• SEBI may allow founders to retain ESOPs post-IPO with clearer guidelines.
• New rules may let PSUs delist if govt holding exceeds 90%.
• Simpler compliance for FPIs investing only in government bonds.

The Securities and Exchange Board of India (SEBI) will consider a few important regulation reforms in its board meeting on Wednesday. The key items on the agenda are draft proposals to amend startup ESOP rules, PSU delisting routes, and relaxing norms for bond market investors.

One of the central concerns to be discussed is if startup founders can retain employee stock options (ESOPs) post-IPO. Presently, after a founder is categorized as a "promoter" in the IPO procedure, they are disqualified from ESOPs. But there exists uncertainty regarding whether founders can exercise options awarded prior to this reclassification. This problem is especially critical for new-generation technology startups, where the founders tend to receive ESOPs in place of wages, particularly during the early years. SEBI had also issued a consultation paper on March 20, 2025, seeking public responses.

SEBI can also consider mandating a one-year "cooling-off" period between issuance of ESOPs and filing of IPO papers, to avoid possible misuse of eleventh-hour stock option  grants.

Another key reform on the cards is to establish a new paradigm for the voluntary delisting of public sector undertakings (PSUs). The plan is to permit PSUs to delist from the public markets if the government retains more than 90% of the equity, particularly where public float is negligible and the financials of the company are weak or stale. SEBI had issued a discussion paper on this in May 2025.

On the capital markets front, the board can consider relaxing compliance standards for foreign portfolio investors (FPIs) putting money in Indian Government Bonds (IGBs) exclusively. Simplifying access through channels like the Voluntary Retention Route (VRR) and Fully Accessible Route (FAR) is viewed as a step to bring in long-term foreign debt investors in greater numbers.

Finally, SEBI is expected to consider a proposal to ease disclosure norms for Qualified Institutions Placements (QIPs). The proposal might permit issuers to offer only issue-specific details, instead of following the wider and more extensive disclosure norms under existing ICDR rules.

Approved, these steps would make a big difference in India's startup ecosystem, public sector scenario, and participation in the debt market streamlining compliance and enhancing investor confidence. The Securities and Exchange Board of India (SEBI) will consider a few important regulation reforms in its board meeting on Wednesday. The key items on the agenda are draft proposals to amend startup ESOP rules, PSU delisting routes, and relaxing norms for bond market investors.