Issue of Capital, LODR, Insider Trading and Takeovers
Where the previous chapter covered market structure, this one covers the specific regulations that fire the moment a company actually raises capital or a listed company's shares change hands in bulk — the ICDR Regulations for issuing capital, the LODR Regulations for a listed entity's ongoing obligations, the PIT Regulations for insider trading, and the SAST Regulations for takeovers.
Several of the numeric thresholds in this area have moved through genuine regulatory change in 2025-2026 — this chapter states the stable, long-standing framework precisely, and flags the specific figures worth a final check against SEBI's current regulations before an exam attempt.
1. Issue of Capital and Disclosure Requirements (ICDR) Regulations, 2018
The ICDR Regulations govern how a company actually brings new securities to the primary market. For a public issue (IPO), the company files a Draft Red Herring Prospectus (DRHP) with SEBI, which is then kept open for public comment for a minimum period before SEBI issues its observations (commonly taking around 30 days), after which the issue must open within a fixed window (commonly 12 months) of receiving SEBI's observations.
A rights issue — an offer of new shares to existing shareholders in proportion to their holding — requires the letter of offer to reach shareholders at least a specified minimum number of days before the issue opens, giving shareholders time to decide whether to subscribe.
A preferential allotment — shares issued to specific identified investors rather than to the public or existing shareholders proportionately — requires shareholder approval by special resolution, and its pricing is governed by a formula based on the security's recent trading price over a specified look-back period.
Preferential allotments also carry a lock-in period restricting the allottee from selling the shares for a specified minimum duration after allotment — the exact current lock-in duration has been revised by SEBI more than once in recent years, so a candidate should confirm the currently applicable figure rather than relying on an older remembered number.
2. Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015
Once listed, a company's ongoing obligations to its exchange and shareholders are governed by the LODR Regulations, which cover board composition norms, related-party-transaction (RPT) disclosure, and periodic financial reporting. Board composition requirements — the proportion of independent directors, committee composition — are covered in more depth in this hub's CS Professional content on board governance, since they are examined there in greater detail.
Quarterly financial results must be disclosed to the stock exchanges within a prescribed period after each quarter's end, and related-party transactions above a materiality threshold require enhanced disclosure and, for material RPTs, shareholder approval.
SEBI has amended the LODR Regulations' RPT materiality and disclosure requirements more than once in recent years — the exact current materiality threshold should always be confirmed against SEBI's current regulations rather than assumed from an older figure, since this is exactly the kind of numeric detail that has moved.
3. Prohibition of Insider Trading (PIT) Regulations, 2015
The PIT Regulations prohibit trading in a listed company's securities while in possession of Unpublished Price Sensitive Information (UPSI) — information that is not generally available and which, if it became available, would be likely to materially affect the price of the securities.
A listed company must close its "trading window" — barring designated persons from trading — during periods when UPSI is undisclosed, and must maintain a Structured Digital Database (SDD), an internally maintained, non-outsourced record logging who received UPSI and when, with a minimum retention period.
UPSI received from outside the listed entity itself (say, during a due-diligence process for an external transaction) must also be logged into the SDD within a short prescribed window of days — SEBI widened and clarified this specific obligation through amendments in 2025, so this is a live, current requirement rather than a settled older rule.
4. Substantial Acquisition of Shares and Takeovers (SAST) Regulations, 2011
The SAST Regulations govern when an acquisition of shares in a listed company triggers a mandatory open offer to the remaining public shareholders — and three specific percentages are this topic's core, stable, frequently tested numeric facts. Acquiring 25% or more of a company's voting rights triggers an initial mandatory open offer for a further minimum stake.
An acquirer already holding between 25% and 75% can make further "creeping acquisitions" of up to 5% more in a single financial year without triggering a fresh open offer, but beyond that increment a fresh open offer obligation is triggered.
The maximum permissible non-public shareholding in a listed company is generally 75% — tied to the minimum public shareholding (25%) requirement under the SCRA framework — so an acquirer cannot use SAST alone to cross into a shareholding band that would require delisting.
An open offer can also be triggered by acquisition of "control" over a company, regardless of the specific shareholding percentage crossed — control is a qualitative test (the ability to appoint a majority of directors, or to control management or policy decisions), not merely a numeric shareholding threshold, and this is a frequently tested distinction from the percentage-based triggers.
Buy-back of shares under Section 68 of the Companies Act is subject to a cap (traditionally 25% of paid-up capital plus free reserves in a financial year, with a lower cap for equity-only buy-backs) and a debt-equity ratio ceiling (traditionally 2:1) after the buy-back, with a board resolution sufficing for smaller buy-backs and a special resolution required beyond a specified threshold.
SEBI's own buy-back route regulations have been through significant change in 2025-2026 — always confirm the currently applicable caps and procedural route (tender offer versus open-market buy-back) against SEBI's current Buy-Back Regulations before citing a specific percentage in an exam answer.
Worked Examples
Example 1. A company files a Draft Red Herring Prospectus with SEBI for a proposed IPO. What is this document's purpose, and what happens after it is filed?
The DRHP discloses the company's business, financials and the proposed issue terms to the public and to SEBI. After filing, it is kept open for public comment for a minimum period, SEBI issues its observations, and the company must open the issue within the applicable window after receiving those observations.
Example 2. A company wants to issue shares to a specific set of identified investors, rather than to the public generally or to existing shareholders proportionately. Which route is this, and what shareholder approval does it require?
A preferential allotment — it requires shareholder approval by special resolution, along with SEBI's prescribed pricing formula and an applicable post-allotment lock-in period.
Example 3. An employee of a listed company receives price-sensitive information about an unannounced acquisition before it is publicly disclosed. Under the PIT Regulations, what must the company do regarding this employee's ability to trade, and what record must be maintained?
The company must ensure the trading window remains closed for designated persons (including this employee) while the information remains undisclosed UPSI, and the company must log the fact that this employee received the UPSI, and when, in its Structured Digital Database.
Example 4. An acquirer purchases 28% of a listed company's voting rights in a single transaction. Does this trigger a mandatory open offer, and if so, under which threshold?
Yes — crossing the 25% initial threshold under the SAST Regulations triggers a mandatory open offer to the remaining public shareholders for a further minimum stake.
Example 5. An acquirer already holds 40% of a listed company and wants to acquire an additional 4% within the same financial year through open-market purchases. Does this trigger a fresh open offer?
No — this falls within the 5% per-financial-year creeping acquisition allowance available to an acquirer already holding between 25% and 75%, so it does not by itself trigger a fresh open offer.
Example 6. An acquirer gains the ability to appoint a majority of a listed company's board of directors through a shareholders' agreement, without necessarily crossing the 25% shareholding threshold. Does this trigger SAST obligations?
Yes — acquisition of "control" is a separate, qualitative trigger under the SAST Regulations, independent of the specific shareholding percentage, so gaining the ability to appoint a majority of directors can trigger open-offer obligations even without crossing 25% shareholding.
Example 7. A candidate is asked to state the exact current percentage cap on an open-market share buy-back. How should a well-prepared candidate approach this, given how this specific area has changed recently?
The candidate should state the stable Companies Act Section 68 framework confidently (the general cap structure and the debt-equity ceiling), while explicitly noting that SEBI's specific buy-back route regulations and caps have changed materially in 2025-2026 and should be confirmed against SEBI's current Buy-Back Regulations before citing a specific current percentage with full confidence — flagging genuine regulatory uncertainty is better than confidently stating a possibly outdated figure.
Summary
The ICDR Regulations, 2018 govern how capital is actually raised — the DRHP-and-observation process for a public issue, the letter-of-offer timeline for a rights issue, and the special-resolution-plus-pricing-formula-plus-lock-in structure for a preferential allotment — while the LODR Regulations, 2015 govern a listed company's ongoing obligations (board composition, RPT disclosure, quarterly results), with RPT materiality thresholds specifically flagged as recently revised and worth confirming against current SEBI text.
The PIT Regulations, 2015 prohibit trading on UPSI, require trading-window closure and a Structured Digital Database, with 2025 amendments widening the UPSI definition and tightening external-UPSI logging timelines.
The SAST Regulations, 2011 turn on three stable, well-established percentages — 25% initial trigger, 5% annual creeping-acquisition allowance, and a 75% maximum non-public shareholding ceiling — plus a separate qualitative "control" trigger, while buy-back regulation under Section 68 and SEBI's own buy-back rules have seen genuine, fast-moving change through 2025-2026 that any current exam answer should confirm rather than assume.
