ICDR CMSL Amendments for CS Executive June & Dec 2026 by CS Shivani Miglani Ma’am (PW)

ICDR CMSL Amendments for CS Executive June & Dec 2026 cover the latest updates to SEBI’s regulations on capital issues and disclosures. These amendments include changes in rights issue applicability, IPO eligibility for ESOPs and Stock Appreciation Rights (SARs), expanded dematerialisation requirements, a defined scope of capital expenditure, and new disqualifications for rights issues and SME IPOs. 

Understanding these updates is essential for CS Executive aspirants to stay current with the regulatory framework governing public offerings and capital markets.

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Recent Amendments to SEBI (ICDR) Regulations 

This academic details important amendments to the SEBI (Issue of Capital and Disclosure Requirements) Regulations. These clarifications and small changes are vital for the upcoming CS Executive examinations. Understanding these updates is key to grasping the current regulatory framework governing capital markets and public offerings.

Applicability of ICDR to Rights Issues

• Previous Rule: The ICDR regulations applied to a rights issue only if the issue size was ₹50 crore or more.

• Amended Rule: The threshold of ₹50 crore has been removed. Now, the ICDR regulations apply to all rights issues by a listed entity, irrespective of the issue size.

Conditions for an Initial Public Offer (IPO)

Before launching an IPO, a company must meet certain regulatory conditions under the updated SEBI (ICDR) rules. These amendments clarify eligibility, disclosure, and compliance requirements, ensuring companies adhere to current capital market norms.

• Ineligibility due to Outstanding Convertible Securities

• Generally, a company cannot launch an IPO if it has any outstanding convertible securities.

• Exceptions: Companies with outstanding Employee Stock Options (ESOPs) or Stock Appreciation Rights (SARs) granted to employees before filing the Red Herring Prospectus (RHP) are now allowed to proceed, provided full disclosure is made in the offer document.

• Inclusion of Stock Appreciation Rights (SARs)

• Previously, only ESOPs were considered for IPO eligibility.

• Now, SARs are also included. SARs differ from ESOPs because employees receive the cash equivalent of stock appreciation rather than actual shares.

• Expanded Dematerialisation Requirement

• Earlier, only promoter-held securities needed to be dematerialised.

• Now, all securities held by promoters, promoter group, selling shareholders, directors, KMPs, senior management, and employees must be in demat form.

• Offer for Sale (OFS) & Holding Period Exemptions

• Normally, shares must be held for at least one year.

• Exemptions now include shares from mergers/amalgamations and equity from conversion of securities held for at least one year.

• Definition of Capital Expenditure

• Capital Expenditure now clearly includes: civil work, fixed assets, land, building, plant, machinery, and repayment of loans originally taken for these purposes.

• New Disqualifications

• Companies cannot make a rights issue if trading in their equity shares is suspended.

• SMEs with any outstanding rights or instruments that could give equity shares in the future are ineligible for an IPO.

Comparison: ESOP vs. SAR

Expanded Dematerialisation (Demat) Requirement

• Previous Rule: Only the securities held by the promoter were required to be in dematerialised (demat) form.

• Amended Rule: This requirement has been significantly broadened. Now, all securities held by the following persons must be in demat form:

• Promoters

• Promoter Group

• Selling Shareholders (in an Offer for Sale)

• Directors

• Key Managerial Personnel (KMPs)

• Senior Management

• Employees

Offer for Sale (OFS) & Holding Period Exemptions

For an Offer for Sale (OFS), shares must generally be held for a period of at least one year.

• Amended Exemption: The one-year holding period requirement does not apply to shares acquired through a scheme of merger or amalgamation. This exemption has been widened to also include equity shares arising out of the conversion of convertible securities that were held for at least one year.

Definition of Capital Expenditure

The term "Capital Expenditure" was previously undefined in the context of lock-in periods for funds raised in an issue. The amendments now provide a specific definition.

Capital Expenditure shall include:

1. Civil work.

2. Miscellaneous fixed assets.

3. Purchase of land, building, plant, and machinery.

4. Repayment of loans that were originally taken for such capital expenditure.

Other Key Amendments

Appointment of Compliance Officer

When appointing a Lead Manager, the issuer must also appoint a Compliance Officer. The regulations now specify that this Compliance Officer must be a duly qualified Company Secretary (CS).

Timeline for Public Announcement

• Previous Rule: A public announcement was required at least 21 days from the date of filing the offer document.

• Amended Rule: The timeline is now calculated from the date of publication of the public announcement, which must be done within two working days (changed from "days").

Renunciation of Rights by a Willful Defaulter Promoter

A promoter who is a willful defaulter is generally barred from renouncing their rights in a rights issue.

• Amended Rule: An exception is now explicitly provided. Such a promoter can renounce their rights within the promoter group or to specified investors.

New Disqualification for Rights Issues

A new condition has been added for eligibility to make a rights issue. An entity is now ineligible to bring a rights issue if trading in its equity shares has been suspended.

Disqualification for SME IPOs

A new disqualification has been added for Small and Medium Enterprises (SMEs) making an IPO. An SME cannot make an IPO if there is any outstanding right or instrument that would entitle any person to receive equity shares of the issuer in the future.