OFS eligibility for CCPS holders: meaning, how it works in India

An offer for sale (OFS) is the part of an IPO in which existing shareholders sell their shares, instead of the company issuing new ones. CCPS stands for compulsorily convertible preference shares, the instrument most venture-backed Indian startups issue to investors. They turn into ordinary equity shares before the IPO.

Investors cannot sell just any shares in an OFS. SEBI sets eligibility tests, and the main one is a holding period. This guide explains how that test treats shares that began life as CCPS.

Regulation 8 of the SEBI (ICDR) Regulations, 2018 says a shareholder's equity shares must have been held for at least one year before the date the DRHP is filed, to be offered in the OFS. SEBI's stated reason, in its consultation paper, is that it wants sellers to have shown long-term commitment.

The rule has exceptions. As of November 2026, one well-known exception covers shares received in a recent restructuring scheme, where the business or invested capital behind those shares existed for more than a year before the scheme was approved.

When CCPS convert into equity shares, the one-year test does not restart from the day of conversion. Under Regulation 8, where shares come from converting fully paid-up compulsorily convertible securities, the time the securities were held counts together with the time the resulting shares were held.

Take an investor who bought CCPS in 2024 and saw them convert into equity in 2026. If the DRHP is filed in 2027, the holding period runs from 2024, not 2026, so the investor meets the one-year test. This is why early investors in startups can usually sell in an OFS even though the equity shares themselves are new.

A scheme here usually means a court-approved restructuring such as a merger or demerger under company law. When one happens, shareholders receive new shares in the surviving company in exchange for their old holdings. Without an exception, those shares would look like they had been held for only a few weeks.

SEBI therefore lets the invested capital behind the new shares count, if it existed for more than a year before the scheme was approved. Reverse flips, where an Indian startup's foreign parent merges into an Indian company, often use this route, which is why the CCPS extension matters to them.

There was a gap for companies that restructured before the IPO. The exception for shares issued under a scheme applied only to equity shares, so a company that issued CCPS under the scheme was not covered. SEBI consulted on the point in 2025 and its board took it up in June 2025.

According to a Cyril Amarchand Mangaldas note dated 16 September 2025, SEBI's ICDR amendment of 8 September 2025 extended the exception to convertible securities such as CCPS, provided they convert into equity shares before the RHP and form part of the OFS. The same note says the amendment helps companies that reverse flip, meaning they move the parent company from abroad into India before listing.

The note stresses that the holding period still cannot be combined across a scheme. The year has to be satisfied wholly before, or wholly after, the scheme's approval. A company whose business ran six months before the scheme and whose new shares were held six months after does not pass by adding the two.

The OFS is also bound by other rules. The offer-for-sale versus fresh-issue guide covers the split between old and new shares, and the IPO lock-in guide covers what happens to the shares that are not sold.

Many startups reach the IPO with several classes of preference shares, issued in different rounds. Before filing, they convert these into equity shares, so the IPO has a single class of shares. The CCPS conversion before IPO guide explains the mechanics: the conversion ratio is set by the company's documents, and the conversion must be complete before the RHP is filed.

The investor then asks a practical question: which of their shares can be put into the OFS? The answer needs two dates, when the CCPS were originally issued and paid for, and the date the DRHP will be filed. Lawyers draw up a table of each seller and holding, and the table is checked against the rules before the DRHP goes to SEBI.

The company's own papers should show the payment of the full price of the CCPS. The rule talks about fully paid-up securities, and a partly paid instrument raises extra questions. If the lawyers find a gap, a common fix is to move a seller's shares out of the OFS, which shrinks the offer for sale and may raise the fresh-issue portion.

Venture investors usually want to sell part of their stake in the IPO, and the OFS is how they do it. If their shares fail the one-year test, they cannot be included, which can force a company to delay the filing or shrink the sale. Clarity on CCPS gives lawyers more room when arranging a restructure before the IPO.

For a reader of the news, it explains why an IPO draft names some sellers and not others, and why a company that reverse flipped recently still has investors selling in the first public offer.

These points come from law-firm and regulator summaries, as of November 2026. Rules change, so check the current regulation.

• Rule: Regulation 8 of the SEBI ICDR Regulations 2018, one-year holding before the DRHP.
• Converted CCPS: the holding period of the CCPS and the resulting shares counts together.
• Scheme exception: widened to convertible securities in the September 2025 amendment.
• No overlap: the one year cannot be split across the pre and post scheme periods.
• SME IPOs have a matching provision in Regulation 230(1)(d).

If a story says investors are "selling in the IPO", it is describing an OFS. The DRHP names each selling shareholder and the number of shares they offer. Check whether the shares come from converted CCPS, and the dates, since that shows how the one-year test was met.

This guide is general information, not legal advice, so confirm the treatment of a particular holding with a securities lawyer.