India: Fast Tracking The Fund Raise: Eligible?

Last Updated: 30 May 2019
Article by Ravi Dubey and Mansi Jhaveri

In a capital starved world, quick access to capital is like a dream come true. It not only enables ease of doing business, but also helps in achieving the growth plans and capex requirements in a timely manner. While the regulatory framework for fund raising on a preferential basis has been relatively lucid, rights issues (which prevents dilution risks) and further public offerings (for wider investor participation) are marred by extensive disclosure requirements and time-consuming regulatory approvals except in case of fast track issues.

SEBI introduced the "fast track" route for rights issues and FPOs to not only allow truncated disclosures in the offer document (primarily dispensing the restated financial statements requirement) but also allow listed companies, subject to certain eligibility conditions, to skip filing the draft offer document with SEBI for its approval. As a result, the listed entities save a substantial amount of time and resources that may go in beefing up the draft offer document with extensive disclosures, restated financials and obtaining SEBI clearance.

While this all sounds like a fairy tale, fast tracking the fund raise also comes with certain sets of eligibility conditions, which may disqualify a listed company from enjoying this route. The eligibility requirements are laid down in the SEBI regulations, and includes inter alia, being listed for at least three years, holding of shares in demat for promoter group, redressal of investor complaints, no show cause notices or proceedings by SEBI and for past three years, compliance with the SEBI listing regulations and no settlement of securities law violations by the issuer, its promoter, promoter group and directors (under the SEBI settlement regulations). Among these eligibility requirements, compliance with the SEBI listing regulations is a major challenge, given the host of obligations which are imposed on a listed company. These compliances while being extensive are also time and format bound, which implies that non-compliance either in the form or in the timeline can impact the eligibility. The spectrum of compliances spans across submitting the shareholding pattern for each quarter, filing of the annual report with the stock exchanges, providing prior intimations for board meetings in certain matters, filing a quarterly compliance report on corporate governance, appointing a compliance officer, maintaining the composition of board and committees as per SEBI listing regulations, etc.

Data available on the stock exchange websites indicates a significant number of non-compliant companies. For example, more than 650 companies have not appointed a compliance officer, as per the data available on the website of BSE Limited for the quarter ended December 31, 2018. Furthermore, more than 240 companies had not timely submitted their annual report to the stock exchanges for Fiscal 2018.

Providing prior intimations for holding board meetings as per the SEBI listing regulations is another crucial requirement where delays by companies have often been observed. Not only the timing but also the form in which the prior intimation is given is of utmost importance, especially if the board meeting is held for fund raising through issuance of securities. As mandated under the in-principal approval checklists of the stock exchanges, prior intimations for board meetings where fund raising through qualified institutions placement ("QIP") etc. is to be approved, needs to include details of such fund-raising options that the board is going to consider. There have been various instances where companies have had to revise their intimations and have often also been issued with warnings from the stock exchanges. This displays the critical nature of the compliances under the SEBI listing regulations and how a simple non-compliance may affect the eligibility of a listed company to take advantage of the fast track route. As per the data available on the BSE website, fines have been imposed on more than 25 companies in the month of February 2019 for not making prior intimations in accordance with the requirements of the SEBI listing regulations.

In November 2009, SEBI further relaxed the eligibility requirement for fast track issues in so far as such non-compliances relate to composition of board of directors (i.e. non-executive directors, independent directors and woman directors). Here, SEBI while sympathizing with non-compliances triggered by actions outside the control of a company, has instead imposed the compliance of composition of board at the time of filing of the offer document. However, for matters in relation to non-compliance of composition of committees is still an open issue which may render many issuers ineligible for fast track issues. Basis the data available on BSE's website, for the quarter ended December 31, 2018, more than 140 companies did not have board compositions compliant with the SEBI listing regulations, more than 70 companies did not have compliant audit committee compositions and more than 100 companies did not have compliant nomination and remuneration committee compositions.

Given the benefits associated with fund raising under the fast track route, SEBI, has been constantly working on revising the eligibility norms for fast track issues. For example, SEBI has modified the eligibility requirement around August, 2015, and provided some flexibility to the eligibility condition by exempting those non-compliances, where the stock exchanges have 'only' imposed a monetary fine on the listed issuer. While SEBI should be applauded for the constant realignment of fund-raising norms to make it market friendly, there still are certain areas of work which may be reconsidered. For example, another ineligibility for fast track issues is regarding settlement of security law violations. It is well understood from SEBI's discussion paper on 'Revisiting the capital raising process' that the intent for disallowing such issuers is inter alia to provide SEBI an opportunity to instruct additional disclosures in the offer document. Prescriptive disclosures for settlement of such security law violations within SEBI regulations could prove to be a more efficient and business-cum-regulator friendly approach, since it would provide a more level playing field (when compared with eligible issuers who have been fined for security law violations or eligible issuers who were non-compliant with composition of board norms).

Considering that three years is a fairly long period of time and the compliance requirements under the SEBI listing regulations are extensive, many companies may not be able to fulfill the eligibility for fast track issues. The ideal situation would be to ensure compliance with all applicable requirements of the SEBI listing regulations. Given that this may not always be possible and data available on BSE's website indicates that a large number of companies have some non-compliances, the following mitigation steps may be considered:

  • firstly, such companies should prior to such contravention but after knowing of an event which may lead to such contravention, approach SEBI for extension in compliance with such requirement. Under SEBI listing regulations, a regulatory framework for delay in compliance is well prescribed;
  • secondly, in case of receipt of a notice of non-compliance, it is in the interest of the listed company to pay the fine, since mere imposition of monetary fines does not disqualify from undertaking a fast track issue, whilst contesting a penalty notice before appropriate forum may render such issuer ineligible for the fast track issue till the final adjudication of the matter; and
  • thirdly, in case of a securities law non-compliance, settling of such non-compliance under SEBI settlement regulations will also render the issuer ineligible for accessing the fast track route. In absence of any provision to cure such ineligibility, seeking SEBI exemptions under the SEBI listing regulations may be a better option.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions