Abridged SEBI Norms For Startups Listing By Mehul Solanki and Ishita Samani


A start-up is a young company founded by one or more entrepreneurs to develop a unique product or service and bring it to market. By its nature, the typical start-up tends to be a shoestring operation, with initial funding from the founders or their friends and families.

The notification issued by the department for promotion of industry and internal trade on February 19, 2019 provided the definition of a startup. Accordingly, a Startup is an entity that is into existence for up to 10 years from the date of its incorporation or registration and has a turnover that is not more than Rs 100 crores during any of the financial years since incorporation or registration and is working towards innovation, development or improvement of products or services or processes or the entity has a scalable business model having a high potential of employment generation or wealth creation. Provided such an entity is incorporated in India as a:

⇒ Private limited Company as per the Companies Act, 2013 or

⇒ Partnership Firm as per section 59 of the Partnership Act, 1932 or

⇒ Limited liability Partnership as per Limited Liability Partnership Act, 2008

Furthermore, an entity that is created by splitting or reconstructing an existing business unit is not considered a start-up. Also, a business entity shall cease to exist as a start-up once it completes 10 years from the date of incorporation or registration and if its turnover for any of the previous financial years exceeds Rs. 100 crores.

Benefits of incorporating a Start-Up


SEBI eases norms for Public Listing of Startups

⇒ Innovators Growth Platform (IGP)

The concept of Innovators Growth Platform (IGP) was introduced to provide an opportunity for the small and confined companies to access public fund. Further to provide more ease to start-ups, SEBI has reduced the period of holding 25% of the capital from two years to one year before the issue.

Additionally, pre-issue shareholding of “accredited investors”- individual with a net worth of Rs. 5 crores have been increased from 10% to 25%. Start-ups would now be allowed to allot 60% of the issue size on discretionary basis subject to a lock-in of 30 days, prior to opening the issue for eligible investors.

Now, companies are allowed to issue superior voting rights to promoters, since the issuer companies that have issued superior voting rights to promoters or founders will be allowed to list themselves under the IGP.

⇒ Open offer cap raised

The limit triggering the open offer will no longer be 25% but would be increased to 49%. Furthermore, the instance of delisting would be permissible only when the post offer promoter shareholding reaches 75% of the total issues shares and at least 50% of the public shares are tendered and accepted.

When an entity aspires to migrate from IGP to the main board of the stock exchange (NSE and BSE), the minimum requirement of capital holding with the qualified institutional buyer would be 50%, if other conditions are not satisfied which was earlier 75%. Alternative Investment Funds (AIFs) and angel investors has now been allowed by SEBI to invest in start-ups.

⇒ Indicative delisting price

The Independent Directors (IDs) are now required to provide a reasoned opinion to shareholders during delisting offers in order to promote transparency. The acquirer will now be permitted to specify an indicative price that will not be lower than the floor price along with the floor price. The price determined by adopting reverse book-building method shall be binding upon the promoters if the same is equal to the floor price.

⇒ Responsibilities of Management of AIF

SEBI also proposed to change the alternative investment funds (AIF) regulations. It has provided a definition of ‘start-up’ as specified by government to enable investment by angel funds. Also, there is list of restricted activities or sectors from the definition of ‘venture capital undertaking’. This will to provide more flexibility to venture capital funds.

SEBI has also clarified scope of responsibilities of managers and members of AIF investment committees, and prescribed a code of conduct for trustees, directors and key management personnel of AIFs.

⇒ Reclassification of promoter shareholding

Promoters with less than 1% shareholding and no ‘control’ will not be required to obtain shareholders’ approval for reclassification to ordinary shareholders. Also, the time gap between the date of board meeting and shareholders meeting has been reduced to make the process more efficient.

⇒ Video and audio recordings

The regulator has said all the video and audio recordings to analyst and institutional investors meets should be made public within 24 hours. Also, the written transcripts of such meetings will have to be made available with five days.


Experts viewed such an initiative as an encouraging step for the blooming India based start-ups to list themselves on various platforms and have an easy access to various sources of funds. Not only listing themselves in the Indian market but such start-up aspires to be listed in foreign stock market which would be matter of pride for an Indian entity.

The whole concept of start-ups revolves around the concept of sacrificing profits in the initial years of growth, thus the profit is missing in them. Consequently, it is difficult for them to list on the main board as the profitability is the key criterion and thus the concept of IGP was introduced. However, the platform did not prove to be a success and has only a handful of takers.

Thus, this norm would ease the difficulties of a start-up and help them focusing on other revenue generating operations and innovation.


Absolute care is taken to prepare this article; however, inadvertently if any errors occur then the Author shall not be held responsible for any such cause. The Content published is only for educational purpose and shall not be construed as the rendering of any Professional Advice in any manner whatsoever. Readers must exercise their own judgment and refer the original source before any implementation. Further, the Content is an original work of the author and may be used only after written permission.





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