SEBI gets strict with promoter-investor profit sharing regulations!
The Securities and Exchange Board of India is getting stricter about the corporate governance rules & regulations when it comes to profit sharing deals between the promoters of the companies and investors like private equity.
It is heard that company promoters who want to enter in agreements with the investor or any third party can only do so once they get a permission of the board along with the shareholders. If there is no permit, you cannot go into an agreement or contract with them. All the upcoming agreements will stay stern on this rule and the ones that already exist that are valid will also have an impact.
The SEBI has cut minimum investment needs by angel funds to Rs. 25 lakhs from Rs. 50 lakhs. They have also reduced the lock in time to one year instead of three years now. The cap on the number of investors in this scheme has increased to 200 from 49. The changes are a lot to take in but the SEBI wants to tighten a few rules. Angel funds can invest in overseas capital ventures with undertakings up to 25 percent.
What about unlisted NCD’s and debt instruments that are securitized? SEBI is allowing FPIs, foreign portfolio investors to put their money in unlisted NCDs or any bonds of Indian companies. Investments made in unlisted corporate securities will be subjected to minimal residual maturity of only three years and there will be a restriction on investments in the real estate market, purchase of land and capital market. SEBI has also stated that the FPI investments which are unlisted corporate debt securities and also all the securitized debt instruments cannot exceed Rs. 35,000 crore.
Experts are suggesting that one of the reasons for SEBI to bring in so many new regulations and rules for promoter investor profit sharing is due to the demonetization in the market. It has impacted the share market of India and we have suffered quite a loss as Sensex has dropped down by 7 percent.
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