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Fagun Bhatt is a student of GNLU and Editor of GNLU Blog on Corporate Laws and Varun Matlani is Managing Editor of GNLU Blog on Corporate Laws
On March 9, 2025, the Securities and Exchange Board of India (SEBI) enacted the SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2025, amending the foundational 2018 ICDR framework. These revisions reflect a deliberate recalibration of India’s securities issuance regime, balancing issuer autonomy with heightened investor protections and procedural efficiency. This analysis dissects seven core amendments, elucidating their regulatory scope and implications for legal practice, drawing on the text of the amendments to ground the discussion in statutory authority. Readers can find attached our Primer on the Amendments – which provides a comparative overview for the changes and analysis.
1. Stock Appreciation Rights: Codifying Incentive Structures
The 2025 amendments integrate Stock Appreciation Rights (SARs) into the ICDR framework, a novel recognition of equity-linked compensation instruments. Regulation 5(2) permits issuers to convert outstanding SARs into equity shares prior to filing offer documents, provided full disclosures accompany the exercise. Regulations 14 and 236 extend SARs’ inclusion within promoters’ contribution calculations, aligning them with Employee Stock Options (ESOs), while Regulation 17 exempts SARs and derivative bonus shares from lock-in requirements for non-promoter holdings—a provision echoed in Regulation 288(1) for employee equity.
This codification broadens the doctrinal scope of permissible pre-IPO capital structuring. Issuers must navigate stringent disclosure obligations to leverage these exemptions, while promoters incorporating SARs into contribution metrics face nuanced compliance burdens under lock-in rules. The amendments signal SEBI’s intent to harmonize Indian securities law with global compensation norms, though their practical efficacy hinges on issuer transparency.
2. SME IPOs: Refining Eligibility and Oversight
The amendments impose rigorous eligibility criteria on Small and Medium Enterprises (SMEs) seeking public offerings, coupled with enhanced oversight mechanisms. Regulation 229(6) mandates a minimum operating profit of ₹1 crore in two of the preceding three financial years, while Regulation 229(4) requires a one-year operational history for entities converted from proprietorships or partnerships. Oversight is bolstered by Regulation 262(1), reducing the monitoring agency threshold from ₹100 crore to ₹50 crore, supplemented by Regulations 262(5) and (6), which demand auditor certifications for fund utilization and working capital exceeding ₹5 crore. Regulation 281A introduces a mandatory exit offer for shareholders dissenting from post-IPO object changes.
These provisions elevate the threshold for SME market entry, reflecting a regulatory preference for financial stability over unchecked access. The lowered monitoring threshold and exit mechanism impose additional fiduciary duties on issuers, potentially inviting litigation from dissenting shareholders under Regulation 281A. Legal practitioners must thus advise SMEs on robust pre-IPO financial planning and post-IPO governance.
3. Financial Limits and Thresholds: Recalibrating Market Parameters
SEBI has revised key financial benchmarks to adapt the ICDR framework to contemporary market conditions. Regulation 3 eliminates the ₹50 crore threshold for rights issue applicability, subjecting all such issues to uniform regulatory scrutiny. Regulation 268(1) increases the minimum allottee requirement for SME IPOs from 50 to 200, enhancing market breadth, while Regulation 230(1) caps Offer-for-Sale (OFS) at 20% of issue size and 50% of selling shareholders’ pre-issue holdings.
This recalibration expands SEBI’s jurisdictional reach over rights issues and strengthens liquidity in SME IPOs, though the OFS restrictions may constrain shareholder exit strategies. The amendments necessitate careful structuring of offerings to comply with these limits, underscoring the role of legal counsel in optimizing issuer compliance within a more inclusive regulatory net.
4. Compliance and Disclosure: Elevating Governance Norms
The amendments fortify compliance and disclosure obligations, signaling a shift toward issuer-led accountability. Regulations 9 and 23(8) mandate the appointment of a qualified company secretary as compliance officer, embedding professional expertise in governance structures. Regulation 245(2) broadens disclosure requirements to encompass EPF/ESIC compliance, site visit reports, and lead manager fees, while Regulation 71 redirects draft letter filings from SEBI to stock exchanges, streamlining intermediary functions.
These changes impose a dual burden: issuers must institutionalize compliance through qualified personnel, and disclosures must withstand heightened scrutiny. The delegation of filings to exchanges reflects a procedural devolution, reducing SEBI’s administrative load while amplifying the issuer’s role in ensuring regulatory fidelity—a shift with significant implications for corporate legal strategy.
5. Investor Protection: Strengthening Statutory Safeguards
Investor protections are reinforced through enhanced transparency and remedial mechanisms. Regulations 29(4) and 189(4) require price band announcements two working days prior to issue opening, published in designated newspapers, ensuring pricing clarity. Regulation 238(b) bifurcates promoters’ excess lock-in into 50% for two years and 50% for one year, entrenching long-term commitment. Regulation 281A mandates exit offers for shareholders dissenting from post-IPO object shifts.
These provisions fortify the investor’s doctrinal position within the ICDR framework. The pricing mandate aligns with principles of fair notice, while the lock-in adjustment balances promoter accountability with flexibility. The exit offer mechanism, however, introduces a potential fault line, as issuers must navigate shareholder claims with precision to avoid disputes, a task demanding meticulous legal oversight.
6. Simplified Processes and Intermediary Roles: Streamlining Administration
Procedural reforms under the amendments prioritize efficiency and issuer responsibility. Regulations 2(1)(m) and 60 redirect draft filings to stock exchanges, relegating SEBI to an informational role. Regulation 69(1-4) abolishes lead manager appointment rules, vesting issuers with intermediary assessment duties, while Regulations 70(6-7) eliminate the abridged letter of offer, mandating comprehensive disclosures.
This streamlining reflects a principled shift toward decentralized regulation, reducing intermediary burdens while amplifying issuer obligations. The abolition of abridged disclosures elevates transparency but increases the legal onus on issuers to produce exhaustive offer documents, a trade-off that reshapes compliance workflows.
7. Lead Managers: Redefining Fiduciary Scope
The amendments significantly curtail lead managers’ responsibilities, redefining their role in the issuance process. Regulations 70(3) and (4) eliminate due diligence and enforcement duties, shifting primary accountability to issuers. Regulation 247(3) retains lead managers’ obligation to file SME IPO public comments with exchanges, and Regulation 246(3) requires annexing site visit reports to due diligence certificates.
This redefinition narrows lead managers’ fiduciary exposure, aligning their role with advisory rather than supervisory functions. Yet, the retained SME-specific duties suggest a residual regulatory reliance on their expertise, necessitating careful delineation of responsibilities in engagement agreements to mitigate liability risks.
Conclusion: A Paradigm Shift in Securities Regulation
The SEBI (ICDR) (Amendment) Regulations, 2025, mark a pivotal evolution in India’s securities law, harmonizing issuer flexibility with investor safeguards and administrative efficiency. By codifying SARs, tightening SME IPO standards, adjusting financial thresholds, elevating governance, enhancing investor protections, simplifying processes, and redefining lead manager roles, SEBI has crafted a framework responsive to modern capital market demands.
