[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-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/-.

[Learn Labz] Company Secretary Executive Program Full Day session [27.7.2008] on Securities Law @ Chennai

Yes, ------------------INVITING you ALL------------------


The Research has begun.....to increase the SUPPLY of Company Secretaries from Chennai.

Learn Labz has Arrived ! Forget your Study ISSUES, we are here to experiment & find SOLUTIONS for you. Now, the first Introductory Brainstorming Labz on Module II of CS Executive Program, Paper 6: "Securities Law & Compliances". Yes, in the Labz way of learning. Enjoy & relish with us for the Whole Day.


Check out the Knowledge Revolution from Chennai with Eminent Specialists & Technicians on every topic of Securities Law. Feel the pulse.


The Learning sessions are divided as follows: [on 27.7.2008]

Learn Labz Session	Timing	Topic of Research
Registration	0800 AM to 0830 AM	Registration & Interaction
Issue of the Day	0830 AM to 0930 AM	Discussion on "Securities Law"as a part of CS Executive Program
Labz I	0930 AM to 1130 AM	SEBI, SCRA, Stock Exchanges, Credit Rating & Depositories
Labz II	1130 AM to 0130 PM	DIP Guidelines, including ESOP, Bonus, ADR, IDR & Others
Labz III	0215 PM to 0415 PM	Intermediaries, Instruments, Mutual Fund, CIS, VCF, Money & Debt Market
Labz IV	0415 PM to 0615 PM	Listing Agreement, Buy Back & Investor Protection

You can submit your Registration Form now.

Details in http://csexecutiveprogram.blogspot.com/


Mail in csexecutiveprogram@gmail.com


For Learn Labz....experimenting with learning

Amendments in SEBI DIP Guidelines

Dear All,

The SEBI has made certain amendments in SEBI (Disclosure and Investor Protection) Guidelines, 2000 vide Circular No. SEBI/CFD/DIL/DIP/28/2007/29/11 dated 29 ^th November 2007 (Today). The gist of amendments is;

1. Introduction of Fast Track Issues (FTIs).

As per existing SEBI (DIP) Guidelines, if existing listed Company wants raise funds from the public either through rights issue or follow on public issue, it needs to comply with procedural formalities as in the case of Initial Public Offering (IPO). The SEBI has come out with Press Release relating FTIs, as it is felt that there is a need to enable well established and compliant listed companies to access Indian primary market in a time effective manner through follow-on public offerings and rights issues. Accordingly, it has been decided to enable listed companies satisfying certain specified requirements to make Fast Track Issues (FTIs).

The amendments made vide this circular to enable well established listed Companies to proceed with follow-on public offering / rights issue by filing a copy of the Red Herring Prospectus (in case of book built issue) / Prospectus (in case of fixed price issue) registered with the Registrar of Companies or the letter of offer filed with Designated Stock Exchange, as the case may be, with SEBI and stock exchanges. Such companies are not required to file draft offer document with SEBI and stock exchanges.

2. Amendments regarding Issue of Indian Depository receipts (IDRs).

As per existing provisions only QIP can apply in an IPO of IDRs. Now, vide this amendment it has been decided to allow all categories of investors to apply in IDR issues, subject to the condition that;

• at least 50% of the issue being subscribed by QIBs, and
• the balance being made available for subscription to other categories of investors at the discretion of the issuer, which shall be disclosed in the prospectus. Further, it has been decided to reduce the minimum application value in IDR from Rs. 2,00,000/- to Rs. 20,000/- and to carry out certain consequential amendments to SEBI (DIP) Guidelines pursuant to amendments to IDR rules by the Ministry of Corporate Affairs.

3. Quoting of PAN mandatory:

Presently, as per SEBI (DIP) Guidelines, all applicants in public and rights issues are required to disclose their PAN/GIR in the application form if they are making an application for a value exceeding Rs. 50,000/-. It has been decided to extend the requirement of quoting PAN in application forms to all applicants, irrespective of the application value.

4. Discount in issue price for retail investors / retail shareholders:

Presently, SEBI (DIP) Guidelines do not provide for issuance of shares at differential price to investors within the net public offer category. SEBI has been receiving requests to permit issuance of shares to retail individual investors / retail individual shareholders at a price lower than that being offered to other categories. It has now been decided to introduce a provision in SEBI (DIP) Guidelines, permitting companies making public issues to issue securities to retail individual investors / retail individual shareholders at a discounted price, provided that such discount does not exceed 10% of the price at which securities are issued to other categories of public.

5. Definition of "Retail individual shareholder" for listed companies:

Presently, listed companies making public issues can make reservation on competitive basis for its existing shareholders who, as on the record date, are holding shares worth up to Rs. 50,000/-. However, no limit has been set on the value of the application that can be made by such shareholders. It has now been decided to define the term "Retail Individual Shareholder" to mean a shareholder whose shareholding is of value not exceeding Rs. 1,00,000/- as on the day immediately preceding the record date, and who makes application or bids in a public issue for value not exceeding Rs 1,00,000/-.

6. Clarification on the term CEO / CFO:

SEBI (DIP) Guidelines requires all directors, CEO and CFO of the issuer company to certify that disclosures made in the offer document are true and correct. It is now clarified that the terms "CEO" and "CFO" in SEBI (DIP) Guidelines shall have the same meaning as assigned to them in clause 49 of the Equity Listing Agreement.

7. Deletion of the chapter on "Guidelines for Issue of Capital by Designated Financial Institutions (DFIs)":

SEBI had introduced separate guidelines in 1992 for primary issuances by DFIs, to place companies / corporations / institutions engaged mainly in financing of developmental activities and playing a catalytic role in the infrastructure development of the country on a different footing. compete on equal footing with private entities and it is felt that DFIs, as a concept, may have outlived its utility. It has therefore been decided to remove the special dispensations given to DFIs by deleting the chapter on "Guidelines for Issue of Capital by DFIs" from SEBI (DIP) Guidelines.

8. Monitoring of issue proceeds:

Presently, as per SEBI (DIP) Guidelines, every issuer making an issue of more than Rs. 500 crores is required to appoint a monitoring agency, which is required to file a monitoring report with SEBI for record purpose. It has been decided that this provision shall not apply to (i) issues by banks and public financial institutions and (ii) offers for sale. Further, it has been decided that the

monitoring agency shall henceforth be required to file the monitoring report with the issuer company and not with SEBI, so as to enable the company to place the report before its Audit committee.

9. Amendments to Guidelines for Preferential Issues:

It has been decided that listed companies intending to make preferential allotment shall be required to obtain PAN of each of the applicants of the preferential issue before making the preferential allotment.

10. Miscellaneous amendments:

· SEBI issues standard observations as a supplement to issue-specific observations on each and every draft offer document filed with SEBI. These standard observations are being rationalised / reviewed. Accordingly, it has been decided to amend SEBI (DIP) Guidelines to incorporate certain clauses from the standard observations, essentially those pertaining to confirmations, undertakings, documents, information, etc., to be submitted by the Lead Manager/s to the Issue while filing an offer document with SEBI. Lead Managers shall also be required to file as an annexure to the due diligence certificate, a detailed check list indicating compliance of each of the clauses of the relevant chapters of SEBI (DIP) Guidelines.

· SEBI (DIP) Guidelines contain certain provisions, which have become redundant or need to be aligned with other provisions of SEBI (DIP) Guidelines / the Companies Act, 1956 or in respect of which, there have been requests for exemption on regular basis. Consequently, it has been decided to fine-tune the guidelines by modifying such clauses.

Thanks & Regards
Alagar
Karvy Investor Services Limited