Framework for Offer For Sale of shares through Stock Exchange Mechanism

Background

Capital market regulator Securities Exchange Board of India (SEBI) has released a circular dated January
23, 2024 encapsulating the framework for offer for sale (OFS) of shares to employees through the stock
exchanges such as NSE & BSE. The promoters of eligible companies will be permitted to sell shares within
two weeks from the offer for sale (OFS) transaction to the employees of such companies.

Analysis:

As of now, the existing procedure of OFS to employees of the eligible company is happening outside the
stock exchange mechanism. However, based on the feedback received from stakeholders, it was realised
that the procedure is time consuming and involves additional costs. Therefore, the regulator has decided
that the promoters can also offer the shares to employees in OFS through the stock exchange mechanism.
Promotors shall make necessary disclosure in the OFS notice to the exchange including number of shares
offered to employees and discount offered if any. The new method will be an add-on method in addition
to the existing procedure outside the stock exchange mechanism.

Procedures for OFS to employees via Stock exchange:

• OFS to employees to occur on T+1 day under a new category called “Employee.”
• For employees, certain shares reserved for employees, disclosed in the OFS notice to Stock exchanges.
• Bidding allowed during trading hours on T+1 day.
• Floor price disclosed to participants under the “Employee” Category.
• Maximum bid amount set at INR 5 lakhs
• Each employee is eligible for allotment of equity shares up to INR 2 lakhs
• Bids for employee category shall not be displayed on the Stock Exchange website.

Allotment under “Employee” category shall be based on the PAN details of employees shared by the
company on T+1 day. The PAN mis-matched bids shall be rejected.
The provisions of this circular shall come into effect from 30th day of issuance of circular.

Sahil Ojha, Audit Associate, SW India