SEBI likely to discuss reforms on startup ESOPs, PSU delisting, bond investment norms

IANS June 18, 2025 411 views

SEBI is set to discuss key reforms affecting startups, PSUs, and foreign investors in its upcoming board meeting. The regulator may clarify whether startup founders can retain ESOPs after their company goes public. A new framework for PSU delisting could be introduced for government-held firms with low public shareholding. Additionally, SEBI is likely to ease compliance norms for FPIs investing in Indian government bonds and simplify QIP disclosures. These changes aim to streamline regulations and boost investor confidence.

"SEBI believes giving ESOPs just before an IPO could be misused." – Regulatory Source
SEBI likely to discuss reforms on startup ESOPs, PSU delisting, bond investment norms
Mumbai, June 18: The Securities and Exchange Board of India (SEBI) is holding its board meeting on Wednesday, and some important decisions related to startups, public sector companies, and foreign investors are likely to be on the agenda.

Key Points

1

SEBI may clarify ESOP rules for startup founders post-IPO

2

New PSU delisting framework for govt-held firms likely

3

Easier norms for FPIs investing in govt bonds

4

Simplified QIP disclosure requirements proposed

One of the key topics expected to be discussed is whether startup founders can continue to hold employee stock options (ESOPs) after their company goes public.

Currently, once a startup founder is classified as a promoter during the IPO process, they are no longer allowed to receive ESOPs.

However, SEBI believes the rules are not clear about whether founders who were granted ESOPs before being labeled promoters can still exercise their stock options -- both vested and unvested -- after the IPO.

This is especially relevant for many new-age tech startups, where founders often take ESOPs instead of salaries in the early days.

As these companies raise funds from investors, the founders’ shareholding gets diluted. To address the confusion, SEBI had issued a consultation paper on March 20, 2025, seeking public opinion on this issue.

The regulator is also considering introducing a one-year ‘cooling-off’ period between the grant of ESOPs and the filing of IPO papers.

SEBI believes giving ESOPs just before an IPO could be misused. Another big topic on the table is voluntary delisting of public sector undertakings (PSUs).

SEBI may look at a new framework allowing PSUs to exit the stock market if the government holds more than 90 per cent of the company’s shares.

Many PSUs have low public shareholding, poor financials, or outdated business models -- making their continued listing less meaningful. A discussion paper on this issue was floated in May this year.

The board is also likely to discuss easing compliance rules for foreign portfolio investors (FPIs) who invest only in Indian Government Bonds (IGBs).

This move could make it simpler for long-term foreign investors to enter the Indian debt market through routes like the Voluntary Retention Route (VRR) and the Fully Accessible Route (FAR).

Lastly, SEBI may take up a proposal to simplify disclosure norms for qualified institutions placements (QIPs).

The new proposal could require companies to disclose only the information that is relevant to the issue, instead of following the broader and more detailed disclosure rules currently in place under the Issue of Capital and Disclosure Requirements (ICDR) regulations.

Reader Comments

Here are 6 diverse Indian perspective comments for the SEBI reforms article:
R
Rahul K.
Finally some common sense reforms for startups! Many founders take ESOPs instead of salary in early days - punishing them later makes no sense. SEBI should allow vested ESOPs at least. This will encourage more entrepreneurs to take risks 🇮🇳
P
Priya M.
The PSU delisting proposal is long overdue. So many loss-making government companies are just occupying space on exchanges. But what about minority shareholders? SEBI must ensure fair exit terms before allowing delisting.
A
Amit S.
As someone working in a startup, the ESOP rules need clarity. Many colleagues joined early believing in the company vision. If founders can't exercise their ESOPs post-IPO, what message does that send to employees? Good move by SEBI 👍
N
Neha T.
The cooling-off period for ESOPs before IPO makes sense to prevent misuse. But one year seems too long - 6 months would be better. Startups need flexibility in talent retention during critical pre-IPO phases.
V
Vikram J.
Simplifying FPI norms for govt bonds is smart - we need more foreign investment in our debt market. But SEBI should balance this with measures to protect domestic investors too. "Atmanirbhar" shouldn't be just a slogan!
S
Sanjay R.
While reforms are welcome, SEBI should not dilute disclosure norms too much. We've seen what happens when regulations become lax (remember the 1992 scam?). Investor protection must remain priority #1.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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SEBI startup ESOPs PSU delisting foreign investors bond market IPO reforms