asbgrowthventures.com-Latest Lock-In Rule Changes Explained

1. Latest Lock-In Rule Changes Explained asbgrowthventures.com/sebi-ipo-reforms-latest-lock-in-rule-changes @ASBGrowthVentures What Are SEBI’s Latest IPO Lock-In Reforms and How Will They Impact IPO-Bound Companies? An easy-to-understand, investor-friendly explanation by ASB Growth Ventures The Indian capital markets are constantly evolving to become more transparent, efficient, and investor-friendly. In a significant move, the SEBI Board has approved important changes to IPO lock-in norms and the disclosure framework, aiming to reduce compliance hurdles for companies while improving clarity for investors. We at ASB Growth Ventures, we closely track regulatory developments that impact IPO- bound companies, founders, investors, and intermediaries. This latest decision by SEBI is a strong step toward smoother IPO execution and better-informed investment decisions. Why These SEBI Changes Matter Initial Public Offerings (IPOs) involve multiple stakeholders—promoters, early investors, lenders, regulators, and retail investors. Over time, SEBI observed two major challenges: 1. Operational difficulties in locking-in pledged shares before IPOs 2. Overly lengthy IPO documents that are difficult for investors to understand 1/6

2. The newly approved amendments address both these concerns in a practical and technology- driven manner. Understanding the Existing IPO Lock-in Rules Under current SEBI regulations: 1. Promoters’ shares are locked in for six months after IPO allotment 2. Non-promoter pre-issue shareholders’ shares (with limited exceptions) are also locked in for six months The idea behind lock-in norms is simple: ensure stability in shareholding and prevent sudden sell-offs immediately after listing. However, problems arise when non-promoter shares are pledged before an IPO. The Real Problem: Pledged Shares Before IPO Many early investors or shareholders pledge their shares to lenders before a company files its IPO papers. Until now: 1. Depositories could not mark pledged shares as locked-in 2. Pledged shares remained freely transferable 3. Issuers struggled to track such shareholders within tight IPO timelines This created serious compliance risks for IPO-bound companies. In some cases, shareholders were untraceable or uncooperative, delaying the entire IPO process. 2/6

3. ASB Growth Ventures has seen firsthand how such technical gaps can complicate IPO readiness. SEBI’s Solution: Technology-Enabled Lock-in of Pledged Shares To fix this long-standing issue, SEBI has amended the ICDR (Issue of Capital and Disclosure Requirements) Regulations. Key Change: 1. Depositories will now be allowed to mark pledged pre-issue shares as locked-in 2. Even if shares are pledged, they will become automatically non-transferable during the lock-in period This ensures: 1. Seamless compliance with IPO regulations 2. Reduced dependency on manual coordination with shareholders 3. Greater certainty for issuers, merchant bankers, and investors According to SEBI Chairman Tuhin Kanta Pandey, this move will simplify compliance and remove unnecessary bottlenecks during IPO preparation. At ASB Growth Ventures, we believe this is a game-changer for companies planning to go public. Mandatory Changes to Articles of Association (AoA) SEBI has also emphasized stronger internal governance by IPO-bound companies. Companies will now be required to: 1. Amend their Articles of Association (AoA) 2. Clearly state that pledged shares remain locked-in even after invocation or release of the pledge 3. Ensure lock-in applies whether shares are held by the pledger or pledgee Additionally: 1. Companies must inform all lenders and pledgees about these AoA changes 2. These details must be clearly disclosed in DRHP and RHP documents This ensures full transparency and avoids last-minute surprises during the IPO process. 3/6

4. Big Relief for Issuers and Market Intermediaries SEBI received multiple representations from market participants highlighting practical difficulties caused by pledged shares. With the new framework: 1. IPO timelines become more predictable 2. Legal and compliance risks reduce significantly 3. Issuers no longer struggle to trace pre-issue shareholders ASB Growth Ventures strongly recommends early IPO-stage companies review their shareholding and pledge structures well in advance. Simplifying IPO Disclosures: Focus on What Truly Matters Another major reform approved by the SEBI Board relates to IPO disclosures. The Problem: 1. Draft Red Herring Prospectuses (DRHPs) often run into hundreds of pages 2. Retail investors find it difficult to identify key risks, financials, and offer details SEBI’s Answer: 1. Introduction of a concise Offer Document Summary 2. Provided through an abridged prospectus at the draft stage itself 4/6

5. Since an abridged prospectus is already required under Section 33 of the Companies Act, SEBI decided to enhance its role instead of introducing an entirely new document. QR Codes for Easy Investor Access Based on public consultation feedback, SEBI has added a smart digital feature: 1. QR codes in the draft abridged prospectus 2. Direct access to: 1. Key IPO announcements 2. Important disclosures 3. Complete offer documents This allows investors to: 1. Quickly understand the IPO 2. Make informed decisions without reading the entire DRHP 3. Still access full details if they want deeper analysis At ASB Growth Ventures, we see this as a big win for retail investors and first-time IPO participants. What This Means for IPO-Bound Companies If you are planning an IPO, these SEBI changes mean: 1. Better regulatory clarity 2. Fewer last-minute compliance issues 3. Stronger governance expectations Companies should: 1. Review pledged share structures early 2. Update Articles of Association 3. Work closely with IPO advisors ASB Growth Ventures helps companies navigate IPO compliance, disclosures, and investor communication efficiently. Impact on Investors For investors, the reforms deliver: 1. Clearer and more concise IPO information 2. Better protection against sudden share transfers 3. Improved transparency in pre-issue shareholding This strengthens trust in India’s IPO ecosystem. 5/6

6. Looking to Prepare Your Company for an IPO? Connect with ASB Growth Ventures for expert guidance on IPO readiness, regulatory compliance, investor communication, and long-term growth strategy. Stay tuned with ASB Growth Ventures for more simplified insights on SEBI regulations, IPO trends, and capital market updates. 6/6