SEBI Proposes Framework to Pledge Locked-In Pre-Issue Shares

Consultation Paper; Dated: 13.11.2025

1. Background

The Securities and Exchange Board of India (SEBI) has released a consultation paper inviting public comments on proposed amendments to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations).

The proposals aim to enhance ease of doing business, simplify disclosure requirements, and encourage greater participation of retail investors in public issues.

2. Current Framework

Under the existing ICDR Regulations, an enabling framework already exists allowing pledge of locked-in shares held by promoters in certain circumstances. However, no such provision currently applies to locked-in shares held by persons other than promoters, leading to practical challenges for such shareholders and their lenders.

3. Key Proposals

3.1 Enabling Framework for Pledge of Locked-in Shares by Non-Promoters

SEBI has proposed to extend flexibility by introducing a structured framework for pledging locked-in shares held by non-promoter shareholders.

The proposed framework includes:

(a) Incorporating appropriate enabling provisions in the ICDR Regulations;

(b) Inclusion of specific clauses in the Articles of Association (AOA) of the issuer company to facilitate such pledges; and

(c) Mandating issuers to provide necessary intimations to the concerned lenders or pledgees.

This measure seeks to balance investor protection with financing flexibility for shareholders other than promoters.

3.2 Streamlining Disclosure Requirements

To simplify and modernise the IPO process, SEBI has proposed:

• Introduction of a revised Offer Document Summary containing rationalised disclosures,
• Requirement to file and host this summary along with the draft and final offer documents, and
• Removal of the abridged prospectus, thereby streamlining documentation and reducing duplication of information for investors.

4. Public Consultation

SEBI has invited comments from stakeholders, including issuers, intermediaries, investors, and market participants.

Deadline for submission of comments – December 4, 2025

5. Significance

These proposed changes are expected to:

• Simplify compliance and documentation in the public issue process,
• Provide greater operational flexibility to non-promoter shareholders,
• Enhance transparency and investor accessibility, and
• Further SEBI’s broader goal of deepening retail investor participation in capital markets.

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