certificate.

    2. The certificate must be in Form B of Schedule V.

    3. Through this certificate, the Debenture Trustee confirms that:

      1. It has carried out the due diligence required under the ICDR Regulations in relation to the issue of the Convertible Debt Instruments.

      2. The objective is to ensure that the interests of the holders of Convertible Debt Instruments are adequately protected.

(d).

  • The Lead Manager(s) must submit a Draft Abridged Prospectus.

    1. The Draft Abridged Prospectus must be prepared in accordance with Part E of Schedule VI.

    2. An Abridged Prospectus is a condensed version of the Prospectus containing the key information that an investor should know before investing.

  • The objective is to enable SEBI to review the summary disclosure document that will eventually be provided to investors.

25(3).

  • The issuer must also file the Draft Offer Document (DOD) with the stock exchange(s) where its specified securities are proposed to be listed.

    1. The filing with the stock exchange(s) is in addition to the filing made with SEBI.

    2. The issuer must also submit certain identification and registration details of its promoters to the stock exchange(s).

  • The information to be submitted depends on whether the promoter is an individual or a body corporate.

Where the promoter is an Individual

  • The issuer must submit the following details of each individual promoter:

    1. Permanent Account Number (PAN).

    2. Bank account number.

    3. Passport number.

Where the promoter is a Body Corporate

  • The issuer must submit the following details:

    1. Permanent Account Number (PAN).

    2. Bank account number.

    3. Company Registration Number (CIN) or any equivalent registration number.

    4. Address of the Registrar of Companies (RoC) with which the promoter is registered.

25(4).

  • SEBI may review the Draft Offer Document (DOD) and:

    1. Specify changes to be made.

    2. Issue its observations on the Draft Offer Document.

  • SEBI is required to do so within 30 days.

    1. The 30-day period does not always begin from the date on which the Draft Offer Document is filed.

    2. Instead, it is calculated from the latest (last occurring) of the events mentioned in clauses (a) to (d).

(a).

  • The first possible starting point is the date on which SEBI receives the Draft Offer Document under 25(1).

  • If no further information or approvals are required, the 30-day period begins from this date.

(b)

  • SEBI may seek:

    1. Clarifications.

    2. Additional information.

    3. Further documents.

  • The Lead Manager(s) must provide a satisfactory reply.

  • If SEBI raises such queries, the 30-day period begins only after SEBI receives the satisfactory reply, and not from the original filing date.

(c)

  • SEBI may also seek Clarifications, or Information from another regulator or government agency.

  • Examples include:

    1. RBI.

    2. IRDAI.

    3. CCI.

    4. Ministry of Corporate Affairs.

    5. Any other relevant authority.

  • If SEBI seeks such information, the 30-day period begins only after SEBI receives the clarification or information from that regulator or agency.

(d).

  • The issuer must obtain an In-Principle Approval Letter from the stock exchange(s).

    1. If the approval letter is received after the events mentioned in clauses (a), (b) or (c), the 30-day period begins only after SEBI receives a copy of the In-Principle Approval Letter.

    2. Where more than one of these events occurs, the 30-day period is calculated from whichever event occurs last.

25(5).

  • Where SEBI specifies changes or issues observations on the Draft Offer Document (DOD), the issuer and the Lead Manager(s) must comply with them.

  • The issuer and the Lead Manager(s) must incorporate all the changes required by SEBI into the Draft Offer Document.

  • After making the required changes, they must prepare an Updated Draft Offer Document.

  • The Updated Draft Offer Document must:

    1. Comply with all the observations issued by SEBI.

    2. Highlight every change made to the original Draft Offer Document.

  • Highlighting the changes enables SEBI to easily identify the modifications made in response to its observations.

  • The Updated Draft Offer Document must be submitted to SEBI.

  • These steps must be completed before filing the Offer Document with:

    1. The Registrar of Companies (RoC).

    2. Any other appropriate authority, wherever applicable.

  • The issuer cannot proceed with filing the Offer Document with the RoC or other competent authority until the Updated Draft Offer Document reflecting SEBI's observations has been submitted.

25(6).

  • If changes are made to the Draft Offer Document (DOD) relating to any of the matters specified in Schedule XVI, further filing with SEBI becomes necessary.

  • The changes must relate to the matters specified in Schedule XVI.

  • Depending on the nature and extent of the changes, the issuer must file either:

    1. An Updated Offer Document or

    2. A Fresh Draft Offer Document.

  • The appropriate document to be filed depends on the requirements of Schedule XVI and the nature of the changes made.

  • The document must be filed with SEBI.

    1. The filing must be accompanied by the prescribed fees.

    2. The fees must be paid as specified in Schedule III of the ICDR Regulations.

25(7).

  • After the Offer Documents are filed with the Registrar of Companies (RoC), copies of those documents must also be filed with:

    1. SEBI.

    2. The stock exchange(s) where the specified securities are proposed to be listed.

  • The filing with SEBI and the stock exchange(s) must be made through the Lead Manager(s).

    1. Along with the Offer Documents, the Abridged Prospectus must also be filed.

    2. An Abridged Prospectus is a shortened version of the Prospectus containing the key information that an investor requires before investing.

    3. The filing must be made promptly after the Offer Documents are filed with the Registrar of Companies.

  • Promptly means without unnecessary delay after the filing with the RoC.

25(8).

  • The issuer must furnish the following documents to SEBI in soft copy (electronic form):

    1. The Draft Offer Document (DOD).

    2. The Offer Document.

    3. The Draft Abridged Prospectus.

    4. The Abridged Prospectus.

  • A soft copy means an electronic version of the document, as opposed to a physical or printed copy.

  • The electronic copies must correspond to the documents that are filed with the regulatory authorities.

  • Furnishing soft copies enables SEBI to:

    1. Review the documents electronically.

    2. Maintain digital records.

    3. Facilitate faster processing and regulatory oversight.

  • This requirement is in addition to any requirement of filing physical copies or other prescribed filings under the ICDR Regulations.

25(9).

  • After SEBI issues its observations, or after the expiry of the period specified under Regulation 25(4)(where SEBI does not issue any observations):

    1. The Lead Manager(s) must submit certain documents to SEBI.

    2. These documents confirm that the issuer has complied with SEBI's observations and the other requirements of the ICDR Regulations before the issue opens.

(a).

  • The Lead Manager(s) must submit a certificate confirming that:

    1. All changes specified by SEBI.

    2. All suggestions made by SEBI.

    3. All observations issued by SEBI.

  • have been incorporated into the Offer Document.

  • This certificate assures SEBI that the final Offer Document fully reflects its comments.

(b).

  • The Lead Manager(s) must submit a Due Diligence Certificate.

  • The certificate must be in Form C of Schedule V.

    1. It must be submitted at the time of filing the Offer Document.

    2. Through this certificate, the Lead Manager(s) confirm that they have continued to exercise due diligence and that the final Offer Document complies with the applicable requirements.

(c).

  • The Lead Manager(s) must submit a copy of the Board Resolution passed by the issuer's Board of Directors.

    1. The resolution must authorise the allotment of specified securities to the promoter(s) towards the promoters' contribution.

    2. The resolution must be passed before the opening of the issue.

  • This enables SEBI to verify that the promoters' contribution has been duly authorised by the Board.

(d)

  • Before the issue opens, the Lead Manager(s) must submit a certificate issued by the Statutory Auditor.

  • The certificate must confirm that the promoters' contribution has been received in accordance with the ICDR Regulations.

  • The certificate must also contain:

    1. The names of the promoters contributing towards the promoters' contribution.

    2. Their addresses.

    3. The amount contributed by each promoter.

    4. Confirmation that the amount has been credited to the issuer's bank account.

  • This enables SEBI to verify that the promoters have brought in the required contribution before the IPO opens.

(e).

  • This requirement arises only where the issuer has issued a public notice disclosing a material development under Paragraph 4 of Schedule IX.

    1. In such a case, the Lead Manager(s) must submit a Due Diligence Certificate.

    2. The certificate must be in Form D of Schedule V.

  • Through this certificate, the Lead Manager(s) confirm that they have exercised due diligence with respect to the material development disclosed by the issuer.

Regulation 26. Draft offer document and offer document to be available to the public

26(1).

  • The Draft Offer Document (DOD) filed with SEBI must be made available to the public.

    1. The purpose is to invite comments from the public on the Draft Offer Document.

    2. The public may submit comments, suggestions or objections, if any, regarding the contents of the Draft Offer Document.

    3. The Draft Offer Document must remain available for public comments for at least 21 days.

  • The 21-day period is calculated from the date of publication of the Public Announcement made under Regulation 25(2).

  • Along with the Draft Offer Document, the Draft Abridged Prospectus must also be hosted.

  • The Draft Offer Document and the Draft Abridged Prospectus must be hosted on the websites of:

    1. The issuer.

    2. SEBI.

    3. The stock exchange(s) where the specified securities are proposed to be listed.

    4. The Lead Manager(s) associated with the issue.

  • During this 21-day period, investors, market participants and the general public have an opportunity to examine the Draft Offer Document and communicate any concerns or observations.

26(2).

  • The issuer must make a Public Announcement after filing the Draft Offer Document (DOD) with SEBI.

  • The Public Announcement must be made within 2 working days from the date of filing the Draft Offer Document with SEBI.

  • The Public Announcement must be published in the following newspapers:

    1. One English national daily newspaper having wide circulation.

    2. One Hindi national daily newspaper having wide circulation.

    3. One regional language newspaper having wide circulation in the place where the registered office of the issuer is situated.

  • The Public Announcement must disclose that the Draft Offer Document has been filed with SEBI.

  • The Public Announcement must also invite comments from the public on the disclosures made in the Draft Offer Document.

  • The public may submit their comments to:

    1. SEBI.

    2. The issuer.

    3. The Lead Manager(s).

  • The comments must relate to the disclosures contained in the Draft Offer Document.

26(3).

  • After the expiry of the public comment period specified under sub-regulation (1), the Lead Manager(s) must submit certain information to SEBI.

  • The public comment period is the period of at least 21 days during which the Draft Offer Document is made available for public comments.

  • The Lead Manager(s) must submit details of all comments received during that period.

  • The comments may have been received by:

    1. The Lead Manager(s).

    2. The issuer.

  • The comments must relate to the Draft Offer Document.

    1. The Lead Manager(s) must also identify the consequential changes, if any, that are required to be made to the Draft Offer Document because of those public comments.

    2. Consequential changes means the modifications or revisions that become necessary after considering the comments received from the public.

  • If no changes are required after reviewing the comments, the Lead Manager(s) may indicate that no consequential changes are required.

26(4).

  • The issuer and the Lead Manager(s) are jointly responsible for ensuring compliance with this requirement.

  • They must ensure that the following documents are hosted on the websites required under the ICDR Regulations:

    1. The Offer Document.

    2. The Abridged Prospectus.

  • The documents must be hosted on the websites prescribed under the applicable provisions of the ICDR Regulations.

  • The contents of the documents hosted online must be exactly the same as the versions filed with the regulatory authorities.

  • There must be no difference between the online version and the version filed with:

    1. The Registrar of Companies (RoC).

    2. SEBI.

    3. The Stock Exchange(s), wherever applicable.

  • The issuer and the Lead Manager(s) must ensure that:

    1. No information is added.

    2. No information is omitted.

    3. No modifications are made after filing.

  • Every version of the Offer Document and the Abridged Prospectus must remain identical across all platforms.

26(5).

  • The Lead Manager(s) and the stock exchange(s) must make the Offer Document available to the public.

    1. A copy of the Offer Document must be provided whenever any person requests it.

    2. The document must be supplied on request and should not be refused without a valid reason.

    3. Both the Lead Manager(s) and the stock exchange(s) are responsible for providing copies.

  • They may charge a reasonable amount for supplying a copy of the Offer Document.

    1. The amount charged should only cover the reasonable cost of providing the document.

    2. The fee cannot be excessive or unreasonable.

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