Sebi Issues Framework For Rejecting Draft Offer Proposals

Companies will not be able to access the capital market if the utilisation plan is too long or if they intend to use the proceeds for brand building and advertisements.

Market regulator Sebi in the 'Framework For Rejection Of Draft Offer Documents Order, 2012' has listed various factors that could lead to disapproval of draft offer papers for fund-raising by companies.

Sebi in its order dated October 9 has said that an offer document could be rejected if the purpose of utilising the proceeds is vague.

It said draft document would not be entertained in case a major portion of the issue proceeds are proposed to be utilised for the purpose which does not create any tangible asset, like expenses towards brand building, advertisement, payment to consultants.

The draft document would be rejected if there is not enough justification for creation of such assets in terms of past performance, experience and concrete business plan of the issue.

The market regulator said it would provide one-time opportunity to issuers for withdrawal of draft offer documents pending with the board.

The offer documents can be withdrawn within one month from the issue date of this general order, it added.

Meanwhile, entities whose draft offer documents are rejected would not be allowed to access capital markets for "at least one year from the date of such rejection".

The period might be increased depending upon the materiality of the omissions and commissions, Sebi said.

"In cases where the board rejects a draft offer document or where an issuer or a merchant banker to an issue chooses to withdraw the draft offer document, there shall be no refund of filing fees with the board," Sebi said.

According to the regulator, mere triggering of any criteria in the general order would not be considered as an automatic case for rejection and a final view would be taken after due consideration on a case-to-case basis.

The market regulator said it would provide one-time opportunity to issuers for withdrawal of draft offer documents pending with the board.

The offer documents can be withdrawn within one month from the issue date of this general order, it added.

Meanwhile, entities whose draft offer documents are rejected would not be allowed to access capital markets for "at least one year from the date of such rejection".

The period might be increased depending upon the materiality of the omissions and commissions, Sebi said.

"In cases where the board rejects a draft offer document or where an issuer or a merchant banker to an issue chooses to withdraw the draft offer document, there shall be no refund of filing fees with the board," Sebi said.

According to the regulator, mere triggering of any criteria in the general order would not be considered as an automatic case for rejection and a final view would be taken after due consideration on a case-to-case basis.

(PTI)