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Monday, August 24, 2009

New 6.42 disclosures for rights issue & ASBA also made applicable & utilisation of funds only after finalisation of allotment, SEBI DIP amended

SEBI/CFD/DIL/DIP/38/2009/08/20 dated August 20, 2009

Download Amended SEBI (DIP) Guidelines, 2000 till date

1. Applications Supported by Blocked Amount (ASBA) in rights issues:

It has now been decided to make ASBA applicable to all rights issues. ASBA will co-exist with the current process, wherein cheque/demand draft is used as a mode of payment. Since the web enabled interface of stock exchanges is now operational [have a look at NSE’s Workstation] for the purpose of acceptance of the rights issue applications, self certified syndicate banks shall upload the application data in to the aforesaid interface of stock exchanges.  Understand about ASBA from [SEBI-ASBA] Lets Learn the Concept.


  1. All applicants who desire to apply through ASBA should hold shares of the issuer company in a depository account.
  2. The applicants shall indicate either in (i) in Part A of the composite application form of rights issue or (ii) in the plain paper application, as to whether they desire to avail of the ASBA option.
  3. All other provisions shall apply mutatis mutandis (means, as like a Public Issue with such modification of the words as Rights issue).

2. Other Amendments numbered as A, B, C, D & E for reference

As you are aware that under clause 8.19 of the SEBI (DIP) Guidelines provides that in a rights issue, the issuer may utilise the issue proceeds collected after satisfying the designated stock exchange that minimum 90% subscription is received and also SEBI has reduced the time period taken for finalization of basis of allotment in the rights issues to 15 days from the date of closure of the issue.  In a public issue, in terms of section 73 of the Companies Act, 1956, the issuer company can access the issue proceeds only after allotment and listing is completed.  All the following Amendments shall be applicable for all rights issues where Draft letters of offer are filed or where Final Letter of Offer is yet to be filed with SEBI on or after the date of this circular.

A. In the clause 5.7.2: In the case of rights issues, lead merchant banker shall ensure that the abridged letters of offer ALONG WITH COMPOSITE APPLICATION are dispatched to all shareholders at least 3 days before the date of opening of the issue.

B. All the new clauses are using the word COMPOSITE application instead of STANDARD application as earlier (in case of rights issues).

C. In CHAPTER VI of the DIP Guidelines dealing with DISCLOSURES regarding rights issue, many amendments were made as below:


There are 3 types of disclosures,

  • 6.42 disclosures on satisfaction of certain conditions
  • Partly Section I and Partly 6.42 disclosures
  • Section I disclosures as like the existing provision

I. A listed issuer company making a rights issue shall make disclosures, as
specified in clause 6.42
, in the letter of offer, if it satisfies the 6.39 conditions as mentioned below:
(a) the issuer company has been filing periodic reports, statements and
information in compliance with the listing agreement for the last 3 years immediately preceding the date of filing of the letter of offer with the designated stock exchange or SEBI.
(b) the information referred to in sub-clause (a) above are available on the website of any recognised stock exchange with nationwide trading terminals or on a common e-filing platform specified by the SEBI.

(c) the issuer company has investor grievance-handling mechanism which includes meeting of the Shareholders’ or Investors’ Grievance Committee at frequent intervals, appropriate delegation of power by the board of directors of the issuer company as regards share transfer and clearly laid systems and procedures for timely and satisfactory redressal of investor grievances.

As per 6.43, every such listed company shall also make a copy of offer document available to the public in the manner specified in sub-clause (ii) of clause 5.6.2 and shall also make such document available as a material document for inspection.


Clause 6.40: If the listed issuer company does not satisfy the ABOVE conditions, it shall make disclosures in the letter of offer as specified in Section I and as specified in sub-clauses (d), (e) and (f) of clause of Section III.


Clause 6.41: Irrespective of whether the conditions specified in clause 6.39 are satisfied or not, the following listed issuer companies shall make disclosures, as specified in Section I, in the letter of offer:
(a) A listed issuer company whose management has undergone change pursuant to acquisition of control in accordance with the provisions of SEBI Takeover Code.
(b) An issuer company whose securities have been listed consequent to relaxation granted by the Board under sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957 for listing of its securities pursuant to a scheme sanctioned by a High Court under sections 391 to 394 of the Companies Act, 1956.

D. In chapter VI, Section IV shall be substituted with the following section as under:-
SECTION IV - CONTENTS OF THE ABRIDGED LETTER OF OFFER: In that clauses 6.44, 6.45 and 6.46 are SUBSTITUTED with new clauses.

For clause 8.19.1, the following clause shall be substituted, namely:-
“The issuer company may utilise the funds collected in the rights issue only after the basis of allotment is finalized.”  Just remember, it is no more after minimum 90% subscription is received.


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