The Security Exchange Board of India (SEBI) issues a circle within which it streamlined the process of the right issue wherein the special emphasis was laid on the dematerializing Rights Entitlements (REs) of the shareholders.
The circular was issued on January 22, 2020, to all the recognized Stock Exchanges, Depositors, Registered Stock Brokers, Registered Merchant Bankers, Registered Registrars to an Issue and Share Transfer Agents, Registered Depository Participants, and Registered Bankers to an Issue.
The circular pertained to the effort of the Security Exchange Board of India (SEBI) to simplify the process of a rights issue and to increase the effectiveness and efficiency by laying more emphasis on the Demat account for all the Right entitlements (REs).
The process of the right issue will mainly emphasize on the subscription and renunciation of Right Entitlements (RE) electronically while dealing with the stock-exchange-platform. Also, the eligible individual on the Right Entitlements will be allotted a separate ISIN number so that the individual can trade on the exchange.
Further, the circular reduce the notice period from at least 7 days to at least 3 days. The individual who wants to renounce the Right Entitlements (RE) can easily be renounced to any other shareholders by selling the same on a stock exchange. Moreover, the trading of Right Entitlements (RE) can be done only at a secondary market platform, which can be commenced on the opening of the right issue and will be closed before the 4 days of the closure of the right issue. The mode of making the payment during such transactions will only be through the ASBA facility.
Further, the Annexure is attached to the circular which contained a detailed procedure on the process of Right Issues such as application form, the dematerialized form of Credit REs, renunciation process of RE, etc.
The main emphasis of the circular was to increase transparency in the transaction and at the same time encourage the electronic transactions in the Indian economy.
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