SEBI eases IPO rules to benefit startup founders
Until now, the promoters were ineligible for share-based benefits
The Securities and Exchange Board of India (SEBI) has amended rules allowing startup founders going public to retain Employee Stock Options (ESOPs) granted at least one year before filing preliminary initial public offering (IPO) papers.
SEBI’s notification read, “An employee who is identified as a ‘promoter’ or part of the ‘promoter group’ in the draft offer document filed by a company with the Board in relation to an IPO, and who was granted options, SAR (Stock Appreciation Rights) or any other benefit under any scheme at least one year prior to filing of the draft offer document, shall be eligible to continue to hold and/or exercise such options, SAR or any other benefit.”
The new rule would facilitate founders who received ESOPs at least one year before the filing of draft papers to continue holding or exercising such benefits even after being specified as the promoter and the company becoming a listed entity.
Until now, the promoters were ineligible to hold or be granted share-based benefits, including ESOPs. If they held such benefits at the time of filing the draft red herring prospectus (DRHP), they had to liquidate the benefits before the IPO.
The new norms will assist public companies intending to list after undertaking reverse flipping. It would shift the country of incorporation from a foreign jurisdiction to India.