A circular was issued by the Security Exchange Board of India (SEBI) on January 22, 2020, to all the recognized Stock Exchanges, Registered Stock Brokers, Depositors, Registered Merchant Bankers, Registered Depository Participants, Registered Registrars to an Issue & Share Transfer Agents and Registered Bankers to an Issue.
With the circular, SEBI has streamlined the procedure of the rights issue and the due consideration is given to the Dematerialization of shareholders’ Rights Entitlements (REs).
The circular signifies the efforts taken by the Security Exchange Board of India (SEBI) to ease the process of a rights issue. Besides, the SEBI has emphasized on the Demat account for all the Right entitlements (REs) to improve the efficiency and effectiveness.
The procedure of the rights issue will give focused attention to the digital subscription and electronic capitulation of Right Entitlements (RE) while trading on the stock-exchange-platform. Besides, a separate ISIN number will be given to the eligible person on the Right Entitlements to enable him to deal on the exchange platform.
Additionally, the notice period has also been reduced from 7 days to a minimum of 3 days by the circular. Whoever wishes to renounce the RE can do so by selling the same on the stock exchange platform.
However, it should be noted that Right Entitlements (RE) can be traded solely at a secondary market platform. The trading of RE can begin with the opening of the right issue and ends up before the 4 days of the closure of the right issue.
ASBA facility will be the only payment mode for these transactions.
Moreover, the Annexure is affixed with the circular that encompasses a detailed course of action for the Right Issues, application form, renunciation process of RE, the dematerialized form of Credit REs and so on.
The main objective of the circular was to improve the transparency in the dealings while boosting the digital transactions in the Indian economy.