Market regulator SEBI has done away with the requirement of prior no-objection or observation letter from the regulator and the stock exchanges before making an application to the NCLT for carrying out restructuring of the capital of a ‘corporate debtor’.

Amendment to LODR

Also, SEBI has, in its latest amendment to its Listing Obligations and Disclosure Regulations (LODR) clarified that certain actions such as related-party transactions, divesting majority shareholding and assets of subsidiaries would not require the approval of the shareholders by way of a special resolution.

SEBI has also now exempted companies from compliance with ‘preferential allotment of shares’ guidelines if the preferential allotment is made under a resolution plan approved under the IBC process. However, the lock-in norms applicable for preferential allotment will continue to apply.

Commenting on the development, Harman Walia, Principal Associate, Induslaw, a law firm, said these are “welcome” and “prudent” moves by SEBI and go on to achieve the intent and mandate of the Insolvency and Bankruptcy Code, which is to provide for a time-bound resolution process.

It may also be recalled that the Corporate Affairs Ministry had in October 2017 issued a circular which provided that no shareholders’ approval (normally required under the Companies Act) would be required to implement a resolution plan for a ‘corporate debtor’.

On the latest SEBI exemption to preferential allotment guidelines for IBC cases, Pankaj Mahajan, Head — Restructuring and Insolvency, Mazars, said this is another step in the direction of removing regulatory roadblocks in terms of providing maximum control to the incoming promoters in order to make the acquisitions more attractive.

Lock-in provision

“The lock-in provisions have been retained to prohibit the short-term profiteering by the incoming promoter. This is one more well thought out amendment which reinforces the pragmatic intent of the government of the day to resolve these cases in a time-bound manner. Again a huge positive, I would say,” Mahajan told BusinessLine . Deepak Bhawnani, CEO, Alea Consulting, described the latest SEBI changes as a “positive and welcome” development and expected them to aid a time-bound resolution process. He also made a case for introduction of the concept of “turnaround specialist” once the IBC process is completed.

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