The Securities and Exchange Board of India (Sebi) has simplified the offer for sale (OFS) process of shares to employees, allowing promoters to offer OFS shares through the stock exchange mechanism. The move aims to enhance efficiency, ease compliance, and reduce costs associated with the existing method that allows employees to receive OFS shares outside of stock exchange mechanism.
Earlier shares were offered to staff outside the stock exchange, making the process, cumbersome, Sebi said.
“In order to enhance efficiency, ease of compliance and reduce cost, and based on deliberations in the Secondary Market Advisory Committee of Sebi and discussions with stock exchanges and clearing corporations, it has been decided that the promoters can also offer the shares to employees in OFS through the stock exchange mechanism,” Sebi said.
OFS is the process that allows existing shareholders or promoters to sell their shares to the public in the secondary market, with proceeds going to the selling shareholders rather than the company. The exchange provides a separate window through the stockbrokers for the OFS process. Companies can route funds through OFS only if the promoters want to sell out their holdings or minimum public shareholding requirements.
Under the new system, OFS to employees shall be on T+1 day along with the retail category under a new category called as “Employee”.
Sebi specifies that a certain number of shares should be reserved for employees, and the same should be indicated in the OFS notice to the stock exchanges from the promoters. Bidding shall be allowed during trading hours on T+1 day only. The employees shall pay the margin upfront to the extent of 100 per cent of the order value in cash or cash equivalents, with a maximum bid amount set at Rs 5 lakh. Each employee is eligible for an allotment of equity shares up to Rs 2 lakh.
In case of undersubscription in the employee portion, the unsubscribed portion may be allotted to employees with bids exceeding Rs 2 lakh on a proportionate basis, for value in excess of Rs 2 lakh but total allotment should not exceed Rs 5 lakh, Sebi said.
The bid book for the ‘Employee’ category should be separate from the retail category book for allotment. Allotment will be based on the Permanent Account Number (PAN) details shared by the company on T-1 day. The promoters must transfer the total OFS shares, including those reserved for the “Employee” category, to the designated clearing corporation on T-1 day, Sebi said.
The provisions of the circular “shall come into effect from the 30th day” of the issuance.