XIII-9
1.
Please note that in the case of issues exceeding Rs.500/- crores—
a)
the
utilization of the proceeds of the issue will be monitories by financial institution.
b)
you
are required to disclose the arrangement made for utilization of the proceeds
of the issue and arrangement made to have the issue monitored by financial
institution.
c)
You
and the monitoring institution should file a copy of the monitoring report with
SEBI.
d)
The
amount to be called up on application or allotment and on various calls should
be exceed 25% of the total issue.
With reference to 1(a) above, you may take into
consideration the following:--
i)
the
proceeds of the issue can be used strictly for the requirements of the
project/activities mentioned in the offer documents and not for any other
purpose;
ii) the proceeds can, however, be invested only in
fixed duration deposits/instruments with co-operative/nationalized banks, UTI,
financial institutions, public sector undertakings (other than public sector
bonds), till the deployment of the proceeds in the proposed project/activities.
2.
See that the issue is within the authorized share capital of the
company; otherwise complete proceedings to increase the same suitably, vide
topic 31.
2A. At least 25% of each class of security
issued by the company should be offered to the public for subscription.
3.
Under section 56 of the Act, as amended by the Companies (Amendment) Act,
1988, listing of shares with recognized Stock Exchange is compulsory whenever
issues are made to the public. Please
note that not less than Rs. 3 crores must be the issued share capital out of
which Rs.1.80 crores must be issued to the public, if the shares are to be
listed with the Stock Exchange.
Every company making public issue should get the
shares enlisted on recognized stock exchange, you are not eligible for
enlistment and consequently, to go in for a public issue, if you had earlier
proposed rights issue and had with drawn that rights issue after the
announcement of the record date for that purpose.
4.
Please note that it is obligatory to appoint an authorized Merchant
Banker as sole/Lead Manager to every public issue. The maximum number of Lead Managers depends upon the size of the
public issue. The Lead Managers are
entrusted with wide range of pre-issue and post issue activities.
Make arrangement to appoint authorized Merchant
Bankers as Lead Manager(s) to the issue, in the first instance.
5.
Please note that you can appoint only those persons as Registrars to
the issue and Share Transfer Agent who have been registered as such with SEBI.
5A. If the issue is first issue to the public,
disclose particulars as to the manner and extent of acquisition of shares by
the promoters prior to the proposed issue, that is, shares acquired for cash or
otherwise than cash, by way of bonus out of free reserves sor revaluation of
assets.
5B. Execute an agreement with the
Registrars to the Issue setting out the functions and obligations [See rule
2(e) of SEBI (Registrars to an Issue and Share Transfer Agents) Rules, 1993 and
for retention of issue records [refer regulation 14(2) of SEBI (Registrars to
an Issue and Share Transfer Agents) Regulations, 1993] at least for a period of
6 months from the last date of dispatch of letters of allotment/share
certificates/refund orders. This is
necessary to enable the investors to approach the Registrar to the Issue for
redressal of their complaints.
6.
Call a Board Meeting for the following purposes:--
a) To fix up the date, time, place and agenda for
convening a General Meeting to pass a Special Resolution or Ordinary Resolution
followed by the Central Government’s approval under section 81 unless the
allotment is made within two years from the formation of the company or within
one year from the allotment of shares made for the first time after formation,
whichever is earlier;
b) To approve the Draft Prospectus, Abridged
Prospectus and application forms and allied matters.
c) To make an application to the Stock
Exchange. The application will be in
the prescribed form accompanied by the supporting documents and appropriate
Analysis Form and a new Issues Statement and should be made before filing of
the prospectus with the Registrar of Companies.
d) To pass a resolution for naming the Lead
manager(s) to the issue and Bankers, Underwriters/Brokers Advisors and
Registrars to the issue and Debenture trustees (In case of Debenture Issue) in
consultation with Lead Manager].
e) To pass a resolution authorizing director(s)
principal Officers to obtain consents from and to execute necessary agreements
with the persons mentioned at (d) above.
f) To pass a resolution authorizing Registrars to the
issue to sign on behalf of the company to realize the proceeds of STOCK INVEST
of the non allottees, or partially successful allottees who had sent more than
one STOCK INVEST.
7.
Forward to the Stock Exchange with which your company is enlisted six
copies of all notices, resolutions and circulars relating to the new issue of
capital, prior to their dispatch to the share holders.
8.
Issue notices and hold the General Meeting and pass the
Resolution. If Ordinary resolution is
passed, proceed to obtain the Central Government’s permission under section 81.
9.
Forward promptly to the Stock Exchange with which your company is
enlisted three copies of the notice and a copy of the proceedings of the
General Meeting.
10.
If Special Resolution is passed, file the same with the Registrar in
Form No.23 within thirty days of its passing along with a receipted treasury
challan, evidencing the payment of requisite fee prescribed under Schedule X to
the Companies Act, 1956 and in accordance with Rule 22(1) of the Companies General
Rules & Forms, 1956.
11.
(1) File the copy of the Prospectus duly signed and dated with all
necessary enclosures with the Registrar and make necessary corrections if it is
so desired after paying the prescribed filing fees, within 3 months of the date of issue of
acknowledgement card by SEBI.
(2) Prospectus should be issued within 90 days of its delivery to the
Registrar of Companies for registration.
12.
Please note that every Abridged prospectus/Prospectus should be
accompanied by an Application Form.
Each Abridged Prospectus can be printed with 2 (two)
Application Forms bearing separate numbers, which can be detached along the
indicated perforated lines.
13.
(1) Make necessary arrangements with the bankers, merchant bankers,
brokers, underwriters, publicity agents, issue the Prospectus and publicise it
as much as possible.
(2) Please note that announcements in newspapers
regarding the proposed public issue should be made before 10 days of the date
of opening of the issue.
(3)
No
advertisement should be released without giving ‘Risk Factors’ in respect of
the issue.
(4)
The
advertisements should not include brand names for the issue excepted the normal
commercial name of the company or commercial brand names of products already in
use.
(5)
Where
there is reservation for NRIs. State in all issue advertisements the fact that
there is reservation and the source from where individual NRI applicants can
procure application form.
(6)
Also
indicate—
--“Investors may note that in case of over
subscription, a SEBI nominated representative shall be associated in the
process of finalization of basis of allotment”.
--“Investors are advised to refer to paragraph on
‘Justification of Premium’ appearing on page….of the Prospectus before making a
decision to invest. Investors may note
that the premium per share according to the guidelines issued by the erstwhile
office of CCI is Rs……at % capitalization rate”.
7) In case the company is not entitled to premium
according to the CCI guidelines, state so specifically, if the issue is at
premium.
8) No announcement should make that the issue has
been oversubscribed or anything to that effect (e.g. “Thank you Investors, for
Your Overwhelming Response”), while the issue is still open for subscription.
14.
Ensure that the publicity/advertisements/brochures, etc. conform to the
Code of Advertisements issued by SEBI”.
15.
Ensure that no exaggerated information or information extraneous to the
prospectus is given by you or your Lead Managers in any press conference,
investors/brokers conference, etc. prior to the issue, for marketing the issue.
16.
Ascertain from the Stock Exchanges the requirements of their members
for free supplies of application forms and prospectuses free supply can be made
on the following basis:--
Supply to Nos. of copies
a) Active members of the stock exchanges 100 each for issues upto Rs.1
crore and 200 each for issues
above Rs.1 crore.
b) Underwriters (if demanded) 1000
c) Managers to the issue 500
d) Each Stock Exchanges
500
The Company should supply additional application
forms and prospectuses, over and above the free quota as indicated above, on
payment of actual cost not exceeding 25 paise per application form and Re.1 per
prospectus and the company should keep a proper account thereof.
All agencies concerned with the marketing of the
public issues should place firm orders for the supply of application forms and
prospectuses with the company sufficiently in advance of the opening of public
issue. Send 20 copies of the prospectus
to each of the Investors Association.
17.
(1) Please note that the notified centers for acceptance of new issue
applications are as below:-
i)
Centres
where recognized Stock Exchanges are situated, viz., Ahmedabad, Bangalore,
Bombay, Calcutta, Cochin—Ernakulam, Delhi, Gawahati, Hyderabad, Indore, Jaipur,
Kanpur, Ludhiana, Madras; Msangalore, Patna, Pune, Bhubaneswar, Rajkot and
Vadodara. (19 centres)
ii) State Capitals not covered by (i) above, viz.,
Agartala, izwal, Bhopal, Chandigarh, Gandhinagar, Gangtok, Imphal, Itanagar,
Kohima, Lucknow, Panaji, Shimla, Shillong, Srinagar and Trivandrum (15
centres).
iii) Cities with a population of more than 5 lakhs
as per the 1981 census, viz., Agra, Allahabad, Coimbatore, Jabalpur, Madurai,
Nagpur, Varanasi, Amritsar, Dhanbad, Hubli-Dharwad, Jodhpur, Calicut, Gwalior,
Jamshedpur, Meerut, Salem, Surat, Ulhasnagar, Vijayawada, Ranchi, Solapur,
Trichirapalli and Visakhapatnam (23 centres)
iv) All Branches of the Bankers to the Company,
other than the Centres referred to in (i), (ii) and (iii) above.
2) Please note that you should have at
least 30 mandatory collection centers including the places where the stock
exchanges are located.
3) You may, in consultation with the
lead manager, appoint authorized collection agents and necessary disclosures
including the names and addresses of such agents should be made in the offer
documents. The collection agents should
be permitted to collect such applications as are accompanied by payment of
application moneys paid by cheques, drafts and stock invests. Under no circumstances they should be
permitted to collect application moneys in cash. The applications so collected should be deposited in the special
share application account with designated scheduled bank either on the same
date or latest by the next working day.
The application forms along with duly reconciled schedules should be
forward to the Registrars to the Issue after realization of cheques and after weeding out the applications in
respect of cheques return cases, within a period of 2 weeks from the date of
closure of the public issue. The
applications accompanied by stock invests should be sent directly to the
Registrars to the Issue along with the schedules within one week from the date
of closure of the issue. Further, the
offer documents and application forms should specifically indicate that the
acknowledgement of receipt of application moneys given by the collection agents
shall be valid and binding on the company and other persons connected with the
issue.
The
investors from the places other than from the places where the mandatory
centers and authorized collection centers are located, can forward their
applications along with stock invests to the Registrars to the Issue directly
by Registered Post with Acknowledgement Due and such applications shall be
dealt with by the Registrars to the Issue in the normal course.
4)
In respect of acceptance of applications for public issue, the Companies are free
to accept the same in as many cities/centers as are convenient to them and to
the managers to the issues, which would be in addition to the centers mentioned
in items(i) , (ii) and (iii) of paragraph (i) above.
5)
where there is a reservation to the NRIs in a public issue, the following
should be ensured:
a)
The
prospectus should contain the name and address so at least one source from
where individual NRI applicants can obtain the application or request.
b)
As
per the scheme of Reserve Bank of India, reservation to NRIs is restricted to
applications accompanied by payment from convertible accounts only. In view of
this,--
i)
the
application form for NRIs/OCBs should not contain provision for payment through
NR(O) accounts;
ii) on the face of the application form meant for
NRIs/OCBs, the following legend is printed in a box.
“Form
meant only for the use of NRIs/OCBs, who pay through their NRE/FCNR accounts or
through cheques/drafts sent from abroad and drawn on convertible rupee accounts
in India; application forms accompanied by cheques drawn on NR(O) accounts are
liable to be rejected.”
iii) the offer document shall clearly state in a box
that NRIs wishing to pay through NR(O) accounts shall not use the form meant
for NRIs/OCBs and must apply in the form meant for resident Indians.
18.
Close taking applications on the date announced for closing but, if the
issue is not fully subscribed by that date, extend it further.
19.
a) Ensure that the promoters contribution is fully brought in before
the public issue opens.
b) A Certificate from the chartered accountant/the
statutory auditor/company secretary in practice to the effect that the
promoters’ contribution in its entirely has been brought in advance before the
public issue opens should be forwarded to SEBI by the Lead Managers at least
one day prior to the date of opening of the issue. The certificate should be accompanied by a list of names and
addresses of friends, relatives and associates who have contributed to the
promoters’ quota, along with the amount of subscription made by each of them.
20.
In case the minimum subscription of 90% of the total issue has been
raised but the issue has not been over subscribed, then allot the shares in
response to the valid applications received and intimate the Stock Exchange and
then complete proceedings of allotment of the shares.
21-22.
In
case the issue is over subscribed, submit the scheme of allotment to the Stock
Exchange concerned in accordance with guidelines and get it approved and then
complete proceedings regarding allotment of the shares accordingly and refund
the money on the applications not accepted.
Please see also Item No.13(6) above.
23.
(a)
Please note that if you have received minimum subscription of 90% of the issue,
including devolvement of obligation of underwriters, within 90 days from the
date of closure of the issue, a certificate to the said effect duly signed by
the Lead Manager(s) and the Chief Executive or Secretary of your company should
be submitted by the Lead Manager(s) to the concerned Regional and other stock
exchanges for obtaining their approval for allotment of shares.
b) A copy of the Certificate mentioned at (a) above
should be sent to SEBI also.
24.
The
Stock Exchange, on being satisfied on the basis of an auditor’s certificate
that the allotment had been properly made, will issue the permission for
enlistment and dealing. Provisions of
section 73 should be noted in this regard.
25.
In
case of under subscription—
i)
inform
the under writers to subscribe for the shares devolved upon them;
ii)
give
intimation to the Regional Stock Exchange as regards(i) above and also about
the response of the underwriters to discharge their obligations.
26.
Please
note the declaration given in prospectus, in case of non-receipt of minimum
subscription, or partial non allotment of shares, for refund of the application
money or excess application money.
27.
Lead
Manager responsible for post issue activities is required to maintain close
coordination with the Registrars to the issue and arrange to depute its
officers at regular intervals after the closure of the issue to monitor the
flow of applications from collecting bank branches, processing of the
applications including those accompanied by stock invest and other matters till
the basis of allotment is decided, dispatch completed and listing done. Any act of omission or commission on the
part of registrars noticed during such inspections should be duly reported to
SEBI.
28.
Proceed
to complete other formalities such as the issue of allotment letters, filing of
allotment return, issue of share certificates, making entries in various
registers, etc.
29.
(1)
Please ensure that Lead Managers advise SEBIU, within 10 days of the time
stipulated for completion of each of the following activities:--
a)
date
of closure of the issue;
b)
date
of allotment;
c)
date(s)
of despatch of share/debenture certificates or date(s) of refund of application
money/excess application money.
d)
Date
of listing at the concerned stock exchange(s).
(2) In case of any extension granted by appropriate
authority, the measures taken or initiated for completion of the activity
within due time should be reported to SEBI by Lead Manager(s) within 10 days of
the original stipulated time.
30.
(a)
Public in at least two All-India newspapers that you have—
i)
dispatched
the refund orders;
ii)
dispatched
share/debenture certificates;
iii)
filed
listing application along with relevant dates;
within
10 days of completion of each activity.
(b) Give information about (a)
above to the concerned stock exchange(s) and to SEBI together with copies of
the newspaper publications.
31.
Furnish
a report in the prescribed form with compliance certificate duly signed by the
auditor or practicing chartered accountant or by company secretary in practice
to Lead Managers who are required to submit the report to SEBI within 45 days
of the closure of the issue.
(1)
Under section 56 of the Act, as amended by the Companies (Amendment)
Act, 1988, listing of shares with recognized Stock Exchange is compulsory
whenever issues are made to the public.
(2)
SEBI has formulated guidelines relating to public issue of capital and
has classified companies into the following categories for the purpose:--
A.
New
companies established by individual promoters/entrepreneurs without tract
record.
B.
New
companies set up by existing companies with a 5 year tract record of consistent
profitability.
C.
Existing
private/closely held and other enlisted companies without three year track
record of consistent profitability.
D.
Existing
private/closely held and other unlisted companies with three years track record
of consistent profitability.
E.
Existing
company which does not have three year track record but had been promoted by
existing companies with a five year track record of consistent profitability.
F.
Existing
listed companies.
(3)
The first public issue of shares by companies falling under Categories
A to E above can have their shares enlisted on the Over the Counter Exchange of
India or any other Stock Exchange(s).
(4)
Check up under which category your company falls. Follow the specific procedure under each
category set out herein below. The
other procedural steps are common to all public issues.
A. FIRST PUBLIC ISSUE BY NEW COMPANY ESTABLISHED BY INDIVIDUAL PROMOTERS AND ENTREPRENEURS WITHOUT TRACK RECORD
If you are ‘New Company’ which has not completed 12 months of commercially operation and its audited operative results are not available and which is set up by entrepreneurs without a tract record, follow the procedure set out below.
1.
Issue shares to the
public at par only.
2.
Please note that—
a)
issue price is
applicable uniformly to all investors including promoters.
b)
the unreserved offer of
equity to the public (that is, after reservation to employees as per item
below) should not be less than the minimum required for listing purposes (that
is, 20% of the issue).
c)
The capital issued
should be made fully paid up within 12 months from the date of issue except
where the issue is for more than Rs.500 crores.
Promoters’ contribution
3.
‘Promoters’ means
promoters, directors, friends, relatives and associates.
4.
Bring in as Promoters’
contribution at least—
a)
25% of the total
issued capital up to Rs.100 crores;
b)
20% of the total
issued capital of more than Rs.100 crores.
5.
Ensure that the
minimum subscription from each of the promoters is Rupees fifty thousand
(Rs.50,000).
6.
Please note that—
a)
promoters’
contribution is subject to lock in period of 5 years (that is, it cannot be
diluted or disinvested for a period of 5 years) from the date of allotment or
from the date of commencement of commercial production, whichever is later.
b)
the lock in period of
five years is applicable to the minimum required contribution. Additional contribution in excess of the
requisite minimum is treated as firm allotment and is, however, subject to
lock-in-period of three years only.
c)
Shares held by
promoters may be pledged with banks/financial institutions(Fis) as additional
security for loans granted b such banks/Fis provided the pledge of shares is
only of the terms of sanction of loan and a disclosure to this effect is made
in the offer documents.
d)
Promoters should bring
in their full contribution before the public issue, irrespective of calls, if
any, involved in the public issue.
e)
Share certificates
issue in relation to their contribution should be inscribed “NOT TRANSFERABLE”
specifying the lock in period of 3/5 years.
RESERVTION PREFERENTIAL/FIRM ALLOTMENT
7.
(a) The reservations
to the various persons/institutions out of the public offer shall, subject to
the ceilings indicated against each category, be as under:
Category of Persons Maximum
Permissible allotment
(percentage)
i)
Permanent employees
(including
Working directors) of the company 10%
And in the case of a new company the
Permanent employees of the
Promoting companies
ii) Shareholders of the
promoting companies 10%
in the case of a
new company and
shareholders of group companies in
the case of an existing company
iii) Indian Mutual Funds 20%
iv) Foreign
Institutional Investors (including
24%
non-resident Indians and overseas
corporate bodies.)
v) Indian and
Multilateral Development
20%
Financial
Institutions.
b)lock in period will be applicable in respect of the shares allotted
against such reservations.
a)
Reservations to
categories (iii), (iv) and (v) above shall be on competitive basis. “Competitive basis” means allotment of
shares in proportion to the shares applied for by the concerned reserved
categories. This is applicable where
the number of shares applied for in any category exceeds the number of shares
reserved for that category.
b)
FII investment will be
subject to the individual and overall ceilings for any individual FII mentioned
in the FII Guidelines issued by Government of India.
c)
Maximum allotment per
employee/shareholder shall not exceed 200 shares of Rs.10 each and in case of
partly or fully convertible debentures such number of debentures as would give
200 shares of rs.10 each on conversion.
d)
Un-subscribed portion
in any reserved category may be added to any other reserved category, subject
to the condition that on final allotment shares/debentures allotted to in
respect of each of the categories does not exceed individual ceilings mentioned
above. The offer document should
contain necessary disclosures for making inter se adjustments amongst the
categories. The un-subscribed portion,
if any, after such inter se adjustments amongst the reserved categories should
be added back to the public offer.
7A. (a) Since the minimum offer to public has
been specified at 25%, in respect of the balance the issuer company is free to
make reservations and/or firm allotments to various categories of persons
mentioned hereafter to the extent of specified percentages. Such reservations and firm allotments
together with the promoters contribution should not exceed 75% of the total
issue amount. Likewise, the
reservations and/or firm allotments to any single category of persons should
not in the aggregate exceed, the specified percentage indicated for that
category. For instance, for Indian
Mutual funds the aggregate of reservations and/or firm allotments should not
exceed 20% of the total proposed issue amount.”
Sr. No. Category of Persons Maximum permissible
Allotment (percentage)
(i) Indian and Multilateral Development
Financial Institutions 20%
(ii) Indian Mutual Funds 20%
(iii) Foreign Institutional Investors (including
non resident Indians and
overseas
corporate bodies) 24%
(iv) Permanent/regular employees of the
issuer company 10%
b)
(i) The investments by the foreign institutional
investors shall be subject to the individual and overall ceilings indicated in
the Foreign Institutional Investors Guidelines issued by the Government of
India.
(ii) In case of firm allotment to permanent and regular employees of
the issuer company, no single employee shall be allotted in excess of 200
shares of Rs.10/- each or its equivalent if the fact value of shares is more
than Rs.10/-; in case of FCDs and PCDs
the firm allotment of the debentures should be such a would not give
each employee more than 200 shares as mentioned above.
(iii) If any person to whom firm allotment is proposed to be made
withdraws partially or fully the offer made to him after the filling of the
prospectus with the Registrar of Companies, the extent of shares proposed to be
allotted should be taken up by the promoters.
(iv) Shares including those acquired on conversion of Partly
Convertible Debentures/Fully Convertible Debentures allotted as above will not
be subject to lock in period. However,
contributions made by the promoters towards equity including those acquired on
conversion of Partly Convertible Debentures/Fully Convertible Debentures shall
continue to be subject to lock in period as hitherto.
[Clarification VIII
dated 11.10.1993 issued by SEBI]
8.
Ensure that shares are
allotted only to bona fide employees of the company.
9.
Please note that
shares are not to be allotted in the joint names of an employee and a non
employee.
10.
Reservation can be
made for subscription by by NRIs and OCBs provided payment is made out of
convertible funds. Please note that
NRIs and OCBs paying through NRI accounts would not be eligible for
reservation.
11.
The holding of single
FII should not exceed 5% of the total issued share capital.
12.
(1) Please note that—
13.
a) no shares can be allotted
to the Funds on private placement basis.
b)the subscription by the Funds should not be reckoned towards
promoters’ contribution.
c)
shares allotted to the
Funds cannot be sold to the promoters under any buy-back arrangement or
otherwise (shares could be sold only through Stock Exchange).
2) Please also note
that Mutual Funds have been exempted from registering their shares with
companies. They are required only to
ensure delivery of shares whether they buy or sell.
12A. In composite
issues, the percentages specified for reservation to various categories shall
be computed with reference to the amount of public issue and not the total
amount of composite issue.
13. Please note
that allotment made on firm basis to Financial Institutions including State
Industrial Development/Investment Corporations, or shares subscribed by the
Financial Institutions on firm allotment will be reckoned towards promoters’
contribution.
FIRST PUBLIC ISSUE OF SHARES BY NEW COMPANY SET UP BY EXISTING COMPANIES WITH 5-YEAR TRACK RECORD OF CONSISTENT PROFITABILITY
If you are “New
Company” set up existing companies each of which has shown profits in its
audited profit and loss account after providing for interest, tax and
depreciation in any five (5) out of the preceding seven (7) years and with
profits during the two (2) years immediately prior to the issue, follow the
procedure set out below :
1.
Ensure that—
a)
each of the promoter
companies has been in existence at least for a period of eight (8) years.
b)
each of the promoter
companies had profits, after providing for interest, tax and depreciation, in
any five (5) years out of the preceding seven (7) years, including such profits
in the two (2) years immediately preceding the year of public issue.
2.
Please note that in
case of Joint Ventures with public sector company or State level agency or
foreign collaborator, the criteria of 5 years track record is applicable to the
private sector promoter companies only.
3.
You are free to
determine the issue price (that is, you can issue shares at premium) in
consultation with Lead Manager(s) to the Issue.
4. If the issue price is at
premium, full justification and parameters for fixation of the premium amount
should be indicated in the prospectus.
Please note that it is obligatory to indicate and take into account the
premium on the shares calculated on the basis of the guidelines framed in this
regard by the erstwhile office of the Controller of Capital Issues. Full justification should be given if the
premium proposed to be charged is higher than the premium computed as per
Controller of Capital Issue’s Guidelines.
5.A. Where the issue is up to Rs.100 crores, or where the issue
(irrespective of the amount) is at a premium exceeding the face value of shares
ensure that—
a)
the contribution of
the promoter companies is not less than 50% of the total equity share capital
of the company; and
b)
the issue price is
applicable uniformly to all investors, including promoters.
B.
Where you propose to
issue equity capital exceeding Rs.100 crores at a premium not exceeding the
fact value of the shares, the promoting companies’ contribution shall be
computed on the basis of total equity to be issued (including premium) at
present and in future upon conversion of optionally convertible instruments
including warrants. Such contribution
shall be computed by applying the slab rates in the manner mentioned below and
the aggregate contribution shall in no case be less than 21 per cent of the
expanded capital:
Size of the Capital Issue Percentage of
(including premium) contribution
On first 100 crores of issue 50
Next 200 crores 40
Next 300 crores 30
Balance issue amount 15
Note: While computing
the extent of promoters’ contribution, the amount to be computed against the
last slab shall be so adjusted that on average promoters’ contribution is not
less than 21 per cent of the expanded capital after conversion.
C.
The following
principles shall apply for computation of promoters contribution in the above
cases:
a)
Where the issue of
capital in addition to initial issue of equity envisages issue of a financial
instrument together with warrants convertible into equity at par and/or premium
at present or at a future date, the promoters’ contribution shall be at the
uniform price and shall be computed on the basis of post-issue capital, i.e.,
on the expanded equity base assuming full conversion of instruments into equity
at any time during currency of the instrument.
If the promoters’ contribution calculated with reference to the slab
rates exceeds Rs.100 crores, the promoters should bring in not less than 50 per
cent of their contribution including premium before opening of the issue and
bring the balance 50 per cent prorata in advance before calls are made on the
public.
b)
Where convertible
instruments are issued with an option to convert them into equity at a premium,
the promoters shall have an option either to bring in the required contribution
in advance by way of equity in proportion to the convertible portion of the
optional instruments or to participate in the same instruments issued to the
public. However, in either case the
promoters’ contribution including premium to the equity in the total expanded
capital (after conversion) shall not be less than the amount arrived at the
applying the slab rates indicated above.
c)
A Certificate from a
Chartered Accountant’s or statutory auditors/Company secretary in practice
shall be furnished to the Lead Manager/SEBI to the effect that the company has
received the money in advance, i.e. before opening of the public issue towards
subscription of shares/convertible instruments, as the case may be. The Board shall pass a resolution allotting
the shares/convertible instruments to promoters against the moneys
received. A copy of the resolution
shall also be filed along with Chartered Accountant’s certificate with the Lead
Manager/SEBI.
D. The benefit of slab system
mentioned above shall be available subject to under noted conditions:
i)
Promoters’ contribution shall be at the same price as
applicable to the investing public.
ii) Lock in period of 5 years from the date of allotment or
commencement of commercial production, whichever is later, shall be applicable
even in respect of equity acquired on conversion of optional instruments in
future.
iii) Projects should be appraised by the lending Development Financial
Institutions.
iv) EPS, book value etc., given in the offer documents for future
projections should be calculated with reference to the expanded capital.
[Clarification VII
dated 10-8-1993 issued by SEBI]
6. Ensure that—
a)
the minimum
subscription from friends, relatives and business associates such as
dealers/distributors is Rs.25,000.
b)
from firms or bodies
corporate which are not business associates like dealers or distributors is
Rs.1,00,000.
[Clarification VII,
dated 10.8.1983 issued by SEBI]
7. Please note
that—
a)
promoters’
contribution is subject to the lock in period of 5 years (that is, it cannot be
diluted or disinvested for a period of 5 years), from the date of allotment or
from the date of commencement of commercial production, whichever is later.
b)
the lock in period of
five years is applicable to the minimum required contribution. Additional contribution in excess of the
requisite minimum is treated as firm allotment and is, subject to lock in
period of three years only.
c)
Shares held by
promoters may be pledged with banks/financial institutions (Fis) as additional
security for loans granted by such banks/Fis provided the pledge of shares is
one of the terms of sanction of loan and a disclosure to this effect is made in
the offer document.
d)
Promoters should bring
in their full contribution before the public issue, irrespective of calls, if
any, involved in the public issue.
e)
Share certificates
issued in relation to their contribution should be inscribed “NOT TRANSFERABLE”
specifying the lock in period of THREE/FIVE years.
RESERVATIONS/PREFERENTIAL ALLOTMENTS
[See under section A of this Topic]
© & (D) FIRST PUBLIC ISSUE BY EXISTING UNLISTED, PRIVATE OR CLOSELY HELD COMPANY WITH/WITHOUT 3 YEAR TRACK RECORD
1.
Check up lf you have
three year track record of consistent profitability.
2.
Issue shares at
premium, if you so desire, only if you have such track record. If you do not a have such track record,
issue shares at part. The premium is to
be decided in consultation with Lead Manager(s) to the issue. Please note that if you are an existing
unlisted company and propose to make composite issue (rights-cum-public),
differential pricing is not permitted.
That is the shares will have to be issued at the same price.
3.
In the case of
companies which were incorporated by conversion of partnership firms, the track
record of partnership firms, which have since been converted into companies
will be considered,--
1)
if the relative
financial statements pertaining to partnership business conform to or are
revised in a format indentical to that required to companies;
2)
if such financial
statements also make adequate disclosures similar to that required of companies
as specified in Schedule VI of the Companies Act, 1956;
Such financial statements should be
duly certified by a chartered accountlant stating unequivocally that—
a)
the accounts as revised
or otherwise and disclosures made are in line with the provisions of Schedule
VI of the Companies Act, 1956; and
b)
the accounting
standards of the Institute of Chartered Accountants of India (ICAI) have been
followed and that the financial statement statements present a true and fair
picture of the firms’ accounts as in the case of companies.
The lead manager should also add his
confirmation that the financial statements furnished on behalf of the partnership
firms are in accordance with the accounting standards prescribed by the ICAI.
4.
(a) Ensure that the public
issue constitutes at least 20% of the expanded capital after the proposed issue.
(b) Obtain approval of the Central Government for relaxation of rule 19(2)(b)
of the Securities Contracts (Regulation) Act, 1956.
5.
Bring in as promoters’
contribution from directors, their friends, relatives and associates at least—
a)
25% of the total issued
equity capital up to Rs.100 crores.
b)
20% of the total issued equity capital of more than
Rs.100 crores.
6.
Ensure that the minimum
subscription from each of the relatives, friends and associates business associates
such as dealers and distributors is Rs.,25,000. The minimum contribution of each of the forms or bodies corporate which
are not business associates is Rs.1 lakh.
7.
Please note that—
i)
Promoters’ contribution
to the proposed equity capital issue is subject to lock in period of five years
from the date of allotment, or from the date of commencement of commercial production
(if you are a manufacturing company) whichever is later.
ii) Where the minimum specified percentage (i.e.20% or 25%) includes equity
capital held prior to the public issue, the lock in period of five years referred
to at (i) above is reduced by the period of such holding, except that the aggregate
percentage held prior to the issue (constituting part of the minimum percentage)
remains locked in for a minimum period of two years from the date of allotment in
the public issue.
iii) Additional contribution in excess of the requisite minimum is treated
as firm allotment and is subject to a lock in period of three years.
8.
In case you propose to
make public issue at premium, check up whether you have made any issue at par during
the 12 months immediately prior to the proposed public issue. Please note that in case you have issued shares
at par during the said period and if you now propose to issue shares to the public
at premium, the shares so issued would be excluded for the purposes of computing
the minimum promoters’ contribution of 20% or 25% of the total issued capital. Such shareholding as have been so excluded for
reckoning promoters’ contribution would be subject to lock in period of three years
from the date of allotment.
9.
Shares held by promoters
may be pledged with banks/financial institutions (FIS) as additional security for
loans granted by such banks/FIs provided the pledge of shares is one of the terms
of sanction of loan and a disclosure to this effect is made in the offer document.
10.
Ensure that the entire
promoters’ contribution including premium, if any, is received before the
public issue, irrespective of calls, if any, involved in the public issue.
11.
Issue share
certificates to the promoters with the inscription “NOT TRANSFERABLE”
specifying the appropriate number of years.
12.
Please note that you
can reserve shares for preferential firm allotment to your employees/Indian
working directors, NRIs and OCBs,
Foreign Institutional Investors and financial institutions as indicated
in the earlier Parts of this TOPIC. Please,
however, ensure that the unreserved offer of equity shares to the public is not
less than the minimum required for listing purposes.
D. FIRST PUBLIC ISSUE BY EXISTING COMPANY WHICH DOELS NOT HAKVE 3-YEAR TRACK RECORD BUT PROMOTKED BY EXISTING COMPANIES HAVING 5-YEAR TRACK RECORD
1.
Please note that you
can issue shares at premium subject to items 2, 3 and 4 below, in consultation
with Lead Manager(s) to the issue.
2.
Bring in on amount
which is equivalent to at least 50% of the total issued capital, as promoters’
contribution )(i.e. as contribution from the promoter companies).
3.
Please note that
additional equity, if required to be subscribed by the promoters in order to
achieve the minimum level of their contribution of 50% should be subscribed at
the same price at which the equity shares are offered for public subscription.
4.
a) If you propose to
issue shares at premium, please note that the said minimum promoters’ contribution
of 50% will be reckoned with reference to only such portion of the issued as
was held by the promoters pursuant to allotment made prior to 12 months of the
proposed public issue.
b)
If the promoters are
unable to bring in additional capital after excluding allotment of shares made
within 12 months prior to the public issue[as stated at (a) above], you can
issue shares to the public only at par.
5.
Please note that—
i)
Promoters’
contribution to the proposed equity capital issue is subject to lock in period
of five years from the date of allotment, or from the date of commencement of
commercial production (if you are a manufacturing company), whichever is later.
ii) Where the minimum specified percentage (i.e. 50% includes equity capital held prior to the public
issue, the lock in period of five years referred to at (i) above is reduced by
the period of such holding, except that the aggregate percentage held prior to
the issue (constituting part of the minimum percentage) remains locked in for a
minimum period of two years from the date of allotment in the public issue.
6.
Shares held by
promoters may be pledged with banks/financial institutions (FIs) as additional
security for loans granted by such banks/FIs provided the pledge of shares is
one of the terms of sanction of loan and a disclosure to this effect is made in
the offer document.
7.
Issue Share Certificate
to the promoters with the inscription ‘NOT TRANSFERABLE’ specifying the
appropriate number of years.
8.
For reservations and
preferential/firm allotment see earlier Parts of this topic.
E. PUBLIC ISSUE BY EXISTING LISTED COMPANY
1.
You are free to
determine the issue price in consultation with the Lead Manager(s) to the
issue.
2.
Ensure that the
Minimum promoters’ contribution irrespective of the pricing of the issue is to
the extent indicated below:
a)
25% of the proposed
issue of capital up to Rs.100 crores.
b) 20% of the proposed issue of capital of more than Rs.100 crores.
OR
a)
25% of the total
issued capital (i.e. expanded capital after the proposed issue) of Rs.100
crores.
b)
20% of the total
issued capital of more than Rs.100 crores.
3.
If there are no
promoters, promoters’ contribution means contribution by directors, friends,
relatives and associates.
4.
Ensure that minimum
subscription from each of the relatives, friends and business associates like
dealers and distributors is rs.25,000.
The minimum contribution from each of the firms or bodies corporate
which are not business associates is Rs. 1 lakh.
5.
Disclose in the
prospectus—
i)
net asset value of the
company as per the last audited balance sheet.
ii)
justification for the
issue price, after taking into account, the guidelines on valuation of shares
formulated by erstwhile office of the Controller of Capital Issues. Also give full explanation justifying the
premium amount, if the premium is higher than the premium arrived at according
to CCT’s Guidelines or if no premium could be charged according to the
guidelines.
6.
Please note that
promoters contribution is subject to lock in period of five years from the date
of allotment of from the date of commencement of commercial production (if you
are a manufacturing company), whichever is later, in the case of promoters’
contribution in terms of item 2(a) above.
OR
b)
In respect of
promoters’ contribution made in terms of item 2(b) above, the lock in period is
five years from the date of allotment the public issue in respect of promoters’
contribution made in the public issue.
In respect of their holdings prior to the date of public issue, the lock
in period is five years as reduced by the period of such prior holdings, except
that such prior holding will remain locked in at least for a minimum period of
two years from the date of allotment in the public issue.
c)
Please note that the
lock in period as set out in (b) above, is applicable only to the aggregate of
the promoters’ contribution made in the public issue and prior holdings, as is
necessary to constitute 25% of the expanded capital.
7. Please note that
if the promoters choose to contribute in the proposed issue more than the
minimum percentages specified above, such additional percentage is treated as
firm allotment and is subject to a lock in period of three years.
8.
Ensure that promoters’
bring in their full contribution in advance before the public issue,
irrespective of calls, if any, involved in the public issue.
9.
Share Certificates
issued in relation to promoters’ contribution should be inscribed ‘NOT
TRANSFERABLE’ specifying the lock in period.
10. RESERVATIONS
PREFERENTIAL ALLOTMENTS
[See under section A of this Topic]