IPO Filings with SEBI involve certain guidelines formulated by SEBI. These guidelines were introduced in 1999 and are in force till date. But, from the year 2007, a demand for revision and renovation of these guidelines is being formed in the market.
IPO Filings with SEBI is associated with some guidelines, called DIP Guidelines. These DIP Guidelines or Disclosure and Investor Protection Guidelines are determined by the Securities and Exchange Board of India or SEBI itself. Any company which intends to file an IPO with SEBI are required to abide by these DIP Guidelines.
History of IPO Filing Guidelines
The DIP Guidelines were first introduced in the year 1999. The DIP Guidelines of the year 1999, were actually constructed integrating all those circulars, that SEBI issued at intervals from 1991. It can be mentioned here, that it was in the year 1991, when CCI or Controller of Capital Issues was abolished and SEBI or Securities Exchange Board of India was delegated the power of regulating the India Capital Market.
But, with time, it was realized that these guidelines were not fulfilling the actual objective and were being administered in a wrong manner. In the year 2007, a demand was generated in the market for redrafting the DIP guidelines. Industry experts felt the need of a comprehensive review of the existing guidelines.
Existing DIP Guidelines regarding IPO Filing
According to the existing DIP Guidelines, every company that wants to make an IPO filing with SEBI, is required to have a "Promoter". Here, promoter refers to a person, who controls the share issuer company or formulates the security issuance plans for the company.
The existing DIP Guidelines also says, that the Promoter should have the record of holding minimum 20% shares of the issuer company for at least three years. The Guidelines also make it clear that, these shares of Promoter cannot be transferred or sold to anyone for three years after closing the IPO deal. But, there are some exceptions. In this three year lockin period the Promoter's shares can be pledged in favor of financial institutions like banks.
It is true that, at present, thousands of companies are raising capital from the primary market through Initial Public Offering abiding by the existing DIP Guidelines, but still, there is a strong demand in the market for up gradation of DIP Guidelines.