SEBI Proposes Key Changes to ICDR Rules to Ease IPO Compliance and Improve Retail Disclosures

The Securities and Exchange Board of India (SEBI) has proposed amendments to its Issue of Capital and Disclosure Requirements (ICDR) Regulations, 2018, including a new framework to resolve lock-in issues for pledged pre-IPO shares and the replacement of the abridged prospectus with a concise, retail-friendly offer document summary.

Currently, pre-issue capital held by persons other than promoters is locked in for six months post-listing. However, depositories cannot create lock-in for pledged shares, leading to compliance challenges during IPOs—especially in companies with large or untraceable shareholder bases.

To address this, SEBI has proposed allowing depositories to record pledged shares as “non-transferable” for the lock-in period based on issuer instructions. Issuers must also amend their Articles of Association to ensure that, when a pledge is invoked or released, the shares remain under lock-in in the account of either the pledgee or pledger.

The regulator noted that non-banking financial companies lending against unlisted shares have supported this mechanism, which is expected to simplify IPO execution while protecting lenders’ interests.

Simplified Disclosures

SEBI has also proposed removing the requirement for an abridged prospectus with every IPO application. Instead, issuers will offer a standardized “offer document summary”—a concise, easy-to-understand version containing key business, financial, and risk disclosures.

SEBI said the voluminous nature of offer documents deters retail investors from reviewing them, reducing engagement and participation in the IPO process.

This summary will be submitted with the draft offer document and made available on the websites of SEBI, stock exchanges, the issuer, and lead managers. The regulator aims to make IPO disclosures more accessible to retail investors, many of whom currently rely on informal or unverified sources, including social media or grey-market chatter.

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