Understand SEBI ICDR with Checklist & download good material to read through the same, its applicable for CS exams now

ICSI has published a good material on ICDR, its an interesting read-through for CS, Non-CS, students, professionals, etc… The content is standardised and really good as a referencer.  Enjoy readin… DOWNLOAD ICDR – An Understanding.

ATTENTION!
STUDENTS OF Company Secretary (CS) PROFESSIONAL/EXECUTIVE PROGRAMME

Supplement on

• ‘Due Diligence and Corporate Compliances Management’ (Module –IV Paper -7)
• ‘Securities Laws and Compliances’ (Module – II Paper -6)

Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations 2009 [called SEBI (ICDR) Regulations, 2009] are applicable for June 2010 Examination.  Please click here for download Softcopy of supplement.

Accordingly, a hard copy of the supplement will be available free of cost to the students after 25th March 2010. Students may receive the hard copy of the supplement by sending a self addressed envelope of 25cms x 18 cms size by affixing stamps for Rs. 6/- to Shri Harish Joshi, Administrative Officer (Store), The Institute of Company Secretaries of India, C-37,Sector 62 , Institutional Area , NOIDA -2 01301. Students may also collect the copy of supplement from headquarters at Lodi Road and Regional/Chapter offices i.e. EIRC, NIRC, SIRC, WIRC, Ahmedabad, Poona, Hyderabad, Bangalore, Jaipur & Noida.

SEBI ICDR now applies to Convertible preference shares, fast track issues liberalised, employee reservation value limited to Rs. 1 lakh, Anchor Investors in IDR & new book building system introduced based on bids at highest price

No. LAD-NRO/GN/2009-10/23/186926 dated 11th December 2009

Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2009 [SEBI ICDR Amendment]

Reg 2(k) “convertible security” means a security which is convertible into or
exchangeable with equity shares of the issuer at a later date, with or without the option of the holder of the security and includes convertible debt instrument and convertible preference shares.

Reg 2(zd) “Qualified Institutional Buyer” (QIB) has 11 items now:

“(xi) insurance funds set up and managed by army, navy or air force of
the Union of India;”

Fast Track Issues – FTI

• Reg 10(b): The average market capitalisation of public shareholding of the issuer is at least five thousand crore rupees (thus reduced to Rs.5,000 crores from erstwhile Rs.10,000 crores).
• Reg 10(b): the annualised trading turnover of the equity shares of the issuer during 6calendar months immediately preceding the month of the reference date has been at least 2% of the weighted average number of equity shares listed during such 6 months’ period. 
  • Provided that for issuers, whose public shareholding is less than 15% of its issued equity capital, the annualised trading turnover of its equity shares has been at least 2% of the weighted average number of equity shares available as free float during such 6 months’ period.
• Reg 10(e): the issuer has been in compliance with the equity listing agreement for a period of at least 3 years immediately preceding the reference date.
  • Provided that if the issuer has not complied with the provision of the equity listing agreement relating to composition of board of directors, for any quarter during the last 3 years immediately preceding the reference date, but is compliant with such provisions at the time of filing of offer document with the Registrar of Companies (RoC) or designated stock exchange, as the case may be, and adequate disclosures are made in the offer document about such non-compliances during the 3 years immediately preceding the reference date, it shall be deemed as compliance with the condition.

Reg 29: An issuer may offer specified securities at different prices, subject to the following: [Differential Pricing]
(a) retail individual investors or retail individual shareholders or employees of the issuer entitled for reservation (on competitive basis) made under regulation 42 making an application for specified securities of value not more than 1 lakh rupees may be offered specified securities at a price lower than the price at which net offer is made to other categories of applicants: Provided that such difference shall not be more than ten per cent. of the price at which specified securities are offered to other categories of applicants.

Reg 42(4): The reservation on competitive basis shall be subject to following conditions:
(a) the aggregate of reservations for employees shall not exceed 5% of the post issue capital of the issuer [not the erstwhile 10% of issue size].

Also, a new Clause is inserted as:

“(g) value of allotment to any employee in pursuance of reservation made under sub-regulations (1) [reservations when issue made through book building] or (2) [reservations when issue made through OTHER THAN book building], as the case may be, shall not exceed 1 lakh rupees.”

Reg 50: Allotment procedure and basis of allotment.
(1) The allotment of specified securities to applicants other than anchor investors shall be on proportionate basis within the specified investor categories and the number of securities allotted shall be rounded off to the nearest integer, subject to minimum allotment being equal to the minimum application size as determined and disclosed by the issuer.

“Provided that value of specified securities allotted to any person in pursuance of reservation made under clause (a) of sub-regulation (1) or clause (a) of sub-regulation (2) [ie, to employees of issuer] of regulation 42, shall not exceed 1 lakh rupees.”

New Clause: Regulation 55A in Rights Issue: Reservation for employees alongwith rights issue:
55A. Subject to other applicable provision of these regulations the issuer may make reservation for its employees alongwith rights issue subject to the condition that value of allotment to any employee shall not exceed 1 lakh rupees.

 

IDR Amendments

Out of the portion to Qualified Institutional Buyer (QIB), UPTO 30% to Anchor Investors (AI) as per Schedule XI. Allocation to AI shall be made on same day of bidding. AI shall be,

2 or more, if allocation is	UPTO 250 crores
5 or more, if allocation is	ABOVE 250 crores

UPTO 1/3^rd of AI portion is reserved for domestic Mutual Funds (MF).

 

Reg 98: Condition for issue of IDR:

(e) The balance 50% may be allocated among the categories of non-institutional investors and retail individual investors including employees at the discretion of the issuer and the manner of allocation shall be disclosed in the prospectus. Allotment to investors within a category shall be on proportionate basis;

“Provided that atleast 30% of the said 50% IDR issued shall be allocated to retail individual investors and in case of under subscription in retail individual investor category, spill over to the extent of under-subscription shall be permitted to other categories.”

Schedule VIII dealing with DISCLOSURES IN OFFER DOCUMENT, ABRIDGED PROSPECTUS AND ABRIDGED LETTER OF OFFER is amended and in specific cases of this Schedule, the regulations will be implemented w.e.f. 1st January & 1st April 2010.

SCHEDULE XI
[See regulation 28(3) and 102]
BOOK BUILDING PROCESS

The following Paragraph is newly inserted:

“PART D
Alternate method of book building

(may be inspired from French Auction.  In case of Dutch Auction, allotments made at single price (like the existing book building process). In case of French Auction, allotments made at bid price)

In case of further public offers, the issuer may opt for an alternate method of book building, as given in this part subject to the following:
(a) Issuer shall follow the procedure laid down in Part A of this Schedule except clause (13) [determination of price] and clause (15) (a) [proportionate allotment] thereof.
(b) The issuer shall disclose a floor price in the red herring prospectus.
(c) Investors other than retail individual investors shall bid at any price above the floor price.
(d) The bidder who bids at the highest price shall be allotted the number
of securities that he has bided for and then the bidder who has bided at the second highest price and so on, until all the specified securities on offer are exhausted.
(e) Allotment shall be on price priority basis for investors other than retail individual investors.
(f) Allotment to retail individual investors shall be made proportionately as illustrated in this Schedule.
(g) Where, however the number of specified securities bided for at a price is more than available quantity (HEAVY DEMAND), then allotment shall be done on proportionate basis.
(h) Retail individual investors shall be allotted specified securities at the floor price.
(i) The issuer may place a CAP either in terms of No. of specified securities or % of issued capital of the issuer that may be allotted to a single bidder.”

Download SEBI (ICDR) Regulations, 2009 amended as till year 2009.

NOC to release 1% issue amount in SEBI circular and not in DIP/ICDR regulations now, application after 4 months of listing with 2 months for bank guarantee

SEBI - OIAE/Cir-1/2009 dated November 25, 2009

Sub: Issue of No Objection Certificate for release of 1% of issue amount

As per the Listing Agreement with the Stock Exchanges, the issuer company
deposits 1% of the issue amount of the securities offered to the public and/or to the holders of the existing securities of the company, as the case may be, with the designated stock exchange. This amount was being released to issuer companies after obtaining a No Objection Certificate (NOC) from SEBI in accordance with the SEBI (Disclosure and Investor Protection - DIP) Guidelines, 2000.  However, the same provisions had not been found in the amended SEBI (ICDR) Regulations, 2009 which has replaced DIP.  Hence, this circular is issued.

For the purpose of obtaining the NOC, the issuer company shall submit an application on its letter head addressed to SEBI in the format specified in Annexure – A, after lapse of 4 months from listing on the Exchange which was the last to permit listing. The application shall be filed by the post issue lead merchant banker with the concerned designated office of SEBI under which the registered office of the issuer company falls, as specified in Annexure – B. On the date of application, the bank guarantees, if any, included in 1% deposit must have a residual validity of at least 2 months.

SEBI shall issue the NOC after satisfying itself that the complaints arising from the issue received by SEBI against the Company have been resolved to its satisfaction, the Company has been submitting monthly Action Taken Reports on the complaints forwarded by SEBI to the company as per the proforma specified in Annexure – C, and the fees due to intermediaries associated with the issue process including ASBA Banks have been paid.

Debt Listing Agreement amendment & clarification requires Equity Listing Agreement compliance unless excluded by Debt Securities Regulations 2008

SEBI has introduced Simplified Debt Listing Agreement that prescribed norms for issue of public or privately placed debt securities and listing of such securities on the exchange and has also issued Clarification on applicability of SEBI Regulations/ Circulars on Initial and Continuous Disclosures for Convertible and Non-Convertible Debt.

Since Part-A of the Listing Agreement for debt is applicable for debt issuers with already listed equity, it is clarified that the covenants in the Equity Listing Agreement that require submission of a draft offer document to SEBI for observations or obtaining of an acknowledgement card are not applicable in case of an issue of debt securities which is made in terms of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008.

Now, SEBI vide SEBI/IMD/DOF-1/BOND/Cir-5/2009 dated 26th November, 2009 has amended the following in the Debt Listing Agreement:

(a). 100% Asset Cover: To align the Listing Agreement with the provisions of the Companies Act, 1956, the amended Listing Agreement requires issuers to maintain 100% asset cover sufficient to discharge the principal amount at all times for the debt securities issued. Further, to provide more information to investors, the periodic disclosures to the stock exchange shall now require disclosure of the extent and nature of security created and maintained.

(b). Submission of certificate on maintenance of security: As against half-yearly certifications on security cover in respect of listed secured debt securities, the amended Listing Agreement provides for submission of such certificates regarding maintenance of 100% asset cover, and the time limit of submission in respect of the last half year has been aligned with the option provided for submission of annual audited results at a later date. In addition to Banks and NBFCs being exempt from submitting such certificates, issuers of Government guaranteed bonds shall also be exempt.

(c). Statement on Use of Issue Proceeds: In order to enhance the quality of disclosures made to investors, issuers shall be required to furnish a statement of deviations in use of issue proceeds, if any, to the stock exchange on a half yearly basis. Also, the same is required to be published in the newspapers simultaneously with the half-yearly financial results.

(d). Deposit of 1% of issue proceeds: So as to ensure that the interest of investors investing in public issues of debt securities is protected, the issuer shall be required to deposit an amount calculated at 1% of the amount of debt
securities offered for subscription to the public. It is refundable or forfeitable in the manner stated in the Rules, Bye-laws and Regulations of the Exchange.

(e). Submission/ publication of Financial Statements: The time-lines for disclosure of financial statements have been aligned with the proposed changes to the Equity Listing Agreement. Accordingly, issuers would now have to publish/furnish to the Exchange, either audited half yearly financial statements or unaudited half yearly financial statements subject to a limited review within 45 days from the end of the half year. In case of the last half year, issuers may opt to submit their annual audited results in lieu of the unaudited financial results for the period, within 60 days from the end of the financial year.

Click here for detailed amendments in Part A & Part B of Debt Listing Agreement

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.

Conditions:

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:

SECTION III – CONTENTS OF THE LETTER OF OFFER

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.

II. NON SATISFACTION OF ABOVE CONDITIONS

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 6.42.16.2 of Section III.

III. SPECIFIC TYPE OF LISTED COMPANIES

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.

E. Chapter VIII - OTHER ISSUE REQUIREMENTS
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.

SEBI ASBA commission clarification that it shall be treated at par with other applications

SEBI/CFD/DIL/MB/IS/5/2009/05/08 dated 5th August, 2009

ASBA – Application Supported by Block Amount

It is, hereby, clarified that for the purpose of payment of commission,
both type of applications i.e. whether uploaded by Syndicate Members
(Non–ASBA) or by SCSBs (ASBA), shall be treated on par and the
commission shall be paid accordingly to Syndicate Members or SCSBs,
as the case may be.

Know all about ASBA from [SEBI-ASBA] Lets Learn the Concept

RBI Guidelines on IDR for issue, transfer & redemption into Equity which shall be made only after 1 year on compliance of FEMA, SEBI & Company Rules

RBI in order to facilitate the eligible companies resident outside India to issue Indian Depository Receipts (IDRs) through a Domestic Depository and to permit persons resident in India and outside India to purchase, possess, transfer and redeem IDRs, it has been decided to operationalise the IDR Rules, notified by the Government of India, as amended from time to time, with immediate effect.  Before further reading, first understand the basics of IDR from [SEBI-IDR]Lets Learn-Indian Depository Receipt-Meaning & Understanding.

The permission has been granted subject to compliance with the Companies (Issue of Depository Receipts) Rules, 2004 and subsequent amendments made thereto and the SEBI (DIP) Guidelines, 2000, as amended from time to time. In case of raising of funds through issuance of IDRs by financial/banking companies having presence in India, either through a branch or subsidiary, the PRIOR approval of the sectoral regulator(s) should be obtained before the issuance of IDRs.

Investment by Persons resident in India / FIIs / NRIs in IDRs
The FEMA Regulations shall not be applicable to persons resident in India as defined under section 2(v) of FEMA, 1999, for investing in IDRs and subsequent transfer arising out of transaction on a recognized Stock Exchange in India. Foreign Institutional Investors (FIIs) including SEBI approved sub-accounts of the FIIs, registered with SEBI and Non-Resident Indians (NRIs) may also invest, purchase, hold and transfer IDRs of eligible companies resident outside India and issued in the Indian capital market, subject to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 notified vide Notification No. FEMA 20 / 2000-RB dated May 3, 2000, as amended from time to time. Further, NRIs are allowed to invest in the IDRs out of funds held in their NRE / FCNR(B) account, maintained with an Authorised Dealer / Authorised bank.
Fungibility
Automatic fungibility of IDRs is not permitted.
Period of redemption
IDRs shall not be redeemable into underlying equity shares before the expiry of 1 year period from the date of issue of the IDRs.
Procedure for transfer and redemption of IDRs

At the time of redemption / conversion of IDRs into underlying shares, the Indian holders (persons resident in India) of IDRs shall comply with the provisions of the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 notified vide Notification No. FEMA 120 / RB-2004 dated July 7 2004, as amended from time to time. Accordingly, the following guidelines shall be followed, on redemption of IDRs:

1. Listed Indian companies may either sell or continue to hold the underlying shares subject to the terms and conditions as per Regulations 6B and 7 of Notification No. FEMA 120/RB-2004 dated July 7, 2004, as amended from time to time.
2. Indian Mutual Funds, registered with SEBI may either sell or continue to hold the underlying shares subject to the terms and conditions as per Regulation 6C of Notification No. FEMA 120/RB-2004 dated July 7, 2004, as amended from time to time.
3. Other persons resident in India including resident individuals are allowed to hold the underlying shares only for the purpose of sale within a period of 30 days from the date of conversion of the IDRs into underlying shares.
4. The FEMA provisions shall not apply to the holding of the underlying shares, on redemption of IDRs by the FIIs including SEBI approved sub-accounts of the FIIs and NRIs.

Others

The proceeds of the issue of IDRs shall be immediately repatriated outside India by the eligible companies issuing such IDRs. The IDRs issued shall be denominated in Indian Rupees.

Source: RBI/2009-10/106 A.P. (DIR Series) Circular No. 05 dated 22nd July 2009

No Delivery Period for all corporate actions of demat securities, SEBI amends

SEBI vide circular no. SEBI/CFD/DIL/LA/1/2009/24/04 dated April 24, 2009 has reduced the notice period from companies to stock exchanges to atleast 7 working days for all types of corporate actions.

It is decided to do away with ‘no-delivery period’ for all types of corporate actions in respect of the scrips which are traded in the compulsory dematerialised mode and accordingly, short deliveries, if any, of the shares traded on cum-basis may be directly closed out.

In case of such direct close-out, the mark-up price would be as stated in SEBI circular no. SMD/POLICY/Cir-08/2002 dated April 16, 2002.

Source: Abolition of no-delivery period for all types of corporate actions vide MRD/DoP/SE/Cir-07/2009 dated July 21, 2009

One day Anchor investors for 30 day lock in, include convertible instruments period for offer for sale & listing in stock exchanges with nation wide terminals - SEBI DIP amended

Source: http://www.sebi.gov.in//circulars/2009/cfdcir362009.pdf

Compulsory listing of IPO on at least one stock exchange with nationwide trading terminals

It has been decided to amend clause 2.1.4 of the SEBI (DIP) Guidelines to provide that an unlisted company making an IPO shall list the securities being issued through the IPO on at least one stock exchange having nationwide trading terminals.

Convertible Equity shares considered eligible for offer for sale

A shareholder can make an offer for sale of the equity shares if such equity shares have been held for a period of at least one year as on the date of filing the draft offer document with SEBI.  It has been decided to amend clause 4.14.2 of the SEBI (DIP) Guidelines to provide that in case equity shares which are received on conversion of fully paid compulsorily convertible securities, including depository receipts, are being offered for sale, the holding period of such convertible securities as well as that of resultant equity shares together shall be considered for the purpose of calculation of the eligibility period.

Introduction of concept of Anchor Investor in public issues through book building route

In clause 11.3.5 after sub-clause (iia), the following sub clause (iib) shall be inserted :-

Out of the portion available for allocation to Qualified Institutional Buyers (QIB) under sub-clause (i) or (ii) or any proviso thereof, as the case may be, UPTO 30% may be allocated to Anchor Investors subject to the following:
a) Anchor Investors shall necessarily be Qualified Institutional Buyers (QIB) as defined in these guidelines.
b) The minimum application size by an Anchor Investor shall be Rs.10 crores.
c) One-third (1/3rd) of the Anchor Investor portion shall be reserved for domestic mutual funds (MF).
d) The bidding for Anchor Investors shall open one day before the issue opens and shall be completed on the SAME day.
e) Allocation to Anchor Investors shall be on a discretionary basis subject to minimum number of 2 investors for allocation of upto Rs.250 crores and 5 investors for allocation of more than Rs.250 crores.
f) The number of shares allocated to Anchor Investors and the price at which the allocation is made, shall be made available in public domain by the merchant banker before opening of the issue.
g) Anchor Investors shall pay a margin of at least 25% on application with the balance to be paid within 2 days of the date of closure of the issue.

h) If the price fixed for the public issue through book building process is higher than the price at which the allocation is made to Anchor Investors, the additional amount shall be paid by the Anchor Investors. However, if the price fixed for public issue is lower than the price at which the allocation is made to Anchor Investors, difference shall not be payable to the Anchor Investors.
i) There shall be a lock-in of 30 days on the shares allotted to the Anchor Investors from the date of allotment in the public issue.
j) No person related to the book running lead managers/ promoters/promoter group in the concerned public issue or the book running lead managers to the concerned public issue can apply under Anchor Investor category.
k) The parameters for selection of Anchor Investors shall be clearly identified by the merchant banker and shall be available as part of records of the merchant banker for inspection by SEBI.
l) The applications made by Qualified Institutional Buyers under Anchor Investor category and under Non Anchor Investor category may not be considered as multiple applications.

Click here for the Applicability of the Guidelines

Download the amended SEBI DIP Guidelines, 2000 as on date

Comply DIP for fully/partly convertible debt, Comply Debt regulations for Non-convertible debentures, SEBI clarifies

Clarification on applicability of SEBI Regulations/ Circulars on Initial and Continuous Disclosures for Convertible and Non-Convertible Debt

SEBI has introduced Simplified Debt Listing Agreement that prescribed
norms for issue of public or privately placed debt securities and listing of such securities on the exchange.

Now it is clarified that, issue and listing of non-convertible debt securities, whether issued to the public or privately placed, is to be done in accordance with the provisions of the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008. Issue of debt securities that are convertible, either partially or fully or optionally into listed or unlisted equity shall be guided by the disclosure norms applicable to equity or other instruments offered on conversion in terms of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 (which is proposed to be replaced by New ICDR regulations, 2009).

Source: SEBI/IMD/BOND/Cir-2/2009 dated June 23, 2009

SEBI proposes Issue of Capital & Disclosure Requirements (ICDR) Regulations, 2009 for DIP guidelines, 2000

Download SEBI (ICDR) Regulations, 2009 effective 26th August 2009.

SEBI has already issued Delisting Regulations replacing Delisting Guidelines and now has proposed to issue SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 replacing the current SEBI (Disclosure & Investor) Protection Guidelines, 2000.

You can expect there will not be (m)any amendments on the current DIP guidelines hereon…as they are proposing to consider DIP guidelines as on 31st May 2009.

 

Download Proposed SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 now.

Yes, now the said Proposal is approved and the new ICDR regulations has come into force with effect from 26th August 2009 regulating the PUBLIC ISSUE of specified securities and convertible securities.

Understand your Updates, right through your email now

Understand 30 clauses of debt securities listing agreement with 2 parts & 5 annexures under securitised debt instruments regulations, 2008

Simplified Listing Agreement for Debt Securities

SEBI/IMD/BOND/1/2009/11/05 dated May 11, 2009

as amended SCRA enables, SEBI (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008 from 26 may 2008 onwards, SEBI has issued Listing Agreement for debt securities w.e.f. 11th May 2009.

As per Regulation 2(1)(e) of the said regulations, Debt Securities MEANS a non-convertible debt security,

• which create/acknowledge indebtedness AND INCLUDES,
• debentures/bonds/other securities of body corporate/statutory body,
• whether constituting CHARGE on the assets OR not, BUT EXCLUDES,
• bonds issued by Government, Security Receipts (SR) & Securitised Debt Instruments.

The said listing agreement is divided into 2 parts with 30 clauses and 5 annexures.  Kindly note dematerialisation of securities is a pre-condition to listing as per Clause 24.

Part A - Minimum Incremental Disclosures, when equity of the issuer company is listed [Clauses 1 to 11].

Part B – Detailed Disclosures (though fewer than Equity Listing), in all other cases [Clauses 12 to 30].

Part A

(in case issuer’s equity securities are listed)

1. Issuer may, subject to the consent of the debenture trustee, send the information stipulated in Clause 2(a) to (d) in electronic form/ fax.  Issuer (NOT, bank/NBFC) to submit within 1 month a half yearly certificate regarding maintenance of 100% security cover in respect of listed secured debt securities as certified by Practising Company Secretary or practising Chartered Accountant.

2. Issuer (NOT, bank/NBFC) shall disclose EPS along with debt service coverage ratio & interest service coverage ratio in accordance with Clause 4 read with Annexures I, II & III in half yearly/annual results.

3. Issuer to create and maintain security ensuring 100% security cover for listed secured debt securities at all times as per Clause 5.

4. Issuer to send half-yearly report to Stock Exchange WITHIN 1 month of September & March, the details of payment of principal interest, alongwith such other details as per Clause 6.

5. Issuer to use ECS/RTGS/NEFT for the purpose of interest/redemption/repayment and also intimate the expected default as soon as it becomes apparent as per Clause 7 & 8.

6. Issuer to credit DEMAT account of allottees WITHIN 2 working days of allotment as per Clause 9.

7. In case of public issue & listing of debt securities, allotment or refund orders shall be given WITHIN 30 days of closure of public issue or pay interest @ 15% p.a. as per Clause 10.

Part B

(in case of NO listed equity securities or on delisting of equity securities)

1. Issuer to transfer unclaimed interest to IEPF and redeem listed securities on pro rata basis or by lots, UNLESS the issue provides otherwise as per Clause 12.
2. Issuer may, subject to the consent of the debenture trustee, send
   the information stipulated in Clause 13(a) to (d) in electronic form/ fax.  Issuer (NOT, bank/NBFC) to submit within 1 month a half yearly certificate regarding maintenance of 100% security cover in respect of listed secured debt securities as certified by Practising Company Secretary or practising Chartered Accountant.
3. Issuer agrees to send copies of Director’s Annual Report, Balance Sheet and Profit and Loss Account to Debenture Trustees, Stock Exchanges & on request to debt security holders as per Clause 15.
4. Issuer to use ECS/RTGS/NEFT for the purpose of interest/redemption/repayment and issue ‘payable-at-par’ warrants/ cheques for payment of interest and redemption and comply with such other requirements of SEBI/SCRA as per Clause 16.
5. Issuer to credit DEMAT account of allottees WITHIN 2 working days of allotment as per Clause 17.
6. In case of public issue & listing of debt securities, allotment or refund orders shall be given WITHIN 30 days of closure of public issue or pay interest @ 15% p.a. as per Clause 18.
7. Issuer shall promptly notify stock exchange of any change that would affect the rights and obligations of the holders of debt securities and any other information having bearing on the operation/performance of the Issuer as well as price sensitive information, including Clause 19 (a) to (n).
8. In case of book closure/record date, 7 clear working days advance notice to be given to stock exchange as per Clause 20.
9. Issuer to intimate any intention to issue new debt securities and also make listing application for the same.  Any material modification in terms of debentures requires prior approval of Stock Exchange as approved by Board of Directors & Debenture Trustees [Clause 21].
10. As per Clause 22, Issuer to designate the Company Secretary or any
    other person as Compliance Officer.
11. Annual listing fees to be paid on or before 30th April every year [Clause 23].
12. Issuer to send notice of meetings & half-yearly report to Stock Exchange WITHIN 1 month of September & March, the details of payment of principal interest, alongwith such other details as per Clause 27.
13. As per Clause 28, Issuer to give Annual Disclosures in Annual Report with respect to its parent & subsidiary companies along with Cash Flow Statement in accordance with AS-3.
14. The Issuer shall,  [Clause 29]
    • WITHIN 48 hours of the conclusion of the Board/Council/Sub Committee Meeting, publish the unaudited financial results in at least one English daily newspaper (which is signed by MD/Executive Director). 
    • Furnish Unaudited Financial Results (Ann I/II/III) to Stock Exchange WITHIN 1 month of half-year.
    • Furnish Limited Review Report (Ann IV/IV) by statutory auditors (PCA for Public Sector) to Stock Exchange WITHIN 1 month of the month of publication of Unaudited financials.
    • Issuer has the option to furnish audited report WITHIN 3 months of financial year (for last half-year) with advance intimation to stock exchange.
    • address qualifications in audit report, if any.

Issuer shall comply with the said agreement and all provisions of  securities laws.  ‘Securities Laws’ mean the SEBI Act, 1992, the Securities Contracts (Regulation) Act, 1956, the Depositories Act, 1996 and the provisions of the Companies Act, 1956 which are administered by SEBI under section 55A thereof, the rules, regulations, guidelines etc. made under these Acts and the Listing Agreement for debt securities.  Issuer also has the option to apply for relaxation of strict enforcement of provisions, in which case Stock Exchange may grant exemption with prior approval of SEBI.

Thus, now Debt Securities has a separate regulation and separate listing agreement.

New Clause 5A&20A in Listing Agreement as amended-unclaimed shares,common notice period, dividend per share basis&voting rights pattern are the updates…

Click here for the amendments in Listing Agreement as on 24th April 2009 http://www.sebi.gov.in/circulars/2009/circfd04.pdf

All the following amendments shall come into force with immediate effect.

To put it simply,

• The unclaimed shares in escrow account shall be transferred to Demat Suspense A/c. after 3 reminders, including corporate benefits, if any and its voting rights will be frozen until claimed.
• The timelines of notice period for record date & board meeting, which were applicable only to rights issue is now made applicable for all corporate actions including mergers, demergers, bonus, buy back, etc…
• “The Issuer agrees to declare and disclose the dividend on per share basis only”.  So, you won’t see hereon 100% or 200%, etc…
• Shareholding pattern to be given for each class of security and voting rights pattern also to be given.

Uniform procedure for dealing with unclaimed shares – Insertion of clause 5A in Listing Agreement
It has been brought to the notice of the Board that there is a large quantum of shares issued pursuant to the public issues, which remain unclaimed despite the best efforts of the Registrar to Issue or Issuers and that there is no uniform practice for dealing with such shares.

It has been decided to provide a uniform procedure for dealing with unclaimed shares i.e., shares which could not be allotted to the rightful shareholder due to insufficient/incorrect information or any other reason (in escrow A/c.). Accordingly, the new Clause 5A is to be inserted, which, inter alia, provides the following:

• The unclaimed shares shall be credited to a demat suspense account opened by the issuer with one of the depository participants after giving 3 reminders at the address mentioned in the depositories database. [Cl 5A(a)]
• Any corporate benefit in terms of securities, accruing on unclaimed shares such as bonus shares, split etc., shall also be credited to such account. [Cl 5A(b)]
• Details of shareholding of each individual allottee whose shares have been credited to such suspense account shall be properly maintained by the issuer. [Cl 5A(c)]
• The allottee’s account shall be credited as and when he/she approaches the issuer, after undertaking the proper verification of identity of the allottee. [Cl 5A(d)]
• The voting rights of these shares will remain frozen till the rightful owner claims the shares. [Cl 5A(f)]
• Details (in aggregate) of shares in the suspense account including freeze on their voting rights, shall be disclosed in the Annual Report as long as there are shares in the suspense account. [Cl 5A(g)]

Notice period for Record Date and Board Meeting – Amendments to clause 16 and clause 19
It has been decided to reduce the timelines for notice period for all corporate actions like dividend, bonus, rights, mergers, demergers, splits, etc, for all scrips whether in demat or physical, whether in F&O segment or not.

The notice period for record date has been reduced to 7 working days (now there is no confusion of whether 30 days or 21 days or 15 days or 7 days) and for board meeting has been reduced to 2 working days (now there is no confusion of whether 7 days or 2 days). 

Kindly note, it is the board meeting intimation where buy back is proposed to be considered as per Cl 19(d) is also 2 working days (not 7 days as earlier).

Uniformity in dividend declaration – Insertion of clause 20A
It has been decided to mandate that listed companies shall declare their dividend on per share basis only. This is expected to bring uniformity in the manner of declaring dividend amongst the listed companies.

 

Cl 20A - “The Issuer agrees to declare and disclose the dividend on per share basis only”.

 

Shareholding pattern for each class of shares and voting rights pattern – Amendment to clause 35
It is clarified that clause 35 of the listing agreement which gives a format for disclosures of shareholding pattern, is required to be given for each class of security separately. Further, it has been decided to amend clause 35 to provide an additional format for disclosures of voting rights pattern in the company.  For the new formats, click http://www.sebi.gov.in/circulars/2009/circfd04.pdf or wait for the amendments in Listing Agreement.

[IDR]Only audited financial statements, neither affairs/status & IOSCO recognised & Interim audit, if more than 180 days

G.S.R 251 (E) - Companies (Issue of Indian Depository Receipts) (Second Amendment) Rules, 2009.  dated 15th April 2009

In the Schedule to IDR Rules (Matters to be specified in Prospectus), under Point No.6 – REPORTING,

6 (i) - Where the law of a country, in which the Issuing company is incorporated, requires annual statutory audit of the accounts of the Issuing company, a report by the statutory auditor of the Issuing company, in such form as may be prescribed by SEBI on -
(A) the audited financial statements and financial status (deleted) of the Issuing Company in respect of 3 financial years immediately preceding the date of prospectus, and
(B) (amended) the interim audited financial statements in respect of the period ending on a date which is less than 180 days prior to the date of opening of the issue, if the gap beween the ending date of the latest audited financial statements disclosed under clause (A) and the date of the opening of issue is more than 180 days.

Provided that if the gap between such date of latest audited financial statements and the date of opening of issue is 180 days or less, the requirement under clause (B) shall be deemed to be complied with if a statement, as may be specified by SEBI, in respect of changes in the financial position of issuing company for such gap is disclosed in the Prospectus.

Provided further that in case of an Issuing Company which is a foreign bank incorporated outside India and which is regulated by a Central Bank which, in turn, is (deleted) a member of Bank for International Settlements or a member of the International Organisation of Securities Commission (IOSCO) which is a signatory to a Multilateral Memorandum of Understanding with India, the requirement under this paragraph, in respect of period beginning with last date of period for which the latest audited financial statements are made and the date of prospectus shall be satisfied, if the relevant financial statements are based on limited review report of such statutory auditor.

 

6(ii) - Where the law of the country, in which the Issuing company is incorporated, does not require annual statutory audit of the accounts of the Issuing company, a report, in such form as may be specified by SEBI, certified by a Chartered Accountant in practice within the terms and meaning of the Chartered Accountant Act, 1949 on -
(A) the financial statements (affairs) of the Issuing Company, in particular on the profits and losses for each of the 3 financial years immediately preceding the date of prospectus and upon the
assets and liabilities of the Issuing Company and

(B) (amended) the interim financial statements in respect of the period ending on a date which is less than 180 days prior to the date of opening of the issue, if the gap beween the ending date of the latest audited financial statements disclosed under clause (A) and the date of the opening of issue is more than 180 days.

Provided that if the gap between such date of latest audited financial statements and the date of opening of issue is 180 days or less, the requirement under clause (B) shall be deemed to be complied with if a statement, as may be specified by SEBI, in respect of changes in the financial position of issuing company for such gap is disclosed in the Prospectus.

For the status hitherto, click http://yehseeyes.blogspot.com/2009/01/idr-rules-amendednon-residents-can.html

File Offer Documents (50 crores) at SEBI Western Regional Office, Ahmedabad from 1st May 2009

Schedule XXII of SEBI (DIP) Guidelines, 2000 (click here for the latest guideline) got amended enabling Merchant Bankers  to file the draft offer documents (public issue & rights issue) of size up to Rs. 50 crores, of the companies whose registered office falls in Gujarat and Rajasthan, with the regional office of SEBI in Ahmedabad.

Securities and Exchange Board of India

Western Regional Office

Unit No: 002, Ground Floor, SAKAR I,

Near Gandhigram Railway Station,

Opposite Nehru Bridge, Ashram Road,

Ahmedabad – 380 009.

Phone: (079) 26583633, 26583634 and 26583635.

Click here for the said circular http://www.sebi.gov.in/circulars/2009/cfdcir04.pdf

Download SEBI DIP Guidelines as on 24th February 2009 with Amendments, Update & its Understanding with respect to offer document, preferential, etc...

The SEBI (Disclosure & Investor Protection) Guidelines amended on 24th February 2009 and click here to download the amended full SEBI (DIP) Guidelines, 2009 @ http://www.sebi.gov.in/guide/dip2009.pdf

Major highlights by CS Adhithya of Cool CS:

1. Timelimit for bonus issue reduced to 15/60 days from the date of Board meeting [erstwhile 6 months]
2. Enhanced the period of validity of observation letter issued by SEBI to 12 months [erstwhile 3 months]
3. Floor price or price band can be announced after registration of RHP with RoC but 2 working days before issue opens
4. Enhanced the upfront amount payable on Preferntial allotment from 10 to 25%

The brief of the amendments are as under:

Opening of Public Issue

An issue shall open within 12 months from the date of issuance of the observation letter by SEBI, if any or within 3 months from the 31st day from the date of filing of the draft offer document with SEBI, if no observation letter is issued.

Requirement of filing updated offer document

File an updated offer document with SEBI, highlighting all changes made in the document and in case of 'significant changes' in the offer document, it shall be filed with SEBI atleast 1 month before filing final prospectus with RoC/SE;

Change in Timelines of Bonus Issue

Shall be completed WITHIN 60 days from the Date of Board Resolution, where-in bonus was announced subject to Shareholders approval OR WITHIN 15 days from the Date of Board Resolution authorising such issue. Once resolved, the board shall not have the option of changing the decision.

Option not to disclose the floor price or price band

Where the issuer has not disclosed floor price or price band in prospectus filed with RoC/SE, it shall be disclosed atleast 2 working days before opening of the bid in case of IPO and atleast 1 working day before the opening of the bid in case of FPO, by way of an announcement in all thenewspapers in which the pre-issue advertisement was released by the issuer or the merchant banker;

Justification for Price in some cases

Justification for price is required to be given in the Offer Document and further, if the Issuer has not disclosed floor price or price band in the prospectus and taken an option to disclose it before 2 working days (for IPO) or 1 working day (for FPO) before opening of an issue, then, announcement shall contain the relevant financial ratios, computed for both upper and lower end of the price band and the basis of issue price or prescribed statements to guide investors in RHP which are,

(a) a statement that the floor price or price band, as the case may be, shall be disclosed at least two working days (in case of an initial public offer) and at least one working day (in case of a further public offer) before the opening of the bid);

(b) a statement that the investors may be guided in the meantime by the secondary market prices (in case of a further public issue);

(c) names and editions of the newspapers where the announcement of the floor price or price band would be made;

(d) names of websites (with address), journals or other media in which the said announcement will be made.

Preferential Allotment of Warrants

For preferential allotment of warrants minimum 25% paid at the time of allotment upfront and if warrant is not exercised, then such 25% money is forfeited.

Lock-in Requirements under Preferential Issue

Shares issued to Promoters (UPTO 20% Post-Issue Capital)	Lock-in for 3 years
Total Post-Issue Capital UPTO 20%	Lock-in for 3 years
Shares issued as Preferential allotment to promoter or promoter group [other than above] or to others	Lock-in for 1 year

Note: Lock-in of convertible instruments (other than Warrants) shall be reduced to the extent of lock-in of such convertible instruments.

Requirements when listed less than 6 months & lock-in

If the Co is listed for less than 6 months, then for such issue (other than to QIB's upto 5) consider the highest of IPO price or Value per share as 391 to 394 Scheme or average weekly high & low closing prices of such period or 2 weeks preceeding relevant date and recompute the price after 6 months, the difference shall be paid by the allottees to the company, otherwise such securities shall continue lock-in till the amount is paid.

Impact of Relaxation under Regulations 29A of Takeover Code

Shareholder (to whom preferential allotment is made) should not have sold such shares during last 6 months (unless relaxed u/R 29A of SEBI Takeover Code).

Preferential Allotment should be completed WITHIN fifteen days from the passing of the resolution (unless relaxed u/R 29A of SEBI Takeover Code).

Copies of Certificate of Statutory Auditor of the Company (Pracitsing CA certificate is allowed only when relaxation u/R 29A of SEBI Takeover Code) certifying that such issue is in compliance with the requirements of the SEBI guidelines, has to be laid @ the General Meeting convened to get the approval for issue of shares.

In case of relaxations granted under Regulation 29A of SEBI Takeover Code, the requirements regarding pricing, lock-in, disclosures in explanatory statement and Certification shall not be applicable to preferential allotment of equity shares, fully convertible debenture and partly convertible debentures ONLY IF an adequate disclosure about the plan is given in the Explanatory Statement.

Exemption from Rule 19(2)(b)

There is a relaxation of the strict enforcement of requirements of rule 19(2)(b) [requirement of 25% of offer to public on initial listing] of the SCRR, 1957 where an unlisted company intends to list its shares issued to the shareholders of a listed company pursuant to a scheme of arrangement approved by a High Court, without making an initial public offer OR for proposal for listing of Equity shares with differential rights as to dividend, voting or otherwise, offered through rights or bonus issue OR Warrants issued along with Non Convertible Debentures through Qualified Institutions Placement by a listed issuer.

Click here to see the applicability of the amendments @ http://www.sebi.gov.in/circulars/2009/dip342009.pdf

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[IDR rules amended]Non residents can invest, if issuing company gets RBI approval & Can be redeemed after issue

G.S.R 35 (E) - Companies (Issue of Indian Depository Receipts) (Amendment) Rules, 2009 (Amendment of Companies (Issue of IDRs) Rules, 2004) - Click here for the amendment

IDRs issued by an issuing company may be purchased, possessed and transferred by a person other than a person resident in India [in addition to person resident in India as earlier] if such Issuing Company obtains specific approval from Reserve Bank of India in this regard or complies with any policy or guidelines that may be issued by RBI on the subject matter".

• The words "Indian resident" wherever occurring shall be substitued with the words "holder of IDRs".
• No letter of offer for issue of IDR, only prospectus shall be filed with SEBI.
• IDRs may be redeemable into the underlying equity shares even before the expiry of the erstwhile one year period from the date of the issue of the IDRs.
• Depository as per Depositories Act is not connected with the rules and hence the definition is deleted. The IDR rules is concerned only with the "Domestic Depository" which means custodian of securities registered with SEBI and authorised by the issuing company to issue IDR.

The new definition of "Overseas Custodian Bank": Overseas Custodian Bank means a banking company which is established in a country outside India and which acts as custodian for the equity shares of Issuing Company, against which IDRs are proposed to be issued by having a custodial arrangement or agreement with the Domestic Depository or by establishing a place of business in India.".

The existing "Continuous Disclosure Requirements" such as issuer company to get certificate from Chartered Accountant about utilization of funds and its variation from the projections of utilization of funds in quarterly intervals and shall also publish it or cause to be published in one of the English language newspapers having wide circulation in India is dispensed with. Continuous Disclosure Requirements may be prescribed by SEBI.

There are following amendments in the Schedule,
Where the law of a country, in which the Issuing company is incorporated, requires annual statutory audit of the accounts of the Issuing company, a report by the statutory auditor of the Issuing company, in such form as may be prescribed by SEBI on -
(A) the audited financial statements and financial status of the Issuing Company in respect of 3 financial years immediately preceding the date of prospectus, and
(B) the financial status of the company for the period between the last date of the period for which latest audited financial statements are made and the date of prospectus:
Provided that in case of an Issuing Company which is a foreign bank incorporated outside India and which is regulated by a Central Bank which, in turn, is a member of Bank for International Settlements, the requirement under this paragraph, in respect of period beginning with last date of period for which the latest audited financial statements are made and the date of prospectus shall be satisfied, if the relevant financial statements are based on limited review report of such statutory auditor.

Where the law of the country, in which the Issuing company is incorporated, does not require annual statutory audit of the accounts of the Issuing company, a report, in such form as may be specified by SEBI, certified by a Chartered Accountant in practice within the terms and meaning of the Chartered Accountant Act, 1949 on -
(A) the financial affairs of the Issuing Company, in particular on the profits and losses for each of the 3 financial years immediately preceding the date of prospectus and upon the
assets and liabilities of the Issuing Company and
(B) the financial status of the company for the period between the last date of the period for which the latest financial statements are made and the date of prospectus.

Further in both the cases, the gap between date of opening of issue and date of reports under the said subparagraphs shall not exceed 120 days.

Understand or read about IDR in http://yehseeyes.blogspot.com/2008/09/sebi-idrlets-learn-indian-depository.html

Thats it, enjoy reading http://www.mca.gov.in/MinistryWebsite/dca/notification/pdf/GSR35(E)_20jan2009.pdf

[SEBI-DIP] non-convertible debentures with warrants allowed in QIP

Issuance of "Non-convertible Debentures with Warrants" (i.e., NCDs with warrants) under Chapter XIII-A

SEBI vide circular No. SEBI/CFD/DIL/DIP/33/2008/08/12 dated 8^th Dec 2008 made the following amendments in Chapter XIII-A of the SEBI (DIP) Guidelines on "Guidelines for Qualified Institutions Placement (QIP)" enable a listed company to make a combined offering of Non-Convertible Debentures (NCDs) with warrants. Qualified Institutional Buyers (QIBs) can subscribe to the combined offering of NCDs with warrants or to the individual instruments, i.e., either NCDs or warrants, where separate books are run for NCDs/ warrants.

The company is however required to obtain relaxation from the applicability of the provisions of Rule 19(2)(b), read with Rule 19(4) of the Securities Contracts (Regulation) Rules, 1957 for listing/ trading of the warrants.

The amendments made vide this circular shall come into force with immediate effect.

Click here to get the amended DIP guidelines

Thanks & Regards
Alagar
CSChennai
Mobile: 919790906827 / 919884731993
email id: alagarcs@gmail.com; csalagar@yahoo.in

[SEBI]FAQ/Notes for CS Executive Program on Securities Law & Compliances

Yes, the Securities Exchange Board of India (SEBI) is helping ICSI students at the very right time by publishing an updated Frequently Asked Questions (FAQ) on various topics covered under Module-II, Paper 6 - "Securities Law and Compliances" of Company Secretary Executive Program.

It can really help you to understand the subject in a lucid manner, the most jolly way.

Now, CS friends can enjoy reading & win the forthcoming CS exams with ease.... Follow the following links...

FAQ-Issues

• Issues by Indian companies in India
• Issues by foreign companies in India (Indian Depository receipts)
• IPO Grading
• Electronic Clearing Scheme (ECS) for refunds
• Applications Supported by Blocked Amount (ASBA) Process

FAQ-Secondary Market

FAQ-Mutual Funds

FAQ-Foreign Institutional Investors

FAQ-Dematerialisation

FAQ-Derivatives

FAQ-Straight Through Processing

FAQ-Collective Investment Schemes

FAQ-Buyback of Securities

FAQ-Portfolio Managers

FAQ-Delisting

FAQ-Consent Orders

Enjoy FAQuin....

[SEBI-IDR]Lets Learn-Indian Depository Receipt-Meaning & Understanding

Credits to Mr. CS Pradeep for this wonderful presentation

LET’S LEARN

IDR - Indian Depository Receipt

IDR – the concept:

 

Concept of IDR introduced in 2004 through Companies (issue of IDR) Rules.

 

What is an IDR?

 

An IDR is an instrument in the form of a depository receipt created by a Domestic Depository in India against the underlying equity of issuing company.

 

Objective of IDRs:

 

The objective of IDR is to enable foreign issuers to raise funds from the Indian Financial Markets.

 

Legal Framework for IDRs:

 

The following is the legal framework as regards IDRs:

 

a. Companies Act –

 

l      General power to make rules (Section 642)

l      Specific power to make rules (Section 605A)

 

     b. Chapter VIA of the SEBI (DIP) Guidelines, 2000.

 

Eligibility criteria for IDR issuers:

 

As per the IDR rules an IDR issuer should satisfy the following:

 

l      Pre-issue paid-up capital and free reserves of the issuer company are at least US$ 50 millions

 

l      A minimum average market  capitalization in its domestic country of at least US$100 millions during the last 3 years

 

l      Trading record/history in India or elsewhere for at least 3 years

 

l      Track record of distributable profits for at least 3 out of immediately preceding 5 years

 

l      Equity shares offered in a financial year shall not exceed 25% of the post issue number of equity shares of the company

 

l      Fulfill eligibility criteria laid down by SEBI

 

SEBI’s powers under the IDR Rules:

 

Policy – related:

l      Specify additional eligibility criteria

l      Specify additional disclosures

 

Operational:

l      Give permission to come with IDR issue

l      Call for further information

l      Give observations on the offer document

 

Exercising the above powers, SEBI has laid down:

l      Disclosures in offer documents

l      Listing agreement

 

Other important points w.r.t. IDRs:

 

a.     Automatic fungibility of IDRs is restricted by RBI.

b.     NRIs and FIIs cannot purchase or possess IDRs unless special permission is taken from RBI.

c.      Repatriating proceeds of IDR issues out of India would entail permission of RBI.

d.     Size of IDR issue not to be less than Rs.50Cr.

e.     IDR issuers prohibited from issuing securities by home regulator not allowed.

 

New amendments made to Chapter VIA of DIP Guidelines and approved by the Board:

 

a.     All investors can now invest in an IDR issue, as opposed to only QIBs earlier.

b.     The minimum application size in an IDR issue has been reduced from Rs.2,00,000 to Rs.20,000/-.