The promoters of eligible companies will be allowed to sell shares within two weeks of the offer for sale (OFS) transaction to the employees of such companies.
The circular also stipulates that the promoters are meant to make necessary disclosures in the OFS notice to the stock exchange including number of shares offered to employees and discount offered.
Why this launch?
Currently, the existing procedure of OFS to employees of the eligible company takes place outside the stock exchange mechanism. However, based on the suggestions received from stakeholders, it was established that the procedure is time-consuming and entails additional costs.
Accordingly, the regulator decided that the promoters can also offer the shares to employees in OFS through the stock market mechanism.
The new method will be an additional method in addition to the existing procedure outside the stock exchange mechanism.
Key provisions of this circular include the following:
1. Bidding will be allowed during business hours on T + 1 day only.
2. Employees will make offers only at cut price of T+1 day.
3. The maximum bid amount will be ₹5 lakhs.
4. Each employee is eligible for distribution of stock shares up to ₹2 lakhs.
5. In the event that there is an undersubscription in the employee share, the unsubscribed share may be allocated to such employees whose offer amount is over. ₹2 lakh on pro rata basis for value over ₹2 lakh subject to the total allocation to an employee not exceeding ₹5 lakhs.
6. The employees must pay in advance the margin to the extent of 100 percent of the order value in cash or cash equivalents.
The regulator has also issued instructions stating that stock exchanges and clearing corporations are meant to take necessary steps and put in place necessary systems for implementation of these provisions.
The circular is available on the regulator’s website at sebi.gov.in under ‘Legal Framework – Circulars’. The provisions of this circular dated January 23, 2024 shall come into force from the 30th day of issue of this circular.
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Published: 24 Jan 2024, 17:12 IST