The Securities and Exchange Board of India (SEBI) has issued guidelines for when draft offer documents may be returned to the issue for re-submission.If disclosures made in the draft offer document are not drafted in simple language with visual representation of data and presented in a clear, concise and intelligible manner, they are liable to be returned to the issuer.A February 6 circular issued by SEBI emphasized the importance of adequate disclosures by the issuer and timely processing of offer documents for the vibrancy of the primary market."It is imperative that the offer documents as filed by the issuers and lead manager(s) are compliant with Schedule VI of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”), which specifies information for disclosure in the draft offer document or the draft letter of offer and the offer document or the letter of offer, as applicable," the circular stated.It highlighted instances where draft offer documents fail to meet these stipulated requirements, prompting revisions or changes that in turn result in a longer processing time.The ‘Guidelines for returning of draft offer document and its resubmission’ provide that draft offer documents may be returned if disclosures made therein do not satisfy one or more of the following requirements:i. Draft offer document is drafted in simple language with visual representation of data, so as to ensure ease of understanding of its contents and which substantially complies with the following principles:
a) Use of short sentences;
b) Use of definite, unambiguous and conventional words;
c) Use of active voice;
d) Use of tabular presentation or bullet lists, where required; and
e) Avoidance of multiple negatives.
ii. The information in the draft offer document is presented in a clear, concise, and intelligible manner, adhering to the following standards:
a) Clear and concise sections, paragraphs and sentences;
b) Descriptive headings and subheadings wherever necessary;
c) Avoidance of legal and technical terminology; and
d) Clarification of technical and complex terms, if any, used to explain the business of the issuer/other matters in simple terms.
iii. The draft offer document avoids:
a) Complex presentations that may make the substance of the disclosures incomprehensible;
b) Vague, ambiguous and imprecise explanations which may lead to more than one interpretation;
c) Complex information quoted or copied from legal documents, unless accompanied with clear and concise explanation of the provision(s) therein;
d) Repetition of disclosures in different sections of the document which may increase the size of the document but does not improve the quality or efficacy of information, unless the context requires otherwise; and
e) Inconsistency in the numbers/data/facts provided in different sections of the offer document or between the draft offer document and subsequent submission(s) made in response to clarifications sought.
iv. The risk factors are appropriately worded in simple, clear and unambiguous language to bring out clearly the risk to the investor, without undermining the same.Further, if the draft offer document requires substantial revision or addenda on key disclosures, corrective measures on account of regulatory interpretation or if the information is not clearlyunderstandable without the necessity of referring to the general rules and regulations, it may be returned to the issuer.The circular has specified that in order to enhance ease of doing business for issuers, where the offer document is returned in terms of these guidelines, there will be no requirement for payment of any fees on account of re-submission. Further, it states,"The Issuer and the Lead Manager(s) shall ensure that the draft offer document is resubmitted only after addressing insufficiency for which the draft offer document was returned and such draft offer document is in compliance with provisions of ICDR Regulations and other applicable laws."
TAGS: Securities and Exchange Board of India SEBI guidelines draft offer documents re-submission circular disclosures primary market Schedule VI ICDR Regulations simple language visual representation
