[Alfiya Noor is a 3rd year law student at Hidayatullah National Law University, Raipur]

INTRODUCTION

In Today’s capital market where certainty and speed take precedence, Securities and Exchange Board of India (SEBI) latest amendment to SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 (ICDRR) reducing the entire rights issue process down to mere 23 working days marks as a transformative shift. Earlier issuers used to grapple with extended timelines between 55 days to 180 days under fast track and regular channels leading to market timing risks and loses to investors. SEBI hopes to give issuers quicker access to finance and investors a more effective and high-quality subscription procedure by implementing a standardized, simplified 23-day cycle. However, this accelerated regime is not without its challenges including heightened compliance risks, operational pressures on intermediaries and concerns about due diligence concerns. This article critically analyses the legal foundations of the amendment, explores the balance between subscription flexibility and procedural constraints, assess stakeholder impacts concluding with insights for future policy development.

REGULATORY BACKDROP

SEBI’s circular (No. SEBI/HO/CFD/CFD-PoD-1/P/CIR/2025/31 dated March 11, 2025) is based on the statutory bedrock of Section 11 and 11A of the SEBI Act 1992 which provide the regulator the authority to create framework to raise capital. Regulation 299 of the ICDRR 2018 served as the procedural lever for the 2025 amendment which allows SEBI to mandate precise and time bound steps for rights issues. In order to improve compliance processes, such as digital filings, credit of Rights Entitlements, and expedited feed payment the 2024 Master Circular has been updated. Although the goal of these regulatory amendments is to combine speed and transparency, the rigidity of the framework begs the crucial question: can a one-size-fits-all, 23-day blend model handle complicated issuances like rights offers on convertible debt that need shareholder approval? The legal debate intensifies when balancing regulatory efficiency with flexibility for unique corporate structure.

THE 23 DAY COUNTDOWN

The amended Regulations 85 now mandates that from the date of Board approval(T) to issue close (T+20) all milestones must be met within 23 working days. The given below Table A lays out precise day counts:

This prescriptive table offers issuers a clear roadmap but allows minimal flexibility for unforeseen delays such shareholder approvals or regulatory clarifications, increasing legal and operational risks for market participants.

 SUBSCRIPTION -WINDOW SQUEEZE: FLEXIBILTY OR FRICTION?

As per Regulations 87, SEBI prescribes a minimum and maximum period of 7 days and 30 days for right issues respectively aligning with the Companies Act 2013. This window theoretically speaking offers issuers strategic flexibility: a shorter window (7-14 days) can fast track capital inflows but risks sidelining retail investors who may need more time with decision- making, some of whom may be awaiting dividend records or market clarity. On the other hand, a longer window of 20-30 days shall ensure greater participation which in turn may have a risk of breaching the regulatory cap of 23 days unless very neatly synchronized. The convertible debt exception throws a wrench in the scheduling, if approval is required, then T* (the date for the second Board meeting) shifts to the date of shareholder approval readjusting all downstream deadlines. Legally, issuers therefore have a quite a delicate act to perform in reconciling statutory notice periods (such as the 21-day EGM notice) with SEBI’s compressed clock, while abiding by standards of corporate governance and disclosure.

AUTOMATED BID VALIDATION: THE TECH TIGHTROPE IN A 23 DAY RACE

A paradigm shift is brought about by SEBI's 2025 circular which requires stock exchanges, depositories, and registrars to collaborate on the development of an automated bid-validation engine. This system must seamlessly ingest ASBA bids via SCSB portals verify eligibility against rights- entitlements credit manage exceptions like bid corrections and support basis of allotment computations. Though investors benefit with near real-time confirmations and faster refunds, the burden on intermediaries is high: establishing a robust IT infrastructure, ensuring data protection and meeting stringent SLA requirement. In a legal sense, even a system glitch could jeopardize the 23-day timeline thereby putting issuer at risk of SEBI Act penalties and could trigger investor class action for violation of statutory obligations. The compliance risks is not trivial, in case of tech spine collapses, the entire fast track model collapses highlighting the need for rigorous pre- launch testing, contingency arrangements and clear accountability framework across market participants.

STAKEHOLDER PRESSURE: A FRAGILE COMPLIANCE WEB

Capital- raising is crammed into a high stake’s compliance sprint by the 23 days right-issue deadline but at what cost? Boards and Issuers must juggle compressed approval cycles, hastily drafting Letter of Offer and balancing Table A’s milestones with statutory requirement. When the Letter of Offer are drafted within days of board approval, it leaves little room for diligence thereby increasing legal risk if disclosures are incomplete or misleading. RTAs and Merchant bankers face are under much more pressure to complete prospectus vetting, diligence and coordination with stock exchanges and SEBI while avoiding mistakes that could trigger penalties. The burden on stock exchanges depositories is no less severe. They must deploy robust validation platforms, amend bye-laws, and train personnel. Meanwhile, retail investors risk being overwhelmed, expected to grasp ASBA mechanics, demat flows, and subscription deadlines in record time. A single procedural failure might expose all parties to SEBI inspection under section 11A or litigation under the India Contract Act 1872, making the legal risk under this condensed framework extremely high.

HYPOTHETICAL CASE STUDY

The is a trade-off between speed and risk when comparing SEBI’s rights issue regime before and after 2025. Under the previous farmwork, issuers enjoyed a 60-days cycle with built in buffer- delays in board approvals, fillings or subscription periods were tolerable though market conditions could shift dramatically in 2 months. Because of the prolonged interaction with investors and middlemen, costs increased by almost ₹1.2 crore.

In contrast, the new regime demands orchestration of drafting, filling, approval and payments within a compressed 23 working day timeline. Cost may drop to around ₹0.8 crore but the legal risks intensifies, missing a deadline risks SEBI penalties and potential investor litigation.

BEST PRACTICES FOR SMOOTH EXECUTION

A robust project management checklist is essential, mapping each deliverable to calendar dates and hold daily standups to monitor progress. Tech readiness is equally critical: API integrations with Self-Certified Syndicate Banks, exchanges and depositories must be completed well in advance and sandbox tests of bid- validation workflow should stimulate real time scenarios to identify glitches. A regulatory filing calendar with pre scheduled SEBI and stock exchange submissions and automated reminders will ensure procedural compliance

Another vital aspect is investor communication plan: a plain- English FAQ explaining the subscription window, Application Supported by Blocked Amount (“ASBA”) process and bid validation status to empower retail investors. Lastly, create a contingency plan: design fallback protocol for shareholder approval delays (for eg. EGM adjournments) and IT outages and appoint rapid response teams for crisis management.

Even though these steps require large time, financial and resource commitments they are essential for reducing legal risk, preventing operational bottlenecks and safeguarding issuer credibility. SEBI’s compressed timeline may be non- negotiable but with disciplined execution, market players can still attain compliance excellence and preserve investor confidence.

LOOKING AHEAD: DIGITALIZETION MEETS INVESTOR PROTECTION

The mandate is not only about speed but marks a more general move to the real time capital market infrastructure. The regulator has already encouraged depositories to employ blockchain technology to trace creating and covenants of security that can evolve into distributed ledger share registries of rights issues..

In light of its 2024 proposal to reduce fundraising timelines, SEBI may combine rights issues with preferential allotment in the future simplifying “IFR mapping” for QIPs and rights offering. SEBI is also revieing its ESG disclosure requirements in line with procedural reforms which may result in rights offer mandates for meaningful sustainability metrics as rather than boiler reports

On the investor- protection front, enhanced safeguards such as post subscription cooling oof period, fractional share allotment pilots and real time bid/allotment disclosures may be introduced to balance the compressed cycle. As SEBI steers toward greater digitization, its success will hinge on harmonizing cutting edge technology with robust legal and procedural safeguards to maintain integrity and investor confidence.

CONCLUSION

SEBI’s new Fastrack rights issue framework tries to strike a balance between speed and transparency in India’s capital market but not without significant legal and operational friction points. Issuers will have to look internally to redesign their workflows while intermediaries from merchant bankers to stock exchanges are bound to bear intense pressure to build an automated bid validation system that is both secure and reliable. The markets have already given clear indication to all players: audit your rights issue processes in light of the 23 days clock, upgrade your ASBA and validation infrastructure and inculcate investor awareness of the compressed timelines for meaningful participation. At the end of the day, operational excellence along with regulatory clarity and collaborative ecosystem can foster a resilient capital for the future where technology, governance and investor protection will decide the success of SEBI’s ambitious reform.