At its 210th board meeting on 1 October 2026, the Securities and Exchange Board of India (SEBI) approved a package of ease-of-doing-business reforms aimed squarely at startups and the funds that back them. This is a policy piece, and the changes matter most to founders already thinking about their IPO runway.

The headline reform is on employee stock options. Founders can now retain ESOPs granted at least one year before the DRHP filing, even after they are reclassified as promoters on listing. Previously, founders were forced to forfeit those options — a rule that punished the very people who had taken the earliest risk. New ESOPs still cannot be issued to promoters after listing, so the relaxation is backward-looking by design, not a loophole for post-listing grants.

Alternative investment funds get attention too. AIFs gain new co-investment avenues, which should give venture and growth funds more flexibility to write larger cheques alongside their fund vehicles — a structural unlock that could meaningfully increase the capital available to late-stage startups.

SEBI also extended the one-year minimum holding-period relaxation for offer-for-sale eligibility to shares arising from the conversion of compulsorily convertible securities under approved schemes. For startups carrying layered cap tables of CCDs and CCPS from multiple rounds, this removes a genuine friction point on the path to listing.

Finally, the board enabled voluntary delisting of public sector undertakings — a reform aimed more at the PSU universe than the startup ecosystem, but part of the same clean-up of listing and delisting mechanics.

Taken together, the 1 October decisions represent the regulator actively removing IPO roadblocks for founders. The ESOP retention fix alone will change how founders and their lawyers plan equity structures two years ahead of a listing — grants made today determine what survives the promoter reclassification tomorrow.

Why it matters for founders

If an IPO is anywhere in your five-year plan, audit your ESOP grants now: options granted at least a year before your DRHP filing are safe under the new rules, so grant early and grant generously to co-founders. The AIF co-investment opening also means late-stage rounds could get bigger — worth factoring into your fundraise strategy.