SEBI Eyes Major Reforms: Startup IPO Norms, PSU Delisting, And Bond Market Access For FPIs

One of the key topics expected to be discussed is whether startup founders can continue to hold employee stock options (ESOPs) after their company goes public.

The regulator is also considering introducing a one-year ‘cooling-off’ period between the grant of ESOPs and the filing of IPO papers.

Source : PTI

The Securities and Exchange Board of India (SEBI) is holding its board meeting on Wednesday, and some important decisions related to startups, public sector companies, and foreign investors are likely to be on the agenda.

One of the key topics expected to be discussed is whether startup founders can continue to hold employee stock options (ESOPs) after their company goes public.

Currently, once a startup founder is classified as a promoter during the IPO process, they are no longer allowed to receive ESOPs.

However, SEBI believes the rules are not clear about whether founders who were granted ESOPs before being labeled promoters can still exercise their stock options -- both vested and unvested -- after the IPO.

This is especially relevant for many new-age tech startups, where founders often take ESOPs instead of salaries in the early days.

As these companies raise funds from investors, the founders’ shareholding gets diluted. To address the confusion, SEBI had issued a consultation paper on March 20, 2025, seeking public opinion on this issue.

The regulator is also considering introducing a one-year ‘cooling-off’ period between the grant of ESOPs and the filing of IPO papers.

SEBI believes giving ESOPs just before an IPO could be misused. Another big topic on the table is voluntary delisting of public sector undertakings (PSUs).

SEBI may look at a new framework allowing PSUs to exit the stock market if the government holds more than 90 per cent of the company’s shares.

Many PSUs have low public shareholding, poor financials, or outdated business models -- making their continued listing less meaningful. A discussion paper on this issue was floated in May this year.

The board is also likely to discuss easing compliance rules for foreign portfolio investors (FPIs) who invest only in Indian Government Bonds (IGBs).

This move could make it simpler for long-term foreign investors to enter the Indian debt market through routes like the Voluntary Retention Route (VRR) and the Fully Accessible Route (FAR).

Lastly, SEBI may take up a proposal to simplify disclosure norms for qualified institutions placements (QIPs).

The new proposal could require companies to disclose only the information that is relevant to the issue, instead of following the broader and more detailed disclosure rules currently in place under the Issue of Capital and Disclosure Requirements (ICDR) regulations.

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)