SEBI Introduces Lock-in Mechanism for Pledged Shares

In a significant move to streamline public issue requirements, SEBI has rolled out a mechanism for the lock-in of pledged shares. Under this new system, depositories are empowered to mark certain securities as 'non-transferable' during the lock-in period when traditional methods aren't feasible.

The initiative stems from amendments made to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. To operationalize this framework, depositories have updated their systems, and issuers are required to modify their Articles of Association and provide necessary disclosures in offer documents.

Compliance with this mechanism is mandatory for stock exchanges, depositories, merchant bankers, and issuers. The framework aims to tackle challenges faced by issuers in cases where shares are pledged by non-promoters, ensuring adherence to the six-month lock-in rule post-allotment.