The regulator has recently ordered bankers to withdraw special rights, such as repurchase guarantees, that a firm may have had with certain shareholders in a number of circumstances.
The Securities and Exchange Board of India (Sebi) has begun to insist on the removal of special rights granted to an investor or a select group of investors or shareholders when a company files its document for an initial public offer (IPO) as part of its efforts to ensure that a company treats all shareholders equally.
The regulator has recently ordered bankers to withdraw special rights, such as repurchase guarantees, that a firm may have had with certain shareholders in a number of circumstances. Occasionally, these rights are incorporated into the shareholding agreements to guarantee the shareholder an exit option in the event that the initial public offering (IPO) fails.
For example, in the case of Transrail Lighting, an amendment noting that Asiana Alternative Investment Fund has waived the buy-back arrangement clause was submitted after the draft red herring prospectus (DRHP) was already filed with Sebi.
The addition read, “Therefore, in the event that our company and/or our promoter selling shareholder, are unable to facilitate an exit for Asiana, our company is no longer required to buy-back the equity shares held by Asiana.”
