Topic 353
DO YOU WISH TO ENLIST YOUR SECURITIES
WITH A RECOGNISED STOCK EXCHANGE?
1. See the administrative guidelines governing listing of
securities and ensure that the issue of capital conforms thereto.
2. Please note that at least ten per cent (10%) or twenty‑five
per cent (25%) as the case may be of each class or kind of securities issued by
you should be offered to the public for subscription.
3. Further note that the minimum issued equity capital of the
company must be Rs. 3 crores of which the minimum offer to the public must be
Rs. 1.80 crores. [Letter No. 1/1/SE/88, dated 15‑2‑1989 issued by
Stock Exchange Division, Ministry of Finance] . [Please see item 'D' below].
4. Keep in mind that minimum of ten per cent (10%) or 25% as
the case may be of the issue should be offered for public subscription through
advertisement in newspapers for a period not less than two days and the
applications received in pursuance of such offer should be allotted.
5. Further keep in mind that at least 10% of each class or kind
of securities issued by your company can be offered to the public for
subscription subject to the following conditions :-
(i) minimum 20 lakh securities (excluding reservation, firm
allotment and promoters contribution) should be offered to the public;
(ii) the size of the offer to the public that is the offer price
multiplied by the number of securities offered to the public should be minimum
Rs. 100 cores; and
(iii) the issue should be made only through book building method
with allocation of 60% of the issue size to the qualified institutional buyers
as specified by SEBI.
6. Note that an unlisted company, with a commercial operation
of less than two years and proposing to issue securities to the public so that
the post issue paid‑up capital of the company would be Rs. 3 crores but
not more than Rs. 5 crores are eligible to apply for listing of the securities,
only on those stock exchange(s) where trading of securities is screen based
and further if market makers are appointed on all the stock exchanges where
securities are listed/proposed to be listed.
7. Note
that the appointment of market makers is subject to the following conditions:
(a) at least one market maker undertakes to make market for a
minimum period of 18 months and at least one additional market maker undertakes
to make market for a minimum period of 12 months from the date on which the
securities are admitted for dealing;
(b) buy and sell quotes offered by the market maker shall be with
a minimum depth of 3 marketable lots;
(c) the bid‑ask spread (difference between quotations for
sale and purchase) shall not at any time exceed 10%;
(d) the inventory of the market maker shall, as on the date of
allotment of the securities, comprise of at least 5% of the post‑issued
capital of the company. [Clause 8.1.3 of the Guidelines].
8. Keep in mind that only those unlisted companies whose
capital after the proposed issue of securities is less than Rs. 3 crores will
be eligible to be listed only on the OTCEI [Clause 8.1.4 of the Guidelines].
9. Please note that it is obligatory to have the shares listed
on the Regional Stock Exchange nearest to your registered office.
10. Further note that Mumbai Stock Exchange has raised the
threshold limit of issued equity capital for listing of new companies to Rs. 10
crores with effect from 25‑2‑1996.
11. In case your company is an existing company listed on any
other stock exchange and now seeking listing on BSE, your company should fulfil
the following criteria:
(i) minimum
issued capital of Rs. 5 crores;
(ii) minimum
book value of Rs. 10 crores (capital plus free reserves); and
(iii) minimum
market capitalisation of Rs. 15 crores.
12. Keep in mind that new companies having registered office in
Maharashtra or for whom Mumbai Stock Exchange is to be the Regional Stock
Exchange as per existing listing requirement and which intend to have post‑issue
capital of less than Rs. 5 crores, the Regional Stock Exchange would be Pune.
Alternatively such companies can seek enlistment with OTCEI.
13. If your company is having a paid‑up capital of Rs. 5
crores or more, it should get the shares listed on at least one more stock
exchange, in addition to the Regional Stock Exchange. [Letter No. 14(2)/SE/85,
dated 23‑9‑1985 issued by the Stock Exchange Division, Ministry of
Finance].
14. Discuss with the Stock Exchange the preliminary arrangements
of enlisting and obtaining a Listing Application Form from the Stock Exchange
Office.
15. See
that the Prospectus conforms to the following conditions:
(i) Subscription list would not be kept open for a period
exceeding ten working days when the issue is underwritten by All‑India
public financial institutions and for a period exceeding twenty‑one days
when the issue is not so underwritten;
(ii) No undue restrictions should be placed on applications by
nonresident Indians and persons of Indian origin resident abroad;
(iii) Applications and application moneys would be received at all
centres where there are recognised Stock Exchanges and application moneys may
be paid in cash or by cheques or drafts drawn on any scheduled bank located at
such centres and refund order of applications, if any, will also be made
payable at par at such centres;
(iv) Application
forms should contain the following self‑explanatory instruction:
"Where the application is for shares of the
face value of Rs. 50,000/‑ or more, the applicant, or in the case of
applications in the joint names, each of the applicants, should mention his
permanent account number allotted under the Income‑tax Act, 1961 or where
the same had not been allotted, the GIR number and the Income‑tax
Circle/Ward/District. In cases where neither the permanent account number nor
the GIR number has been allotted, the fact of non‑allotment should be
mentioned in the application forms. Application forms without this information
will be considered incomplete and will be liable to be rejected." [Clause
6.23.2.2 (b) (iii) of the Guidelines].
(v) The application forms should have perforated acknowledgment
slips which should be stamped by the receiving banks and handed over to the
applicants on receipt of the applications. The acknowledgment slips should bear
identification numbers which should also appear on the application forms;
Please also note that you can print two application forms with the Abridged
Prospectus. The two forms should have different serial numbers and should be
detachable along the indicated perforated line.
(vi) Applications should be invited in units or multiples of five
hundred or fifty shares for shares of the nominal value of Rs. 10/‑ or
Rs. 100/‑ respectively;
(vii) Multiple applications should be discouraged and the Board of
Directors reserves the right to reject in its absolute discretion all or any
multiple applications;
(viii) All application forms should be accompanied by a copy of the
Abridged Prospectus/Prospectus. [Section 56(3)].
(ix) Instructions to applicants to mention the number of
application form on the reverse of the instruments to avoid misuse of
instruments submitted along with the applications. [Clause 6.23.2.2(b)(i) of
the Guidelines].
(x) Provision in the application form for inserting particulars
relating to savings bank/current account number and the name of the bank with
whom such account is held to enable the Registrars to print the said detials in
the refund orders after the names of the payees. [Clause 6.23.2.2 (b)(ii) of
the Guidelines].
(xi) Giving option to investors to either receive securities in the
form of physical certificates or hold them in dematerialised form. [Clause
6.23.2.2 (iv) of the Guidelines].
16. Keep in mind that your company is free to make public or
rights issue of equity shares in any denomination determined by your company in
accordance with sub‑section (4) of section 13 of the Act and in
compliance with norms as specified by SEBI. [Clause 3.7.1 of the Guidelines].
17. If your company is proposing issue shares in any denomination
then comply with the following:
(a) the
shares should not be issued in the denomination of decimal of a rupee;
(b) the denomination of the existing shares should not be altered
to a denomination of decimal of a rupee;
(c) at any given time there should be only one denomination for
the shares of your company;
(d) do not forget to amend the Memorandum and Articles of
Association before changing the standard denomination;
(e) Adhere to the
disclosure and accounting norms specified by SEBI from time to time. [Clause
3.7.3 of the Guidelines].
18. Ensure that the Memorandum and Articles of Association
contains the following provisions:
(i) that
a common form of transfer shall be used;
(ii) that fully paid shares shall be free from all lien and that
in the case of partly paid shares the company's lien shall be restricted to
moneys called or payable at fixed time in respect of such shares;
(iii) that any amount paid‑up in advance of calls on any share
may carry interest but shall not in respect thereof confer a right to dividend
or participation in profits;
(iv) that there shall be no forfeiture of unclaimed dividends
before the claim becomes barred by law;
(v) that option or right to call off shares should not be given
to any person except with the sanction
of the company in General Meeting;
(vi) that registration of transfer shall not be refused on the
ground of the transfer being either alone or jointly with any other person or
persons indebted to the company on any account whatsoever;
19. Submit the Listing Application (as per Appendix VIII to Stock
Exchange Regulations) to the Stock Exchange along with a letter of application
as per Appendix VI of the said Regulations within ten days after the date of
filing of the Prospectus with the Registrar.
20. Ensure that the Analysis Form for new issues offered for
public subscription and New Issues Statement in the prescribed form accompanies
application form.
21. Forward along with the Listing Application the documents and
particulars specified in sub‑rule (2) of rule 19 of the Securities
Contracts (Regulation) Rules:
(i) Three
copies of Memorandum and Articles of Association;
(ii) Debenture
trust deed;
(iii) Prospectus
(5 copies);
(iv) List
of underwriters together with the amount underwritten by each;
(v) Letters
of appointment of brokers;
(vi) Brokerage
agreement;
(vii) agreement(s)
with financial institution(s);
(viii) Underwriting
agreements;
(ix) Vendor's/promoier's
agreements;
(x) Service
and selling agency agreements;
(xi) Director's
reports and balance‑sheet for the last five years;
(xii) A
short history of the company with details of its activities;
(xiii) Specimens of letter of allotment/offer, letter of acceptance,
share certificates, debenture certificates, transfer and split and
consolidation receipts, etc. [Stock Exchange Regulation 20, Appendix VII];
(xiv) Letter indicating the observations made by SEBI on the draft
prospectus if any;
(xv) Certificate from the Lead Manager to the Issue reporting
positive compliance with the requirements of Guidelines for Disclosure and
Investor Protection, issued by SEBI.
22. Along with Application Form also submit a return called a
Distribution Schedule relating to the distribution of shares including the
names and holdings of the ten largest shareholders and of the directors of the
company. [Stock Exchange Regulation 21 and Appendix XV].
23. While filing an application furnish an undertaking to the
effect that you shall scrupulously adhere to the time‑limit of ten (10)
weeks from the date of closure of the subscription list for allotment of all
securities and despatch of allotment letters/certificates and refund orders.
24. Also furnish a scheme of the arrangements made by your
company for such compliance while the application.
25. Ensure that the undertaking and the accompanying scheme are
signed by the Chief Executive of your company or by a person authorised by your
Board.
26. Also enclose with the Application Form a Listing Agreement
Form to be had from the Stock Exchange Office duly executed under the seal of
the company. [Stock Exchange Regulation 22.1]. The Listing Agreement Form
contains the conditions which the listed company must comply with so long as
its securities are quoted on the Stock Exchange.
27. A demand draft or pay order for the initial listing fee of
Rs. 7,500/‑ and the appropriate annual listing fee and stamped on non‑judicial
stamp paper of the requisite value drawn in favour of "The Stock
Exchange" should also be forwarded to the Stock Exchange with the Listing
Application.
28. The listing fees are applicable only to the regional Stock
Exchange and other Exchanges will be entitled only to 50 per cent of the
listing fee.
29. Note that the above differential is in respect of annual
listing fees and not for the initial listing fee, which will be payable by the
companies in full to the Exchanges.
30. In case your company has not paid any initial listing fee but
whose securities have been continued on the official list, pay only the annual
listing fee here after so long as your company's securities continue on the
official list and not the initial listing fee.
31. In case your company has paid the initial listing fee, if the
initial listing fee is to be paid by your company, pay annual listing fee.
32. Keep in mind that on the basis of recommendations of Dr. K.R.
Chandratre Committee on listing fees payable by companies SEBI Board has asked
the Stock Exchanges to fix the quantum of listing fees after obtaining approval
from SEBI for collection of 3 years listing fees upfront at the time of initial
listing and subsequently once in every 3 years by amendment of their bye‑laws/listing
agreement. The Stock Exchanges also advised to keep this amount in an escrow
account which may be drawn periodically by them to the extent of their yearly
annual listing fees.
33. Ensure that shares of the applicant company are broadly and
evenly held by the general public i.e. there should be at least 150 to 300
shareholders for a company with an issued capital of Rs. 10 lakhs and
proportionately more for larger companies.
34. Also see that the shares have been so held by them for a
period of not less than one year prior to the date of the Listing Application
to the Stock Exchange for shares already issued.
35. Note that new companies should make public offer in
accordance with SEBI Guidelines. Subscriptions by Central/State Government(s)
and their agencies, public financial institutions and mutual funds are counted
as part of the public offer.
36. Further note that the applications involving subscription by
mutual funds on a direct placement basis should include letters from the
Fund(s) conveying the agreement to the proposed investment.
37. In the case of an Indian Company being subsidiary of a
Foreign Holding Company, in requiring observance of the requisite minimum
quantity of shares for public subscription, sale of any portion of the Holding
Company's interest in the capital of the Indian Company is not insisted upon.
But in such a case, the number of shares held by the Foreign Holding Company is
not excluded from total issued capital (existing and new) while calculating the
quantum of shares required to be offered for public subscription.
Topic 354
1. Make the appeal under Section 22A of the Securities
Contracts (Regulation) Act, 1956 under the Securities Contracts (Regulations)
(Appeal to Securities Appellate Tribunal) Rules, 2000 against such refusal,
ornission of failure as the case may be.
2. Prepare the memorandum of appeal in the Form given in the
Rules aforesaid giving therein a concise statement of facts and grounds of
appeal in a chronological order each paragraph containing as neatly as possible
a separate issue fact or otherwise. [Rule 10(1)].
3. Ensure that the said appeal is either typewritten or
cyclostyled or printed neatly and legibly on one side of good quality paper of
foolscape size in double space and separate sheets should be stitched together
and every page should be consecutively numbered. [Rule 7(1)].
4. Enclose copies of the order against which the appeal is
filed to the appeal one of which should be a certified copy along with a copy
of the authorisation to act as the authorised representative and the written
consent thereto by such authorised representative. [Rule 11(1) & (2)].
5. Enclose a demand draft of Rs. 5,000/‑ to the appeal as
fees, favouring "the Registrar, Securities Appellate Tribunal" and
payable at the station where the registry is located. [Rule 9].
6. Also prepare an index containing the details of the
documents to be relied upon and enclose it to the appeal.
7. Make the appeal within 15 days from the date on which the
reasons for refusal are furnished to the company. [Rule 3(1)(a)].
8. File the appeal in 3 sets in a paper book along with an
empty file size envelop bearing full address of the respondent and in case the
respondents are more than one, then sufficient number of extra paper books
together with empty file size envelop bearing full addresses of each
respondent. [Rule 7(2)].
9. If no reason for refusal is furnished then make the appeal
within fifteen days from the date of expiry of ten weeks from making the
application for per‑mission for the shares or debentures to be dealt with
on the Stock Exchange. [Section 73(1A), Proviso] or within such further period
not exceeding one month as the Appellate Tribunal may, on sufficient cause
being shown allow. [Rule 3(b)].
10. File the appeal along with all the enclosures with the
registry of the Appellate Tribunal within whose jurisdiction your company's
case falls by hand delivery or send it by registered or speed post addressed to
the Registrar of the Appellate Tribunal. [Rule 4(1) read with Rule 13(1)].
11. Keep in mind that the memorandum of appeal sent by post will
be deemed to have been presented in the registry on the day it is received in
the registry. [Rule 4(2)].
12. Note that the above appeal filed before the Securities
Appellate Tribunal will be dealt with by it as expeditiously as possible and it
will be disposed of finally within 6 months from the date of receipt of the
appeal. [Section 22A (4) of the Securities Contracts (Regulation) Act, 1956).
13. Further keep in mind that your company may authorise one or
more chartered accountants or company secretaries or cost accountants or legal
practitioners or any of your company's officers to present its case before the
Securities Appellate Tribunal. [Section 22C of the Securities Contracts
(Regulation) Act, 1956].
14. If your company is aggrieved by any decision or order of the
Securities Appellate Tribunal, you can file an appeal to the High Court within
60 days from the date of communication of the decision or order of the
Securities Appellate Tribunal to your company on any question of fact or law
arising out of such order and the High Court can extend the said period of 60
days to a further period not exceeding 60 days. [Section 22F of the Securities
Contracts (Regulation) Act, 1956].
Topic 355
DO YOU BEING A LISTED COMPANY WISH TO
COMPLY WITH THE CONDITIONS FOR CONTINUED LISTING?
1. Please note that once your company has become a listed
company you are required by clause 40A of the Listing Agreement to comply with
the requirent of quantitative continuous listing condition in order to maintain
a minimum ating stock post listing.
2. Maintain on a continuous basis, the minimum level of non‑promoter
holding at the level of public shareholding as required at the time of listing.
3. Keep in mind that in case the non‑promoter holding of
your company as 1st April, 2001 is less than the limit of public shareholding
as required at the time of initial listing, then raise within one year the
level of non‑promoter holding to at least 10%.
4. If your company fails to do as above then buy back the
public shareholding the manner provided in SEBI (Substantial Acquisition of
Shares and Take overs) Regulations, 1997.
5. Do not make preferential allotment or an offer to buy back
of your company's own securities if such allotment or offer result in reducing
the non-promoter holding below the limit of public shareholding specified under
SEBI (Disclosure and Investor Protection) Guidelines 2000 as applicable at the
time of intial listing or the limit of 10% as the case may be.
6. Remember that if your company has been referred to BIFR then
your company need not follow the above steps and it is exempted from complying
with the said requirements.
7. Ensure that when at any time any person acquires or agrees
to acquire 5% more of the voting rights of any securities of your company, the
said acquirer
8. Further ensure that when at any time any person acquires or
agrees to acquire any securities of your company exceeding 15% of the voting
rights of your company, or if any person who already holds securities in your
company which in aggregate carries less than 15% of the voting rights of your
company and that person seeks to acquire the securities of your company
exceeding 15% of the voting rights such person should not acquire any
securities of your company exceeding 15% of the voting rights of your company
without complying with the relevant provisions of the SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997.
9. Note that your company no longer need to comply with the
requirement of having at least 5 shareholder for every Rs. 1 lakh capital
issued.
10. Further note that stock exchanges are required to monitor the
level of nonpromoter holding on a half yearly basis from the returns submitted
by the listed companies in specified formats.
Topic 356
1. Keep in mind that your company being an unlisted company can
make an application to the SEBI Board for relaxation of Rule 19(2)(b) the
Securities Contracts (Regulation) Rules, 1957 for listing of your company's
shares without making an initial public offer only if the following conditions
are satisfied:
(i) the shares of the unlisted company being the transferee
company have been allotted to the holders of securities of a listed company
being the transferor company pursuant to a scheme of reconstruction or
amalgamation under the provision of the Companies Act, 1956 and such scheme has
been sanctioned by the High Court/s of the Judicature;
(ii) the listing of the shares of your unlisted transferee company
is in terms of scheme of arrangement sanctioned by the High Court/s of the
Judicature;
(iii) atleast 25% of the paid up share capital, past scheme of your
unlisted transferee company seeking listing comprises shares allotted to the
public holders of shares in the listed transferor company;
(iv) your unlisted company has not issued/reissued any shares, not
covered under the scheme;
(v) there are no outstanding warrants/instruments/agreements
which gives right to any person to take the shares of your unlisted transferee
company at any future date and if there are such instruments in the scheme
sanctioned by the Court, the aforesaid 25% should be counted after giving
effect to the consequent increase of capital on account of compulsory
conversions outstanding as well as on the assumption that the options
outstanding, if any, to subscribe for additional shares will be exercised;
(vi) the share certificates of your company have been despatched to
the allottees pursuant to the scheme of arrangement or their names have been
entered as beneficial owner in the records of the depositories;
(vii) the shares of the transferee company issued in lieu of the
locked‑inshares of the transferor company are subjected to the lock‑in
for the remaining period;
(viii) in addition to the requirement mentioned above in (vii) the
following conditions are also to be complied with:
(a) in case of hiving off of a division of a listed company (say
A) and its merger with a newly formed company or existing company (say 'B')
there would not be any additional lock‑in, if the paid up share capital
of company B is only to the extent of requirement for incorporation purposes.
(b) in case of merger where the paid up share capital of the
company seeking listing company B is more than the requirement for
incorporation, the promoters' shares shall be locked‑in to the extent of
20% of the post merger paid up capital of the unlisted company, for a period of
3 years from the date of listing of the shares of the unlisted company and the
balance of the entire premerger capital of the unlisted company shall also be
locked in for a period of 3 years from the date of listing of the shares of the
unlisted company. [Clause 8.3.5.1 of the Guidelines]
2. Convene a Board Meeting by giving notice to all the
directors of your company as per section 286 and pass the necessary Resolution
authorising the Secretary or any Director of your company to make the
application to SEBI and to take any and every step for obtaining the
relaxation.
3. Please keep in mind that every officer of the company whose
duty is to give notice of the Board Meeting as aforesaid and who fails to do so
will be punishable with fine up to Rs. 1000/-. [Section 286(2)]
4. Make the application to the SEBI Board through the regional
stock exchange of the listed company and the regional stock exchange may
recommend the application giving the reasons therefor. [Clause 8.3.5.2 of the
Guidelines]
5. Take steps for listing simultaneously on all stock exchanges
where the shares of the transferor listed company are/were listed within 30
days of the date of the final order of the High Courts approving the scheme and
ensure that the formalities for commencement of trading is completed within 45
days of the date of final order of the High Courts. [Clause 8.3.5.3 of the
Guidelines]
6. Give an advertisement before commencement of trading of your
shares in one English and one Hindi newspaper with nationwide circulation and
in one regional newspaper with wide circulation at the place where the
registered office of your company is situated, giving details as specified in
Schedule XXVIII of the Guidelines. [Clause 8.3.5.4 of the Guidelines]
Topic 357
DO YOU WISH TO GET YOUR SHARES LISTED ON
OVERTHE‑COUNTER EXCHANGE OF INDIA (OTCEI)?
1. Note the guidelines for issue of securities and their
listing on OTCEI, dated 9‑5‑1991 issued by Ministry of Finance and
Trading Mechanism and Business Rules of OTCEI issued by OTCEI.
2. Also note the SEBI Guidelines for OTCEI issues given in
Chapter XIV of the Guidelines.
3. Keep in mind that a company with an issued capital of more
than Rs. 30 lakhs but not more than Rs. 10 crores is eligible for listing on
OTCEI.
4. Further keep in mind that a company can issue shares
directly to the public after getting the issue sponsored by a sponsor who is a
member of the OTCE ("Direct Offer").
5. Also keep in mind that any company making an initial offer
of equity share or any other and has also appointed at least 2 market makers
(one compulsory and one additional market maker). [Clause 14.1.1 (i) & (ii)
of the Guidelines].
6. Alternatively, offer the shares in the first instance to the
sponsor who can, at a later appropriate and convenient time, make a public
offer. ('Indirect Offer').
7. Note that where public issue is made through OTCEI without
sponsor taking any shares, the 'Guidelines' issued by SEBI should be followed.
8. Make the public issue (direct or indirect) through a
prospectus/letter of offer issued by the company.
9. Furnish
the prospectus/letter of offer to OTCE for clearance.
10. Check up whether your issue of equity shares conforms to the
guidelines issued in respect of listing of securities on OTCE.
11. Please note that the minimum issued equity share capital of a
company will be Rs. 30 lakhs, and the maximum will be Rs. 10 crores, subject to
minimum public offer of equity shares worth Rs. 20 lakhs in face value.
12. Further note that any company making an initial public offer
of equity shares or any other security convertible at a later date into equity
shares and proposing to list them on the OTCEI must comply with all the
requirements specified in the Guidelines.
13. Keep in mind that companies whose paid‑up capital after
the proposed issue of securities is less than Rs. 3 crores are eligible to be
listed on OTCEI only.
14. If your company has an issued equity capital of more than Rs.
300 lakhs, comply with the listing requirements and guidelines as they are
applicable to such companies for enlistment on other recognised Stock
Exchanges; [See also Topic 352, 353].
15. Ensure that the minimum number of centres for collection of
application forms in respect of issue of securities by companies under the
OTCEI is four, one each from the Northern, Western, Southern and Eastern
regions of the country.
16. Note that OTCEI will always have power to increase the number
of centres depending upon the size and nature of the issue of securities made
by a company.
17. If your company is already listed on a recognised stock
exchange, it would not be simultaneously eligible for listing on OTCE.
18. Identify
the sponsor, and appoint him after obtaining letter of acceptance from him.
19. Obtain
a sanction letter from the sponsor taking up the sponsorship.
20. Ensure that sponsor finds an additional "market
maker" for compulsory marketing of shares.
21. Appoint the additional market maker after obtaining the
letter of acceptance from him.
22. Execute an agreement with the sponsor regarding the price.
and terms on which the sponsor has agreed for placement with him or for the
direct issue of shares to the public.
23. Obtain unconditional undertaking by the sponsor to make
continuous market by offering "two‑way quotes" buy and sell
quotes for the security for a period of three years from the date of
commencement of trading.
24. Obtain unconditional undertaking by the additional market
maker to make continuous market by offering two‑way quotes buy and sell
quotes for the security for a period of one year from the date of commencement
of trading.
25. Have your company and your project appraised by the sponsor
as to its financial, technical, technological and economic viability and
investment worthiness and obtain the Project Report.
26. Obtain a certificate from the sponsor‑as regards your
eligibility to be listed on the OTCEI.
27. Obtain further a certificate to the effect that shares to be
traded on OTCEI have already been subscribed by licensed dealers/members of
OTCEI.
28. Ensure
that the sponsor undertakes that
(a) it
will make the necessary arrangements for full subscription of public offer;
(b) in the event of undersubscription, the unsubscribed portion
will be subscribed by it. (Ensure that an agreement to this effect is executed
with the sponsor);
(c) it will ensure that the securities are offered and allotted
to the public in a fair manner subject to the approval of the OTCEI, and
Government guidelines currently in force in this regard;
(d) it will compulsorily and continuously (on all working
sessions of the OTCEI) make market in the security by offering two‑way
quotes for buying and selling of the security.
29. If shares taken by the sponsor are to be offered for public
subscription then fix the price at which shares are to be offered in
consultation with the sponsor. (Please note that the sponsor is free to acquire
shares at one price and divest them later at another price).
30. Ensure that promoters' stake in the company is retained at
the minimum level of 20% of the total issued capital, after disinvestment.
31. Note
that the promoters shares are subject to lock‑in‑period of three
years.
32. Ensure that the sponsor agrees to act as market maker for the
shares at least for a period of three years on a compulsory basis and also
finds an additional market maker for such compulsory market making.
33. Ensure that the sponsor compulsorily gives "two way
quotes" based on minimum or maximum trading prices as may be stipulated by
OTCEI in respect of the scrip.
34. Follow the procedure, mutatis mutandis, regarding issue of
prospectus/letter of offer set out at Topics 304 to 309.
35. Send
the draft letter of offer/prospectus to OTCEI for clearance.
36. Appoint the sponsor or, in consultation with the sponsor, any
other members/licensed dealers of OTCEI as managers to the issue.
37. Obtain the approval of OTCEI for any publicity material
(advertisements, brochures, circulars, etc.) relating to the public issue.
38. Make an application to OTCEL Murnbai in the specified form
for registration of listing and permission to deal in equity shares.
39. Pay a one‑time listing fee of Rs. 6,000/‑ and an
annual listing fee of 0.01% of the paid‑up equity share capital of the
Company in case of listing of equity shares and 0.01% of the gross amount of
securities issued in case of listing of any other security, subject to a
minimum payment of Rs. 1,000/‑ in either case.
40. Enclose
the following documents with your application-
(i) Certified true copy of the letter of appointment of the
sponsor and the acceptance letter from the sponsor.
(ii) Certified true copy of the letter of appointment of the
additional. market maker and the acceptance letter from the additional market
maker.
(iii) Certified
true copy of Project Appraisal Report of the sponsoring member.
(iv) Certificate from sponsor for the eligibility of the company to
be listed on the OTC Exchange.
(v) Agreement between sponsor and Company regarding the price and
terms on which the sponsor has agreed for the placement in case of placement
with sponsor or for the issue directly to public.
(vi) Certified true copy of Memorandum and Articles of Association
of the Company.
(vii) Certified true copy of the Audited Balance Sheets for previous
three years of the company.
(viii) Undertaking by the sponsor to subscribe to the unsubscribed por
tion (if any) in the event of the issue being not fully subscribed by public on
terms agreed upon by the Company and sponsor.
(ix) Unconditional undertaking by the sponsor to make continuous
market by offering two‑way quotes for the security for a period of three
years from the date of commencement of trading.
(x) Unconditional undertaking by the additional market maker to
make continuous market by offering two‑way quotes for the security for a
period of one year from the date of commencement of trading.
(xi) Certified true copy of Resolutions passed in general meeting
authorising the issue of securities for which listing is sought.
(xii) Certified true copy of Resolution from company authorising its
representatives to deal with OTC Exchange of India.
(xiii) Certified true copy of sanction letter from sponsor taking up
sponsorship of the company.
(xiv) Any
other document to substantiate the information given in this form.
41. Please note that your company must authorise the OTCEI or any
of its nominees or agents to transfer shares upto such number of shares per day
per folio as may be prescribed by OTCEI at the time of admitting your security
for listing, with a view to expediting transactions.
42. Further note that your company should undertake to process
applications for transfer of shares lodged with it or its nominees or agents
within 17 days (including holidays) from the date of lodgement.
43. Note that the aforesaid period may be reduced at a future
date after due notice, and failure to adhere to this time‑limit would
lead to payment of fine as may be decided by OTCEI.
44. Keep in mind that your company should declare to OTCEI, the
portion of your share capital which is not intended to be traded. Mark such
certificates as not good for trading. If at a later date, if you wish to make
those shares tradeable, you should give a notice of 7 days before those shares
are offered for trade on the OTCEI.
Topic 358
DO YOU, AS
PiVESTMENT/LEASING/FINANCE/HIRE‑PURCHASE COMPANY, WISH TO ENLIST ON
OTCEI?
1. Ensure that your company's post‑issue paid up share
capital is Rs. 1 crore so as to be eligible for listing on the OTCEI.
2. Further ensure that your company has a track record for the
past three years represented in continuous profitability.
3. Your company has been registered with Reserve Bank of India
under the Non‑Banking Finance Companies (Reserve Bank) Directions under
the category of equipment leasing companies, hire purchase companies, housing
finance companies, investment companies or loan companies at least for a period
of 2 years prior to date of applying for listing in OTCEI.
4. Please note that the sponsor in these scrips should at least
hold 10 per cent of the public offer as market making inventory (instead of 5 per
cent as applicable to other OTCEI listed companies).
5. Further note that the objective of the issue could also
include seeking membership on stock exchange including OTCEI but companies
listed on OTCEI or its group/associate companies are not permitted to make
market in their own scrips.
6. Obtain investment grade rating by a rating agency in cases
where it has floated fixed deposits or debentures.
Topic 359
1. Note that Non‑resident Indians (NRIs) and Overseas
Corporate Bodies (OCBs) owned by NRIs are permitted to invest in new issues of
shares (both equity and preference) and convertible debentures, whether issued
to the public or on private placement basis rights basis on non‑repatriation
basis, without any limit and without prior permission of the Reserve Bank of
India (RBI) subject to the following conditions:
(a) The investee company not a Chit Fund or a Nidhi company or
does not carry on agricultural/plantation activities and/or real estate
business (excluding real estate development, i.e. development of property and
construction of houses).
(b) The payment for the shares or convertible debentures issued
to such NRIs or OCBs is received by remittances from abroad through nor mal
banking channels or out of funds held in investor's NRE/FCNR/NRO/ NRSR/NRNR
account maintained with banks through normal banking channels or by transfer of
funds held in investor's NRE/FCNR/NRO/NRSR/NRNR account maintained with banks
authorised to deal in foreign exchange in India or authorised co‑operative/commercial
banks in India.
(c) Neither the capital invested nor any income arising
therefrom, whether by way of capital appreciation or dividend or otherwise, is
eligible for repatriation out of India at any time.
(d) All dividends/interest accruals and sale or maturity proceeds
of shares/convertible debentures (if sold in future) will be credited only to
the investor's NRSR account where the purchase consideration is paid out of
funds held in NRSR account and to NRO or NRSR account at the option of the
seller where the purchase consideration is paid out of inward remittance or
funds held in NRE/FCNR/NRO/NRNR account. NRO account with a bank authorised to
deal in foreign exchange in India.
(e) the NRI or OCB shall not purchase shares or convertible
debentures of an Indian company which is engaged in print media sector.
2. Keep in mind that authorised dealers and authorised
commercial/cooperative banks can permit withdrawal of funds from
NREIFCNR/NRO/NRSR/NRNR accounts for making the proposed investments.
3. Also keep in mind that the amount of consideration for
purchase of shares or convertible qebenture of your company on non‑repatriation
basis should be paid by way of inward remittance through normal banking
channels from abroad or out of funds held in NRE/FCNR/NRO/NRSR/NRNR account
maintained with an authorised dealer or as the case may be with an authorised
bank in India. [Schedule 4 paragraph 3 of the Regulations]
Topic 360
DO YOU, AS NRI/OCB, WISH TO PURCHASE
SECURITIES OTHER THAN SHARES OR CONVERTIBLE DEBENTURES?
1. Keep in mind that you can without limit purchase on
repatriation basis Government dated securities or treasury bills or units of
domestic mutual funds or bonds issued by a public sector undertaking in India
or shares of public sector enterprises which are held by the Government of
India and who decides to disinvest a portion of these shares provided the
purchase is in accordance with the terms and conditions stipulated in the
notice inviting bids.
2. Please note that you may also without limit purchase on non‑repatriation
basis, dated Government securities other than bearer securities, treasury
bills, units of domestic mutual funds, units of Money Market Mutual Funds in
India or National Plan or National Savings Certificates. [Schedule 5 paragraph
2(2) of the Regulations]
3. If you being a NRI/OCB have purchased securities on
repatriation basis as above then make payment by inward remittance through
normal banking channels out of funds held in your NRE/FCNR account. [Schedule 5
paragraph 3(2) of the Regulations]
4. If you have purchased securities on non‑repatriation
basis, then make the payment either by inward remittance through normal banking
channels or out of funds held in your NRE/FCNR/NRO/NRSR/NRNR account.
Topic 361
1. Please note that proposals for investment upto 100% equity
share capital of new issue with full benefits of repatriation of capital and
dividend by NRIs/OCBs will receive automatic approval if the following
conditions are fulfilled:
(a) The investment should be in a high priority industry as per
Annexure III to the Ministry of Industries Press Note No. 14 dated 8‑10‑1997.
(b) The plant and machinery to be imported should be new and not
second‑hand.
(c) The proposed project should conform to the locational policy.
It should be located within 25 Kms. from the periphery of Standard Urban Area
limits of a city having a population of more than 10 lakhs,. The restriction on
location will not, however, apply if the unit is to be located in an area
designated as 'industrial area' by the concerned State Government before 25‑7‑1991.
[See Press Note No. 17/1992, dated 2‑11‑1991 issued by the
Department of Industrial Development].
2. Further note that proposals for investment upto 100% equity
share capital with full benefits of repatriation of capital and dividend by
NRI's/OCB's is also allowed under automatic approval in case of the following
additional categories:
(i) 3 categories of industries/items related to mining
activities given in Part A of Annexure III to Press Note No. 14 dated 8‑10‑1997.
(ii) 13 additional categories of industries/items given in Part B
of Annexure III to Press Note referred above.
(iii) 2 categories of industries/items given in Part C of Annexure
III to Press Note referred above.
3. Keep in mind that permission for investment under the
aforesaid sc well be granted by the RBI only if such investment is made by
inward remil or by debit to your NRE/FCNR account.
4. Ensure that the proposal is a composite one including
details of the capital goods to be imported. (Please note that no separate
clearance is necessary for such imports).
5. Note that the RBI's automatic permission for the investment
will include exemption from the operation of the provisions of FEMA and the
import licence will be issued by the Director‑General of International
Trade on receipt of RBIs confirmation.
6. Further note that repatriation of investment will be
permissible only the unit of the company for which the investment is being made
has gon commercial production and subject to compliance.
7. Further note that this scheme is open to new industries as
well as for expansion or diversification of existing industrial undertakings.
8. NRIs/OCBs can invest upto 100% of the equity share capital
wit repatriation benefits even in industries other than high priority
industries a industries reserved for the public sector.
9. Keep in mind that cases falling under aforesaid, your
company h make an application to Secretariat of Industrial Assistance in Form
FC Ministry of Industry, Department of Industrial Policy and Promotion, Udyog
Bhavan, Delhi‑ 110 001 or in plain paper with 10 copies containing
complete inform regarding the proposals who in turn will put the application
before the Foreign Investment Promotion Board (FIPB) within 15 days.
10. Ensure that comments of your company's administrative
ministry placed before the FIPB either prior to or in the meeting of the Board.
11. In case your company also requires approval for grant of
industri cence in connection with foreign direct investment your company should
rn composite application in Form FC/IL‑SIA along with a Demand Draft o
2,500/‑ in favour of Pay and Accounts Officer, Department of Industrial D
opment, Ministry of Industry, New Delhi drawn on the State Bank of India, man
Bhavan, New Delhi to SIA, Department of Industrial Policy and Promo Ministry of
Industry, Udyog Bhavan, New Delhi in 10 copies of both the a cation and the
forwarding letter.
12. Keep in mind that no fee is required to be payable only
foreign collaboration application and the fee of Rs. 2,500/‑ is
payable only for obtaining industrial licence.
13. Note that FIPB would consider your proposal in totality which
will not only include foreign investment but also foreign technical
collaboration as well as industrial licence.
14. Note
that while considering any proposal the FIPB would examine the following:
(i) whether the items of activity involve industrial licence or
not and if so the considerations for grant of industrial licence must be gone
into;
(ii) whether the proposal involves technical collaboration and if
so (a) the source and nature of technology sought to be transferred, (b) the
terms of payment (payment of royalty by 100 per cent subsidiaries is not
permitted);
(iii) whether the proposal involves any mandatory requirement for
exports and if so whether the applicant is prepared to undertake such
obligation (this is for small industry units, as also for dividend balancing
and for 100 per cent EOUs/EPZ units);
(iv) whether the proposal involves any export projection and if so
the items of export and the projected destinations;
(v) whether the proposal has concurrent commitment under other
schemes such as EPCG scheme, etc.;
(vi) in the case of export oriented units (EOUs) whether the
prescribed minimum value addition norms and the minimum turnover of exports are
met or not;
(vii) whether the proposal involves relaxation of locational
restrictions stipulated in the industrial licensing policy; and
(viii) whether
the proposal has any strategic or defence related considerations.
15. Further note that while considering a proposal FIPB will give
priority to the following:
(i) items falling within Annexure III of the new industrial
policy (i.e. those which do not qualify for automatic approval);
(ii) items
falling in infrastructure sector;
(iii) items
which have an export potential;
(iv) items which have large scale employment potential and
especially for rural people;
(v) items which have a direct or backward linkage with agro
business/farm sector;
(vi) items which have greater social relevance such as hospitals,
human resource development, life saving drugs and equipment;
(vii) proposals
which result in induction of technology or infusion of capital.
16. Further note that FIPB would consider specially the following
during the scrutiny and consideration of any proposal:
(i) the extent of foreign equity proposed to be held (keeping in
view sectoral caps if any, e.g. 49% allowed in telecom sector excluding
FII's investment.
(ii) extent of equity with composition of foreign/NRI (which may
include OCB)/resident Indians;
(iii) extent of equity from the point of view whether the proposed
project would amount to a holding company/wholly owned subsidiary/a company
with dominant foreign investment venture;
(iv) whether the proposed foreign equity is for setting up a new
project Ooint venture or otherwise) or whether it is for enlargement of
foreign/NRI equity or whether it is for fresh induction of foreign equity/NRI
equity in an existing Indian company;
(v) in the case of fresh induction of foreign/NRI equity and/or
in cases of enlargement of foreign/NRI equity in existing Indian companies
whether there is a resolution of the Board of directors supporting the said
induction/enlargement of foreign/NRI equity and whether there is a shareholders
agreement or not;
(vi) in the case of induction of fresh equity in the existing Indian
companies and/or enlargement of foreign equity is existing Indian companies,
the reason why the proposal has been made and the modality for
induction/enhancement [i.e. whether by increase of paid‑up
capital/ authorised capital, transfer of share (hostile or otherwise) whether
by rights issue, or by what modality];
(vii) issue/transfer/pricing
of shares will be as per SEBLRBI guidelines;
(viii) whether the activity is an, industrial or a service activity or
a combination of both;
(ix) whether the item of activity involves any restriction by way
of reservation for the small scale sector;
(x) whether there are any sectoral restrictions on the activity (e.g.
there is ban on foreign investment in real estate while it is not so for
NRI/OCB investment);
(xi) whether the item involves only trading activity and if so
whether it involves export or both export and import, or also includes domestic
trading and if domestic trading whether it also includes retail trading;
(xii) whether the proposal involves import of items which are either
hazardous, banned or detrimental to environment (e.g. import of plastic scrap
or recycled plastics).
17. Keep in mind that FIPB would consider and recommend proposals
for 100% foreign owned holding subsidiary companies based on the following
criteria:
(i) where only 'holding' operation is involved and all
subsequent/downstream investments to be carried out; would require prior
approval of the Government;
(ii) where proprietary technology is sought to be protected or
sophisticated technology is proposed to be brought in;
(iii) where
at least 50 per cent of production is to be exported;
(iv) proposals
for consultancy; and
(v) proposals for power, roads, ports and industrial model
towns/industrial parks or estates.
18. Further keep in mind that in special cases where the foreign
investor is unable initially to identify an Indian joint venture partner, the
FIPB may consider and recommend proposals permitting 100% foreign equity on a
temporary basis that the foreign investor would divest to the Indian parties
atleast 26% of its equity within a period of 3 to 5 years.
19. Further keep in mind that in the case of a joint venture
where the Indian partner is unable to raise resources for expansion or
technological upgradation of the existing industrial activity, the FIPB may
consider and recommend increase in the proportion or percentage upto 100% of
the foreign equity in the enterprise.
20. Further keep in mind that in respect of trading companies,
100% foreign equity may be permitted in the case of the activities involving
the following:
(i) export;
(ii) bulk
imports with export/expanded warehouse sales;
(iii) cash
and carry wholesale trading;
(iv) other import of goods or services provided at least 75 per
cent is for procurement and sale of goods and services among the companies of
the same group.
21. Keep in mind that in case of domestic Air Taxi
operations/Airline operation equity up to 100 per cent will be permitted to be
made by NRIs and OCBs.
22. Please note that NRIs' and OCBs' are permitted to subscribe
upto 100% of equity shares/convertible debentures of existing/new companies (with
repatriation benefits) which are/to be engaged in the following activities:
(i) Development of serviced plots and construction of built‑up
residential premises;
(ii) Real estate covering construction of residential or
commercial premises including business centres and offices;
(iii) Development
of townships;
(iv) City and regional level urban infrastructure facilities
including roads and bridges;
(v) Manufacturing
building materials; and
(vi) Financing
of housing development.
23. Original investment is subject to lock‑in‑period
of 3 years from the date of issue of shares convertible debentures.
24. Prior permission of RBI is necessary for repatriation of
original investment, after the expiry of 3 years of iock‑in‑period.
25. Keep in mind that OCBs will be permitted to repatriate net
profit arising from sale of such investment after the lock‑in‑period
of three years upto 16%.
26. Please note that NRIs/OCBs are also allowed to set up Indian
companies with 100% equity participation for carrying on Air Taxi Operations in
terms of the guidelines issued by Director General, Civil Aviation for Air Taxi
Operations, with full repatriation benefits.
27. Keep in mind that in the aforesaid case repatriation of the
investment and/or remittance of dividend will be permitted only after expiry of
5 years of operation of the Air Taxi Scheme and only out of accumulated net
foreign exchange earnings.
28. Further note that NRIs/OCBs are also allowed to undertake
revival of sick industrial units by taking bulk investment in them either by
way of purchase of equity shares from existing shareholders or in the form of
subscription to new equity issues of the sick units on the following basis:
(i) The bulk investment can be made on private placement basis
up to 100% of the equity capital of the sick company with full benefits of
repatriation of capital invested and income earned thereon.
(ii) Repatriation of capital brought into India for the revival of
the sick company will be permitted after minimum period of five years, on
merits of individual cases, after taking into account the future payment
liabilities of the investee company.
(iii) Issue/transfer of equity shares should be approved by the
existing shareholders of the company through Special Resolution.
29. Note that a company will be considered as sick only in either
of the following two circumstances:
(i) a public financial institution or a consortium has already
formulated a plan for its rehabilitation or revival;
(ii) a public financial institution or bank providing credit
facilities to the company has classified it as a sick unit on the basis of
losses made consecutively for atleast previous 3 years and the market
price of the company's shares has been below par atleast for two years.
Topic 362
DO YOU AS NRMNDIAN CITIZEN/OCB WISH TO
SELL/TRANSFER SHARES/ BONDS/DEBENTURES OF INDIAN COMPANY?
1. Please note that if you are a citizen of India or NRI or
OCB, you can transfer your shares/bonds/debentures previously purchased by you
under the portfolio investment or under any Direct Investment Scheme from the
stock market through a member of a Stock Exchange in India and delivery of such
shares, bonds or debentures so purchased should be taken by him or on his
behalf by the Concerned authorised dealer or its nominee to the following
without approval of RBI under FEMA:
(a) Citizen
of India
(b) NRI
(c) Company
or body corporate incorporated in India
(d) Overseas
bodies corporate predominantly owned by NRIs (OCBS).
2. Ensure that the proceeds of the transfer are credited to
your Ordinary Non‑resident Rupee Account NRO by the transferee with a
bank, with no right of repatriation outside India.
3. Keep in mind that where the transfer is by a non‑resident
to a person resident in India, the transferor or transferee should obtains a
permission from the concerned Regional Office of RBI under whose jurisdiction
the Head/Registered Office of Indian company whose shares are to be transferred
is situated by making an application in Form TS 1 to it in duplicate.
Topic 363
1. Note that Government by Press Note No.4 (2001 Series) dated
21st May, 2001, permitted Foreign Direct Investment (FDI) up to 100% for
development of integrated township, including housing commercial premises,
hotels resorts, city and regional level urban infrastructure facilities such as
roads and bridges, mass rapid transit systems and manufacture of building
materials and development of land and providing allied infrastructure also form
an integrated part of township development.
2. Further note that by Press Note No.3 (2002 Series) dated 4th
January, 2002, Government issued Guidelines for allowing FDI in the development
of integrated township.
3. Ensure that the foreign company intending to invest is
registered as an Indian company under the Companies Act, 1956 vide Topic 1
or 2.
4. Further ensure that the main Objects Clause of the said
company's Memorandum of Association contains a clause for pursuing the
aforesaid object of development of integrated township.
5. Once the company is formed, convene a Board Meeting after
issuing notices to the directors of your company as per Section 286 and decide
to take up land and assembly and its development as a part of Integrated
Township Development and also for making and application to the Foreign
Investment Promotion Board (FIPB) by passing a Board Resolution.
6. In the same Board Meeting also pass a resolution authorising
the Secretary of the company or any other director of the company to make the
application to the FIPB and to take every step that will be necessary to obtain
the approval.
7. Please keep in mind that every officer of the company whose
duty is to give notice of the Board Meeting as aforesaid and who fails to do so
will be punishable with fine up to Rs. 1000/‑. [Section 286(2)].
8. Ensure that the core business of the company which is
seeking investment, is in integrated township development with a record of
successful execution of such projects elsewhere.
9. Keep in mind that the minimum area to be developed by the
company should be 100 acres for which norms and standards are to be followed as
per local bye laws/rules.
10. In case there are no local bye‑laws/rules as above
ensure that a minimum of two thousand dwelling units for about ten thousand
population is required to be developed by the investor.
11. Once the proposal is approved by the FIPB on the
recommendation of Ministry of Urban Development and Poverty Alleviation and
other concerned Ministries/departments see that the company achieves clear
milestones.
12. Do not forget to keep the minimum capitalisation norm of US$
10 million if your company is a wholly owned subsidiary and of US$ 5 million if
your company is a joint venture with any Indian partner or partners and bring
the funds upfront.
13. Note that a minimum lock‑in period of 3 years
from the completion of minimum capitalisation will apply before repatriation of
original investment is permitted.
14. Complete a minimum of 50% of the integrated project
development within a period of 5 years from the date of possession of the first
piece of land and in case the investor wants to exit earlier due to reasons
beyond his control, the FIPB should be informed to decide about it on a case‑to‑case
basis.
15. Keep in mind that conditions regarding the use of land for
commercial purposes, development charges, external development of charges and
other charges as laid down in master plan/bye‑laws, preparation of layout
and building plan, development of internal and peripheral development,
development of other infrastructure facilities including the trunk services,
etc., will be the responsibility of the investor as per planning norms and
standards on similar lines as those applicable to local investors.
16. Also keep in mind that in the absence of the aforesaid
standards and norms, every State Government may decide their own conditions for
which the urban development plan formulation and implementation guidelines
circulated by the Ministry of Urban Development and Poverty Alleviation will
serve as a guiding principle.
17. Hand over free of cost to the Government/local
authority/agency as the case may be, land with assemble area for peripheral
services such as police station, milk booths.
18. Retain the lands for community services such as schools,
shopping complex, community centres, ration shop, hospital/dispensary etc.
19. Develop these services on your own and make them operational
before the houses are occupied.
20. Make available to the local authorities free of cost
playgrounds, parks after properly developing them.
21. Ensure
the norms and standards as applicable under local laws/rules.
22. Remember that for companies investing in Special Economic
Zones, FIPB may accord exemption to any of the above‑mentioned conditions
on a caseto case‑basis and such exemption will be an interim measure till
guidelines are evolved in due course in a need based manner.
Topic 364
1. Note that Government by Press Note No.4 (2001 Series) dated
21st May, 2001, allowed private sector participation up to 100% in the defence
industry sector with foreign direct investment (FDI) permissible up to 26% both
subject to licensing.
2. Further note that by Press Note No.2 (2002 Series) dated 4th
January, 2002 Government issued Guidelines for licensing production of arms and
ammunitions.
3. Before making an application to avail the permission for
licensing production of arms and ammunitions make sure that you are either an
Indian company or a partnership firm.
4. Further ensure that the management of your company or
partnership firm is in Indian hands with majority representation on the Board
of Directors as well as the Chief Executive of your company or partnership firm
being resident Indians.
5. Convene a Board Meeting after issuing notices$ to the
directors of your company as per Section 286 and decide to make an application
to the Department of Industrial policy and Promotion, Ministry of Commerce and
Industry for obtaining a licence and also an application to the Foreign
Investment Promotion Board (FIPB) for obtaining permission for the FDI by
passing Board Resolutions.
6. In the same Board Meeting also pass a resolution authorising
the Secretary of the company or any other director of the company to make the
application to the Department of Industrial policy and Promotion, and also to
the FIPB and to take every step that will be necessary to obtain the necessary
approvals.
7. Please keep in mind that every officer of the company whose
duty is to give notice of the Board Meeting as aforesaid and who fails to do so
will be punishable with fine up to Rs. 1000/‑. [Section 286(2)]
8. Furnish along with the applications full particulars of the
directors of your company and the chief executives.
9. Keep in mind that in this matter the Government reserved the
right to verify the antecedents of the foreign collaborators and domestic
promoters including their financial standing and credentials in the world
market where FDI is involved.
10. Also keep in mind that preference will be given by the
Government to original equipment manufacturers of design establishments, and
companies having a good track record of past supplies to armed forces, space
and atomic energy sectors and having an established Research and Development
base.
11. Further keep in mind that cases involving FDI will be
considered by the FIPB and the licences given by the Department of Industrial
Policy and Promotion in consultation with Ministry of Defence.
12. Note that there would be no minimum capitalisation for the
FDI and ensure that a proper assessment is done by the management of the
applicant company depending upon the product and the technology.
13. Further note that the licensing authority would satisfy
itself about the adequacy of the net worth of the foreign investor taking into
account the category of weapons and equipment that are proposed to be
manufactured.
14. Remember that there would be a 3 year lock‑in for
transfer of equity from one foreign investor to another foreign investor
including Non‑Resident Indians (NR1s) and Other Corporate Bodies (OCBs)
with 60 % or more NRI stake and such transfer would be subject to prior
approval of the FIPB and the Government.
15. Also note that the Ministry of Defence will not be in a
position to give purchase guarantee for products to manufactured but the
planned acquisition programme for such equipment and overall requirements would
be made available to the extent possible.
16. Keep
in mind the following factors :
(a) the capacity norms for production will be provided in the
licence based on the application as well as the recommendations of the Ministry
of Defence, which will look into existing capacities of similar and allied
products.
(b) Import of equipment for pre‑production activity
including development of prototype by the applicant company would be
permitted.
(c) Adequate safety and
security procedures would need to be put in place by the licensee once the
licence is granted and production commences and these would be subject to
verification by authorised Government agencies.
17. Provide the standards and testing procedures for equipment to
be produced under licence from foreign collaborators or from indigenous
Research and Development to the Government nominated quality assurance agency
under appropriate confidentiality clause.
18. See that the nominated quality assurance agency inspects the
finished product and conduct surveillance and audit of the quality assurance
procedures of the company's equipments and gives you the necessary certificate.
19. Note that only on case‑to case basis, self
certification will be penrnitted by the Ministry of Defence which may involve
either individual items, or group of items manufactured by the company and such
permission will be for a fixed period and subject to renewals.
20. Further note that purchase preference and price preference
may be given to the public sector organisations as per guidelines of the
Department of Public Enterprises.
21. Do not violate the provisions given below which may lead to
cancellation of the licence :
(a) Arms and ammunitions produced by the company should be
primarily sold to the Ministry of Defence.
(b) Arms and ammunitions may also be sold to other Government
entities under the control of the Ministry of Home Affairs and State
Governments with the prior approval of the Ministry of Defence.
(c) No
such item should be sold within the country to any other person or entity.
(d) The export of manufactured items would be sub ect to policy
and guidelines as applicable to ordinance factories and defence public sector
undertakings.
(e) Non‑lethal items would be permitted for sale to
persons/entities other than the Central or State Governments with the prior
approval of the Ministry of Defence.
(f) Need to institute a veritable system of removal of all goods
out of the factories.
22. Note that Government decision on applications to FIPB for FDI
in Defence Industry Sector will be normally communicated within a time frame
of 10 weeks from the date of acknowledgement by the Secretarial for Industrial
Assistance in the Department of Industrial Policy and Promotion.
XXIV. Issue of Share/Debenture
Certificate
Topic 365
DO YOU WISH TO ISSUE CERTIFICATES FOR
SHARES OR DEBENTURES?
1. Note that the Registrars to a public/rights issue have been
entrusted with the following activities relating to the issue of
share/debenture certificates:
(1) Printing covering letters for despatching share certificates,
for refunding application money/stock invest, printing of allotment
letterrefund order.
(2) Printing postal journal for despatching share certificates or
allotment letters and refund orders by registered post.
(3) Printing
distribution schedule for submission to stock exchange.
(4) Preparing
share certificates on the computer.
(5) Preparing
register of members and specimen signature cards.
(6) Arranging
share certificates in batches for signing by authorised signatories.
(7) Trimming
share certificates and affixing common seal of the company.
(8) Attaching
share certificates to covering letters.
(9) Mailing
of documents by registered post.
(10) Binding
of application forms, application schedule and computer outputs.
(11) Payment of consolidated stamp duty on allotment letter/shares
or debenture certificates or procuring and affixing stamp of appropriate value.
(12) Issuing
call notices for allotment money to allottees.
2. For
issue of Share Certificates take the steps given below.
3. Call a Board meeting and pass a resolution approving the draft
format of the Share Certificate and its printing.
4. Handover to the Registrar, to the issue impression of the
Common seal at the time of clearing the art works of pre‑printed share
certificates.
5. Send a draft format of the Share Certificates before giving
them for printing to the Exchange for approval if your company is listed on a
recognised Stock Exchange.
6. Companies listed with OTC Exchange of India may issue a
jumbo share certificate in favour of Custodian and issue counter receipts to
every allottee with respect to then holding. [Rule 4(4) of the Companies (Issue
of Share Certificates) Rules, 1960].
7. Note that "Custodian" means an entity carrying on
post‑trade activities such as, settlement of purchases and sales,
information reporting, safe keeping of securities and/or participating in any
clearing system for and on behalf of the client to effect deliveries of the
securities.
8. Print the share certificates under the authority of a Board
resolution, which will be consecutively machine numbered and the blank forms
and the blocks, engravings, facsimiles and hues relating thereto will be kept
in the custody of the secretary or a person appointed by Board for this purpose
who will render an account thereof to the Board. [Rule 4(8) of the Companies
(Issue of Share Certificates) Rules, 1960].
9. When you issue share certificates on issue of any share
capital, pass a Board resolution before issuing the certificates; and receive
back the letter of allotment or its fractional coupons.
10. The aforesaid step need not be taken where your company is
issuing share certificates against letters of acceptance or letters of
renunciation or in case of a bonus issue.
11. Keep in mind that where a letter of allotment is lost, your
Board may issue a certificate on reasonable terms of indemnity, expenses. etc.
12. Enter the particulars in the Register of Members to be kept
in the form given as an Appendix to the Companies (Issue of Share
Certificates) Rules, 1960.
13. Ensure that share certificates issued pursuant to conversion
of debentures or exercise of right, or bonus issue are, as far as possible, in
marketable lots and in respect of the balance, certificates may be issued in
denominations of 1‑2‑5- 10‑20‑50 shares. [Clause
6.5.2.3 of the Guidelines].
14. Issue share certificates to successful applicants for
eligible number of shares in tradeable lots and the minimum tradeable lot in
case of shares of face value of Rs. 10/‑ each should be fixed at the
option of the issuer/offeror on the basis of offer price given below provided
that the maxim tradeable lot in any case should not exceed 100 shares:
Offer price per share Minimum tradeable lot
(a) Upto Rs. 100/‑ 100 shares
(b) Rs. 101/‑ to Rs. 400/‑ 50 shares
(c) Greater than Rs. 400/‑ 10 shares
[Clause 8.6.1 (iv) of the Guidelines].
15. Specify the name(s) of the person(s), the shares to which it
relates, and the amount paid‑up thereon, on each share certificate. [Rule
5(1) of the Companies (Issue of Share Certificate) Rules, 1960.
16. Ensure that share certificates relating to shares which are
subject to lock-in‑period are inscribed with the words "NOT
TRANSFERABLE" for the specified period from the date of allotment or, in
the case of manufacturing company, from the last date of the month in which
commercial production is expected to commence as declared in prospectus letter
of offer of rights, whichever is later.
17. Affix the common seal of the company in the presence of and
under the signatures of (i) two of your directors or two persons acting on
behalf of your directors under a duly registered power of attorney, and (ii)
the secretary or some other person appointed by the Board for the purpose. Not
more that one of such two directors should be a managing or wholetime director.
[Rule 6 of the Companies (Issue of Share Certificate) Rules, 1960].
18. In the aforesaid case your company's directors (and not the
secretary or the other person authorised) may affix signatures by means of any
machine, equipment or other mechanical means such as engraving in metal or
lithography (but not by rubber stamp). The directors so signing shall be
responsible for the safe custody of such mechanical device or material.
19. Handover the certificates to the Registrars to the Issue
within 15 days of the date of closure of the issue, and the company will be
accountable for any delay in this regard.
20. Make available in advance to the Registrars the requisite
funds for postage/mailing charges for despatching the certificates/allotment
letters or advice, etc.
21. Ensure delivery of share certificate to the shareholders by
registered post within three months of the allotment of shares and in case of
registration of transfer of shares within two months of the application for the
registration of the transfer of any shares. [Section 113(1)].
22. Make bulk mailing of share/debenture certificates by
registered post at Mumbai and Delhi:
MUMBAI ‑ (i)
Mumbai G.P.O.
(ii) Kalbadevi
P.O.
(iii) Dadar
P.O.
DELHI ‑ Corporate
Post Office,
Foreign Post Office Building.
23. Ensure that the Registrars to the issue tender bulk
registered mail to the designated post offices.
24. When your company issues a share certificate in exchange of
or in replacement of that which is already issued and is being sub‑divided,
consolidated, defaced, torn or old, decrepit, worn‑out or where the
endorsement space is wholly filled up then take the steps mentioned below.
25. Receive the old certificate back, for which a fee for this
not exceeding Rs. 2 as may be decided by the Board may be charged. [Rule
4(2) of the Companies (Issue of Share Certificates) Rules, 1960].
26. If your company is listed on a recognised Stock Exchange, no
fee can be charged for sub‑division and consolidation of share
certificates into denominations corresponding to the market units of trading or
for issue of new certificates in replacement of those which are old, decrepit
or worn‑out or where the cages on the reverse for recording transfers
have been fully utilised.
27. State on the face of such new certificate and its counterpart
that it is "issued in lieu of Share Certificate No ________ sub‑divided
replaced on consolidation of shares", as the case may be. [Rule 5(2) of
the Companies (Issue of Share Certificate) Rules, 1960].
28. Open one extra register i.e., "Register of
Renewed and Duplicate Certificates" in which enter particulars in this
respect, viz., name, number and date of issue of the old certificate, etc. In
the Register of Members, indicate this fact in its "Remarks column"
and give cross references in both these registers for each other.
29. Put immediately the word "cancelled" either by
stamp or by punch in bold letters on the old certificates so surrendered to
you. These cancelled certificates may be destroyed after three years of their
surrender, but under a Board resolution and in the presence of a person duly
appointed by the Board in this respect. [Rule 9(2) of the Companies (Issue
of Share Certificates) Rules, 1960].
30. Keep in mind that the aforesaid requirement need not be
followed when the share certificates are cancelled under section 6(2) of the
Depositories Act, 1996 when such certificates are cancelled in accordance with
Regulation 54(5) of Securities and Exchange Board of India (Depositories and
Participants) Regulations, 1996. [Rule 9(2) Proviso of the Companies (Issue of
Share Certificates) Rules, 1960].
31. Please ensure that Share Transfer Agent, if any, appointed by
the company has been entrusted with the following work:
(a) printing of new share/debenture certificates in lieu of misplaced,
lost, mutilated certificates;
(b) issuing new certifcates against request for consolidation of
or split‑up of share/debenture certificates;
(c) see that new certificates are issued within one month of the
date of lodgement for sub‑division, consolidation.
32. When your company issues duplicate share certificates, the
original of which have been lost or destroyed, then take the following steps:-
(a) take
prior consent of your Board;
(b) issue advertisement in the newspaper indicating the distinctive
numbers of share certificates which have been lost, Company's intention to
issue duplicate certificates in lieu thereof and time limit for lodging any
objection against issue of duplicate certificates;
(c) charge a fee not exceeding Rs. 2 as may be fixed by the
Board. Proper evidence as to the original having been lost or destroyed should
be obtained. [Section 84]. Fix up reasonable terms as to indemnity,
publication of newspaper advertisement, bank guarantee, expenses, etc. etc.;
(d) state on the face of such duplicate certificate and its
counterpart the words, "duplicate issued in lieu of Share Certificate No
__________. The word "DUPLICATE" shall have also to be stamped or
punched across the face of such duplicate certificate, that is in the middle of
its front body;
(e) issue new certificates in replacement of those which are lost
within six weeks of notification of loss and receipt of proper indemnity if
your company is listed on a Stock Exchange;
(f) observe
the same formality as mentioned in items 17 and 18 above.
33. Ensure that the secretary of your company or the person
appointed by the Board for the purpose of sealing and signing the share
certificates, authenticates all the entries made in the Register of Members and
the Register of Renewed and Duplicate Certificates. [Rule 7(3) of the
Companies (Issue of Share Certificates) Rules, 1960].
34. Keep in mind that the functions of the Board as mentioned
above can also be exercised by a committee thereof consisting of not less than
three directors where directors are more than six, and if below that number,
then two, and at least half of the directors in this committee shall consist of
directors other than a managing or wholetime director.
35. See that the managing director of your company and/if there
is no such managing director then every director of your company is responsible
for the maintenance, preservation and safe custody of all books and documents
relating to the issue of share certificates except the blank forms of share
certificates mentioned in item 1. [Rule 9(1) of the Companies (Issue of
Share Certificates) Rules, 1960].
36. If any share certificate is surrendered to the company then
immediately deface it by the word "cancelled" either by stamping or
by punching in bold letters and destroy it after the expiry of three years from
the date on which it is surrendered under the authority of a resolution of the
Board and in the presence of a person duly appointed by the Board for this
purpose. [Rule 9(2) of the Companies (Issue of Share Certificates) Rules,
1960]. This is applicable in cases mentioned in item 30 above [Rule
9 (2) Proviso of the said Rules].
Debenture Certificates:
37. For
issue of Debenture Certificates take the steps given below.
38. Print the debenture certificates and deal with them in
accordance with the provisions of the trust deed or articles. In absence
thereof, the aforesaid procedure in relation to shares may be followed.
39. Before final printing, get the approval of the recognised
Stock Exchange(s) with whom the debentures of your company are listed for the
format of Debenture Certificate.
40. Unless prohibited by any law or by any order of any court,
tribunal or other authority, deliver the certificates of all shares, debentures
and certificates of debenture stocks, in accordance with the provisions of
Section 53, to the personsentitled to such certificate, within three months
after the allotment of the shares, debentures or debenture stock or within two
months of the application for registration of the transfer of any such shares,
debentures or debenture stock, as the case may be. [Section 113(1)].
41. Where there is any difficulty in delivering in the manner
aforesaid the certificates of any debentures, either on allotment or on
transfer, make an applicationt to the Company Law Board for extending the
period, which shall not exceed nine months beyond the period of three months or
two months, as the case may be, within which the certificates must be
delivered. [See also Topic 367].
42. The application to the Company Law Board must be made by way
of a petition in Form No. 1 given in Annexure 11 to the Company Law Board
Regulations, 1991 and shall be accompanied by a fee of Rupees Five hundred and
must specify all material particulars including the period of extension sought
as also the reasons therefor to the concerned Bench of the Company Law Board in
whose jurisdiction the registered office of your company is situated which is
given in Annexure I to the aforesaid Regulations.
43. Application should be made by way of a petition and should be
accompanied by the following documents:
(a) Certified true copy of the letter of allotment or a copy of
the instrument of transfer;
(b) Certified true copies of the resolutions of the Board
allowing the transfer and/or seeking extension;
(c) Affidavit
verifying the petition;
(d) Bank
draft evidencing payment of application fee of Rs. 50/‑;
(e) Certified true copy of the latest audited balance sheet and
profit and loss account together with auditors, report and directors' report;
(f) Memorandum of appearance with copy of the Board resolution or
the executed Vakalatnama, as the case may be;
(g) Index of documents. [Annexure III item 10 of the Company
Law Board Regulations, 1991].
44. The aforesaid documents should be attested by the applicant‑petitioner
or authorised representative or advocate and they should be serially marked as
Annexure A1, A2, A3, and so on.
45. When the petition is filed by authorised representative,
Memorandum of appearance shall be appended to the petition in Form No. 5 in
Annexure II to the Regulations, 1991. Of course where the petition is filed by
an advocate it should be accompanied by a duly executed Vakalatnama.
46. Once your company obtains the order of the Company Law Board
act in accordance with the order of the Company Law Board.
47. Deliver the Certificates by taking acknowledgment receipt and
make entries in this regard in the relevant register.
48. Please note that companies directed to issue shares in
dematerialised form will have the Depositories appointed who in turn will issue
necessary receipts to investors in lieu of share certificates.
Topic 366
DO YOU WISH TO ISSUE SPLIT SHARE CERTIFICATES?
1. Keep in mind that share certificates are split only in
either of the following three circumstances :-
(a) when the shareholder is having one single certificate or one
or more share certificates consisting of shares of more than the trading lots;
(b) when the denomination of the nominal value of shares is
changed such as from Rs. 100/‑ to Rs. 10/‑ or from Rs. 10 to any
denomination not less than Rs. 1. [Clause 3.7.3 of the SEBI (Disclosure
of Investor Protection) Guidelines, 2000 ];
(c) when some of the shares belonging to one single share
certificate is to be transferred to some body and the remaining number of
shares are to be kept with shareholder.
2. Ensure that the request for splitting of the share
certificates is accompanied by the original share certificates in lieu whereof
the company will issue split share certificates. [Rule 4(2) of the Companies
(Issue of Share Certificates) Rules, 1960].
3. Hold a share transfer committee meeting of the Board of
Directors and take the proposal of issuing split share certificates to that
meeting for approval and also for affixing common seal on the new share
certificates which are to be issued in lieu of the share certificates
surrendered to the company.
4. Affix the common seal of the company on the new share
certificates in the presence of two directors and the secretary of the company,
if any, or some other person appointed by the Board for the purpose. [Rule 6
of the Companies (Issue of Share Certificate) Rules, 1960.].
5. Ensure
that all the aforesaid persons sign the share certificate.
6. Also ensure that
out of the two directors as mentioned aforesaid, at least one is other than the
managing or whole‑time director of the company, if the composition of the
Board of Directors of the company so permits.
7. Keep in mind that in place of the two directors mentioned
above, any two persons acting on behalf of the directors under a duly
registered power of attorney can sign the share certificate. [Rule 6 of the
Companies (Issue of Share Certificates) Rules, 1960].
8. Also ensure that on
the face of the share certificates issued or against the stub or counterfoil of
each one of them it is stated "issued in lieu of share certificate No
____ sub‑divided". [Rule 5(2) of the Companies (Issue of Share
Certificates) Rules, 1960].
9. Enter the particulars of the issue of split share
certificates in a Register of Renewed and Duplicate Certificates indicating
against the names of the persons to whom the certificate is issued, the number
and date of issue of the share certificate in lieu of which the new
certificates are issued. [Rule 7(1) of the Companies (Issue of Share
Certificates) Rules, 1960.].
10. Also enter in the Register of Members of your company
necessary changes by suitable cross‑references in the 'Remarks' column
thereof. [Rule 7(2) of the Companies (Issue of Share Certificates) Rules,
1960].
11. Do not take any fee for issuing split certificates in case
your company is listed with any recognised Stock Exchange. [Clause 8(b) of
the Standard Listing Agreement.].
12. Take a fee not exceeding Rs. 2/‑ per certificate issued
on splitting of share certificates in case your company is not a listed
company.
Topic 367
DO YOU WISH TO APPLY TO COMPANY LAW
BOARD FOR DELAYING DELIVERY OF DEBENTURE CERTIFICATES?
1. Note that as per the opening words of section 113(1) your
company can avoid the requirement of sending the certificate of share,
debenture or debenture stock, within three months of allotment and within two
months of registration of transfer, as the case may be, only if there is a
prohibition against the sending of such certificate by reason of any express
provision made in any law or in any order of any court, tribunal or other
authority.
2. Further note that,although Section 154 (1) permits a company
to suspend registration for a period of one month at a time, this does not mean
that the company is prohibited from issuing share certificate during this
period.
3. Note, however, that where the provisions of Section 113
would come in conflict with some other provisions of this Act or any other Act,
the conflicting provision, though enabling, may assume prohibitory character.
4. Your company is entitled to refuse registration of shares
within two months of lodgment by virtue of the provisions made in Section 111
and Section 111A and once such registration has been refused, there is no
question of share certificate being issued within two months although it cannot
be said by any means that what Section 111 permits to do is really a
prohibition.
5. Keep in mind that, unless enabling provision of sub‑section
(1) of Section 111 is given a prohibitory character, Section 111 and Section
111A would itself become otiose.
6. Further keep in mind that in the absence of any provision of
law which permits a company to delay the delivery of share certificates or
debenture certificates, the requirement of sending the certificates laid down
in Section 113 must be complied with, by your company.
7. Note that, as regards allotment of shares, debentures or
debenture stock, the period of three months shall count only from the date of
allotment and not from the date of advice of allotment.
8. In case your company wishes to delay the delivery of the
certificate of debenture or debenture stock beyond the period of three months
or two months, as the case may be, as laid down in Section 113, your company
should make an application to the Company Law Board praying for extension of
the said period of three months or two months, as given in items 42 to 46 of
Topic 365.
9. Note that the maximum period within which the certificate of
share, debenture or debenture stock must be delivered is nine months, beyond
the period of three months or two months, depending on whether it is a case of
allotment or transfer.
10. Further note that the maximum period is twelve months for
delivery of certificate in case of allotment or eleven months for delivery of
the certificate in case of transfer, as the proviso to sub‑section (1) of
Section 113 speaks in terms of extending the period of three months or two
months to a further period of nine months, that is, extending the said period
of three months or two months by a further period of nine months.
11. For issue of the certificaies for shares or debentures,
follow the procedure laid down in Topic 365.
XXV. Refund of Excess Application Money
Topic 368
DO YOU WISH TO REFUND APPLICATION/EXCESS
APPLICATION MONEY?
1. Note that in case of underwritten public issues if your
company does not receive the minimum subscription of 90% of the issue amount,
including devolvement of the underwriters within 60 days from the date of
closure of the issue, your company should forthwith refund the entire
subscription money received. [Clause 6.3.8.2 of the Guidelines].
2. Further note that for delay beyond 8 days, after your
company becomes liable to pay the amount if any, in refund of such
subscription, your company is obliged to pay interest (@ 15% per annum) as per
Section 73 of the Act. [Rule 4D].
3. Also note that in case of non‑underwritten public
issues, if your company does not receive the minimum subscription of 90% of the
issued amount on the date of closure of the issue or if the subscription level
falls below 90% after the closure of issue on account of cheques having been
returned unpaid or withdrawal of application, your company must forthwith
refund the entire subscription amount received and if there is delay beyond 8
days your company will be liable to pay the amount at a interest of 15% per
annum. [Clause 6.3.8.1 of the Guidelines read with section 73(2A) and Rule
4D].
4. Further note that the Lead Manager is required to confirm to
SEBI within 6 days of the closure of the issue that the issue is subscribed to
the extent of at least 90% through the 3 day post issue monitoring report in
the format given in Schedule XVI of the Guidelines. [Clauses 7.2 &
7.2.1.1(a) of the Guidelines].
5. Ensure that your company refunds within 10 weeks from the
closure of the issue the entire application money, if an application is wholly
rejected if the permission for enlistment has not been granted by the Stock
Exchange(s) and the excess application money after adjustment against money
payable on allotment, if an application is accepted in part.
6. Make the refund within 8 days of the expiry of the time
limits mentioned above without payment
of any interest.
7. Open a separate account with 'Refund Banker' and deposit the
amount due to the investors.
8. Please note that in terms of the agreement executed between
your company and the Registrars to the Issue (RTI), the following activities
are to be undertaken by the RTI:
(a) Preparation of list of allottees and non‑allottees as
per the basis of allotment approved by the Stock Exchange;
(b) Preparation
of allotment‑cum‑return statement;
(c) Printing covering letters for despatch of refund orders/stock
invest and printing of allotment letter‑cum‑refund order;
(d) Printing postal journal for despatch of refund
orders/allotment letters-cum‑refund orders.
9. Keep in mind that the Lead Manager is responsible for
ensuring compliance with the requirements laid down in this Topic.
10. Your company is required to give an undertaking that the
requisite funds for the purpose of despatching refund orders (and allotment
letters/certificates) by registered post/under certificate of posting have been
made available to the Registrar to the Issue. [Clause 6.5.5.1 read with
6.5.6.1(d) of the Guidelines].
11. Ensure that the amount of refund due from your company to
investors is deposited in/transferred to a separate account with the 'Refund
Banker'.
12. Ensure that a certificate to this effect from the 'Refund
Banker' together with details of the total amount is deposited in the account
and date of deposit is required to be furnished to SEBI alongwith the final
post issue monitoring report to be filed within the 3rd day from the date of
listing or 78 days from the date of closure of the subscription of the issue,
whichever is earlier. (Public issue)/50Day (Right issue) Post issue monitoring
Report of the Lead Manager [Clause 7.2 of the Guidelines].
13. Ensure that the Registrars to the Issue print in the refund
order, the details of the investor's savings bank/current account number and
the name of the bank and branch with whom such account is held, after the name
of the payee wherever the information is given by the investor in the
application form. Please note that the application form in respect of
public/rights issues should contain suitable provision for inserting the
relevant particulars.
14. Indicate the place where the refund order is encashable,
which should normally be the place of the applicant.
15. Make out refund orders to the person whose name appears first
in the application form in case of joint applications.
16. Have the bank charges, if any, for encashing such cheques/pay
orders paid by the applicants. Such cheques or pay orders will, however, be
payable at par at the places where the applications are received.
17. Have
the bankers/Registrars properly advised to ensure strict compliance.
18. Despatch refund orders marked A/c. Payee cheque or pay orders
drawn on any scheduled bank in _________ by Registered Post if the value of
such refund orders is above Rs. 1500/‑. [Clause 6.5.5.1 read with
Clause 6.5.6.1(d) of the Guidelines].
19. Issue refund orders under certificate of posting for amounts
below Rs. 1500/‑. [Clause 6.5.5.1 read with Clause 6.5.6 1(d) of the
Guidelines].
20. Bulk
mailing of refund orders by registered post can be done at Mumbai and Delhi
MUMBAI (i) Mumbai G.P.O.
(ii) Kalbadevi
P.O.
(iii) Dadar
P.O.
DELHI Corporate
Post Office,
Foreign Post Office Building.
21. Ensure that ihe Registrars to the Issue tender bulk
registered mail to the designated post offices.
22. Refunds
together with interest, if any, thereon should be made as per item 17 above.
23. In the case of applications made by STOCK INVEST the Lead
Manager should ensure that the Registrars to the Issue handle the applications
in accordance with the instructions issued by RBI. [Clause 7.4.1.1 of the
Guidelines].
24. Please ensure that the Registrar is authorised by a Board
Resolution to do the following:
(a) to sign on behalf of the company to realise the proceeds of
stockinvest from the issuing bank;
(b) to
affix non‑allotment advice on the instrument; or
(c) to cancel the STOCK INVEST of the non‑allottees, or
partially successful allottees who had submitted more than one STOCK INVEST;
(d) to send back such cancelled STOCK INVEST directly to the
investors. [Clause 6.5.4.3(c) of the Guidelines]
25. Credit refunds to their Indian account details of which are shown in their application in the case of applications from NRIs on non‑repatriation basis.
26. In the case of NRI applicants who remit money through rupee
draft from abroad, convert the amount of refund into the relevant foreign
currency at the rate(s) on the date of such refund. (Please include a note to
the effect that the company is not responsible for any loss that may be
incurred by the applicants on account of conversion of rupee into foreign
currency or vice versa).
27. Where the applications are made accompanied by NRE
cheques/drafts payable at ________ as the case may be, refunds will be credited
to the NRE Accounts, on which such cheques/drafts were drawn. The applicants
who are giving their Indian address must also specify their NRE Account and
details for refund of excess application money, if any.
28. Make refunds to 'all other applicants in US Dollars'
equivalent of Indian Rupees to be refunded. Indian rupees will be converted
into US Dollars at such rate of exchange which is prevailing on the date of
remittance.
29. Issue public notice in case of non‑receipt of refund orders.
30. Publish at least in three All India newspapers the fact of
your having despatched refund orders within 10 days of completion of such
refund. [Clauses 7.5.1 and 7 7.4 of the Guidelines].
31. Include in the advertisement details of despatch of cancelled
stockinvests directly to the investors by the Registrars. [Clause 7.5.1 of
the Guidelines].
32. Send copies of the newspaper publications to SEBI and to the
concerned stock exchange(s) soon after their publication.
33. Please note that the Lead Manager to the issue is
specifically entrusted with the responsibility of ensuring compliance with the
requirements of items 29, 30 and 31 above.
34. Also file a statement signed by Chief Executive of the company
or a person authorised by your Board of Directors, with the Regional Stock
Exchange within 5 working days of the date of completion of refund
certifying that the refund orders have been made and despatched within the
prescribed period of 10 weeks. [Press Note No. 1/63/SE/87, dated 8‑1‑1988
issued by Ministry of Finance, Stock Exchange Division].
Topic 369
DO YOU WISH TO SUBMIT PERIODICAL REPORTS
TO SEBI ON PUBLIC ISSUE
1.
(a) Please note that the post issue Lead Manager to the issue is
responsible for submitting to SEBI the
following three post‑issue reports:
(i) 3‑Day Monitoring Report in case of issue through book
building route for book built portion
(ii) 3 day Monitoring Report in other cases, including fixed price
portion of book built issue.
(iii) Final
Post Issue Monitoring Report for all issues.
as per Formats given in Schedule XVI of the
Guidelines. [Clauses 7.2 and 7.2.1.1 of the Guidelines].
(b) Please enclose: Certificate from the refund banker that the
amount of refund due from the company to investors is deposited in a separate
account giving details of the total amount deposited in the account and date of
deposit. [Para 9(c)(ii) of Schedule XVI of the Guidelines].
2. Keep in mind that the due date of the first 3 days
Monitoring Report mentioned above in 1(a)(i) is 3rd day from the date of
allocation in the book build portion or one day prior to the opening of the
fixed price portion whichever is earlier.
3. Also keep in mind that the due date of the second 3 day
Monitoring Report mentioned above in 1(a)(ii) is 3rd day from the date of
closure of the issue.
4. Further keep in mind that the due date of the Final Post
Issue Monitoring Report is 3rd day from the date of listing or 78 days from the
date of closure of the subscription of the issue, whichever is earlier.
5. The aforesaid reports should be submitted within 3 working
days from the due dates to SEBI
(a) at
its Regional Office whereat the prospectus is dealt with; and
(b) at
its Head Office (Earnest House) Mumbai, in duplicate.
6. The due dates of the aforesaid reports will be 3rd day from
the date of closure of subscription of the issue and 78th day from the date of
closure of subscription of the issue. [Clause 7.2.1.1 of the Guidelines].
7. The reports should be submitted either by registered post or
delivered at the counter of SEBI on any working day between 2.30 p.m. and 5.30
p.m. [Clause 16.2.3.1 of the Guidelines].
8. Please note that failure to submit the reports within the
stipulated time limits by the concerned Lead Manager would entail appropriate
action under SEBI (Merchant Bankers) Rules/Regulations, 1992. [Clause
16.5.1(c) of the Guidelines].
9. Please further note that one penalty point advice would be
issued for delayed submission/non‑receipt of one post issue report and
action would be taken under the Regulations for awarding of 4 penalty points. [Clause
16.5(a) & (b) of the Guidelines].
10. Further note that it is the responsibility of the Lead
Manager(s) to give correct information after verifying the same from the
company and the Registrars to the Issue. [Para 9(c)(i) of Schedule XVI of
the Guidelines].
11. Ensure that the Lead Merchant Banker(s) inform. the SEBI on
important development about the particular issue being lead managed by them
during 3 the intervening period of the aforesaid reports. [Clause
16.2.3.2 of the Guidelines]
XXVII. Underwriters to an Issue
Topic 370
DO YOU WISH TO APPOINT UNDERWRITERS FOR
YOUR PUBLIC ISSUE?
1. Please note that your company before appointing any
underwriter for the public issue ensure that your lead merchant banker satisfy
himself about the ability of the underwriters to discharge their underwriting
obligations. [Clause 5.5.1 of the Guidelines].
2. Further note that if the issue is underwritten and if the
minimum subscription of 90% of the net offer to public including devolvement of
underwriters within 60 days from the date, of closure of the issue, your
company should forthwith refund the entire subscription amount received. In
case of rights issue the amount should be returned within 42 days. [Clauses
6.3.8.2 and 6.10.12(i) of the Guidelines].
3. If your company's issue is not underwritten and your company
does not receive the minimum of 90% of the issued amount on the date of closure
of the issue or if the subscription level falls below 90% after the closure of
issue on account of cheques having being returned unpaid or withdrawal of
applications, your company must forthwith refund the entire, subscription amount
received. [Clause 6.3.8.1 of the Guidelines].
4. If your company decides to underwrite the issue, such
underwriting can be for the net offer of securities to the public, that is,
after exclusion of the amount reserved for firm allotment reservation or promoters'
contribution. [Clause 3.4.1 Explanation of the Guidelines].
5. The
following can be appointed as underwriters:
(i) Public
financial institutions.
(ii) Scheduled
banks.
(iii) Lead Managers.
(iv) Merchant
Bankers.
(v) Persons
registered with SEBI to act such.
(vi) OTC Dealers registered with SEBI under SEBI (Stock Brokers and
Sub‑brokers) Rules/Regulations, 1992.
(vii) Stock
Brokers registered with SEBI under the aforesaid Rules/Regulations.
6. Please note that the subscription list for the public issue
unless fully sub scribed should be kept open for a maximum period of 10
calendar days.
7. Further note that if the subscription list is not kept open
as aforesaid, the underwriter is not obliged to discharge his obligation.
8. Please
ensure that
(i) each lead manager holding a certificate accepts a minimum
underwriting obligation of five per cent of the total underwriting commitment
or rupees twenty‑five lacs, whichever is less. [Regulation 22 read
with clause 5.5.3 of the Guidelines];
(ii) if the lead manager is unable to accept the minimum
underwriting obligation, he makes arrangement for having the issue underwritten
to that extent by a merchant banker associated with the issue. [Proviso to Regulation
22];
(iii) SEBI
is informed of such arrangement. [Proviso to Regulation 22] ;
(iv) the total underwriting commitments of underwriters registered
under SEBI (Underwriters) Regulations, 1993 under all the agreements do not
exceed twenty (20) times his net worth computed in terms of Regulations 7. [Regulation
15(2)];
(v) the outstanding underwriting commitments of a Merchant Banker
do not exceed 20 times his net worth at any point of time. [Clause 5.5.4 of
the Guidelines];
(vi) the relevant details of underwriters are included in the offer
document. [Clause 5.5.5 of the Guidelines].
9. Please
note that
(i) ordinarily banks are permitted to underwrite upto 10% of the
net public issue;
(ii) no such restrictive ceiling on underwriting obligation is
imposed on the public financial institutions.
10. Keep in mind that the rates of underwriting commission are
subject to the provisions of section 76 of the Companies Act, 1956, and such
rates can be mutually negotiated between you and the underwriter, and such
negotiated rates are required to be set out in the 'Underwriting Agreement'. [Clause
13 Notes of the Model MOU].
11. Convene a Board Meeting after giving notice to all the
directors of the company as per section 286 and pass a Board resolution
appointing underwriters and approving underwriting agreements drawn on the
basis of Model Underwriting Agreement.
12. Please keep in mind that every officer of the company whose
duty is to give notice of the Board Meeting as aforesaid and who fails to do so
will be punishable with fine of upto Rs. 1000/‑. [Section 286(2)].
13. Obtain underwriters' written consent before including their
names as underwriters in the final offer document. [Clause 5.5.2(b) of the
Guidelines].
14. Appoint the requisite number of underwriters in consultation
with the Lead Manager.
15. Enter into an agreement with the underwriter and ensure that
the said agreement provides for the following:
(i) the
period for which the agreement shall be in force;
(ii) the
amount of underwriting obligations;
(iii) the period, within which the underwriter has to subscribe to
the issue after being initiated by or, on behalf of such body corporate;
(iv) the
amount of commission or brokerage payable to the underwriter;
(v) details of arrangements, if any, made by the underwriter for
fulfilling the underwriting obligations. [Regulation 14 of the SEBI
(Underwriters) Regulations, 1993].
16. Execute the agreement on the basis of the Model Underwriting
Agreement with suitable modifications depending upon the circumstances of each
case.
17. Please note that the underwriting obligation in the event of
undersubscription of the issue is to be determined in the manner set of in
clause 10 of the Model Agreement.
18. Inform the underwriter in writing within 30 days of the
closure of the subscription list about the total number of shares/debentures
remaining unsubscribed, and the number of shares required to be taken up, or
the subscription to be procured therefor, by the underwriter. [Clause 11(a)
of the Model Agreement].
19. Furnish to the underwriter the manner of such computation of
his obligation together with a certificate from your auditors in support of the
computation. [Clause 11(b) of Model Agreement].
20. Ensure that the underwriter makes or procures subscription to
the extent of devolvement not later than 30 days of the receipt of the
communication referred to above. [Clause 11(c) of the Model Agreement].
21. In case of default by the underwriter, make alternative
arrangements for subscription of such shares/debentures. [Clause 11(d) of
Model Agreement].
22. Your company is required to disclose in the Prospectus the
names and addresses of the underwriters and the amount underwritten by each of
them. [Clause 6.3.13(a) of the Guidelines].
23. Ensure that the Board of Directors of your company gives a
declaration in the Prospectus that the underwriters have sufficient resources
to discharge their respective obligations. [Clause 6.3.13(b) of the
Guidelines].
24. Further ensure to incorporate in the Prospectus, a statement
to the effect that, in the opinion of the Lead Managers, the underwriters
assets are adequate to meet their obligations. [Clause 5.5.2(a) of the
Guidelines].
25. Please note that Underwriting Agreement is to be filed with
stock exchange(s), and is also required to be annexed to the Due Diligence
Certificate by Lead Manager while submittin the draft prospectus to SEBI. [Annexure
No. 8 of Schedule III of the Guidelines]
26. Furnish a copy of the prospectus to the underwriter before
delivering it to the Registrar of Companies. [Clause 3 of Model Agreement].
27. Obtain the approval of the underwriters if the Prospectus is
to be filed after a period of 30 days of the date of execution of the
Underwriting Agreement. [Clause 4 of the Model Agreement].
28. Ensure that the requisite number of copies of the Prospectus
and Application Forms are furnished to the underwriters in terms of the
Underwriting Agreement. [Clause 6 of the Model Agreement].
29. Please note that underwriters have the right to terminate the
Underwriting A reement under the special circumstances. [Clause 16 of the
Model Agreement]
30. Pay the underwriting commission within 15 days from the date
of finalisation of allotment, and obtain and keep the requisite proof of such
payment. [Clause 13(2) of the Model Agreement].
31. Ensure that every underwriter in the event of being called
upon to subscribe for securities of a body corporate pursuant to the agreement
entered into between your company and the underwriter under Rule 4(b) of the
SEBI (Underwriters) Rules, 1993, subscribe to the securities within 45 days of
the receipt of such intimation from your company. [Regulation 15(3) of the
SEBI (Underwriters) Regulations, 1993].
Topic 371
[See Securities Appellate Tribunal (Procedure) Rules, 2000, dated 18‑2‑2000]
1. Please note that your company can prefer an appeal to the
Central Government if it is aggrieved by any order made before the Commencement
of the Securities Laws (Second Amendment) Act, 1999.by SEBI under the SEBI Act,
1992 or the rules and regulations framed under that Act within 30 days, but not
after the expiry of 45 days, if permitted by the Central Government, of the
date of communication of the order [Rule 4].
2. Further note that the Central Government may admit the
appeal filed on expiry of the said 30
days but before the expiry of 45 days only if sufficient cause is shown for not
preferring the appeal within 30 days [Rule 4(2)].
3. Also note that no appeal will be entertained by the Central
Government after the said 45 days [Rule 4(2)].
4. Keep in mind that 30 days/45 days referred to above will be
reckoned with reference to the date on which the appeal is received by the
Central Government.
5. Finalise
appeal in 'Form of Appeal' appended to the Rules. [Rule 3].
6. The appeal can be signed either by one of your company's
authorised representative specifically authorised by the Board of Directors of
your company. [Rules 9, 10 and 11].
7. Enclose
the following with the Form of Appeal:
(i) Receipt evidencing
payment of fee of Rs. 5000/‑. Please note that the fee is to be deposited
in the nearest branch of the State Bank of India under the Head "065‑Other
Admn. Services ‑ Other Services - Other Receipts".
(ii) Two copies (one of which will be certified/authenticated) of
the impugned order.
(iii) Certified true copy of the Board Resolution authorising your
company's representative to appear before the Central Government in case you do
not wish to appear in person. Please note that this authorisation can be filed
before the commencement of the hearing.
(iv) Other
document(s) in support of your objection against the impugned order.
8. File the appeal together with the relevant annexures in
duplicate addressed to the Secretary to the Government of India, Department of
Economic Affairs, Ministry of Finance, North Block, New Delhi. [Rule 12] .
9. If the appeal is filed after the expiry of 30 days mentioned
above, enclose to the appeal an application supported by an affidavit setting
forth the facts for not preferring the appeal within the stipulated period of
30 days, and praying for admission of the appeal. [Rule 4(2)] .
10. If you do not wish to be personally present for being heard,
you should authorise in writing an Advocate/Chartered Accountant/Cost and Works
Accountant/Company Secretary as your representative for the purpose. [Rules
9 and 10].
11. Furnish additional information documents, if any, called for
by the Central Government within 30 days. [Rule 13]
12. Orders of the Central Government will be passed after
considering the appeal and documents, and after giving the hearing. [Rule
16] .
13. A copy of the aforesaid order may be obtained by any person
other than the appellant and the SEBI by depositing Rs. 100/‑ under the
head 065‑Other Administrative Services‑Other Services‑Other
Receipts. [Rule 19].
14. If your company is aggrieved by any order made after the
commencement of the Securities Laws (Second Amendment) Act, 1999, dated 16‑12‑1999
by SEBI under the SEBI Act, 1992 or rules and regulations framed under that Act
then your company has to follow the procedure laid down in the Securities
Appellate Tribunal (Procedure) Rules, 2000.
15. Prefer the appeal under sections 15T(1)(a) and 15U of the
SEBI Act, 1992 read with the Securities Appellate Tribunal (Procedure) Rules,
2000.
16. File the appeal within a period of 45 days from the date on
which a copy of the order against which the appeal is filed is received by your
company. [Rule 3(1)].
17. Keep in mind that the Appellate Tribunal may entertain an
appeal after the expiry of the aforesaid period of 45 days if it is satisfied
that there was sufficient cause for not filing it within that period. [Rule
3(1) proviso].
18. Present the memorandum of appeal in theform. annexed to the
Rules in the registry of the Appellate Tribunal, within whose jurisdiction your
company's case falls either by hand delivery or by registered post or speed
post addressed to the Registrar. [Rule 4(1) and Rule 13(1)].
19. Keep in mind that the memorandum of appeal sent by post will
be deemed to have been presented in the registry on the day it is received in
the registry. [Rule 4(2)].
20. Ensure, that the aforesaid appeal is either typewritten or
cyclostyled or printed neatly and legibly on one side of the good quality paper
of foolscap size in double space and separate sheets are stiched together and
every page is consecutively numbered. [Rule 7(1)] .
21. Present the appeal in 3 sets in a paper book along with an
empty file size envelop bearing full address of the respondent and in case the
respondents are more than one, then sufficient number of extra paper books
together with empty file size envelop bearing full addresses of each respondent
should be furnished by the appellant. [Rule 7(2)].
22. Ensure that the memorandum of appeal sets forth concisely
under distinct heads, the grounds of such appeal without any argument or
narrative, and such ground is numbered consecutively and is in the manner
provided in item 21 above. [Rule 10(1)].
23. Do not present separate memorandum of appeal to seek interim
order or direction if in the memorandum of appeal, same is prayed for. [Rule
10(2)].
24. Ensure that the memorandum of appeal is accompanied with a
fee remitted in the form of crossed demand draft drawn on any nationalised bank
in favour of "the Registrar Securities Appellate Tribunal" payable at
the station where the registry is located. [Rule 9(1)].
25. Keep in mind that "Registrar" means the Registrar
of the Appellate Tribunal and includes an officer of such Appellate Tribunal
who is authorised by the Presiding Officer to function as Registrar. [Rule 2(1)(i)].
26. Keep in mind that the amount of fee payable in respect of
adjudication orders made under Chapter VI of the SEBI Act, 1992 will be as
given below
Amount of Penalty imposed Amount of fee payable
1 Less
than Rs. 10,000/‑ Rs.
500/-
2. Rs.
10,000/‑ and or more but less ‑ Rs.
1,200/-
than Rs. 1 lakh
3. Rs.
1 lakh or more Rs.
1,200/‑ plus Rs. 1,000/‑ for
every additional Rs. 1 lakh of
penalty
or fraction thereof.
[Rule
9(2)(i)].
27. Also keep in mind that the amount of fee in respect of any
other appeal against an order of SEBI under the SEBI Act, 1992 will be Rs. 5,000/‑.
[Rule 9(1)(ii)].
28. Ensure that the memorandum of appeal is accompanied with
copies of, the order at least one of which should be certified copy, against
which the appeal is filed. [Rule 11(1)].
29. If your company is represented by authorised representative,
a copy of the authorisation to act as the authorised representative and the
written consent thereto by such authorised representative should be appended to
the appeal. [Rule 11(2)].
30. Ensure that the memorandum of appeal does not seek relief or
reliefs therein against more than one order unless the reliefs prayed for are
consequential. [Rule 12].
XXIX. Appeal from SEBI under Depositories Act
Topic 372
1. Prepare the appeal in 3 sets in the form prescribed by the
aforesaid Rules in a paper book along with an empty file size envelope bearing
full address of the respondent and in case the respondents are more than one,
then sufficient number of extra paper books together with empty file size
envelope bearing full addresses of each respondent should be furnished by your
company. [Rule 7(2)].
2. Ensure that the aforesaid appeal is either typewritten or
cyclostyled or printed neatly and legibly on one side of the good quality paper
of fullscape size in double space and separate sheets are stiched together and
every page should be consecutively numbered and filed in the manner mentioned
above. [Rule 7(1)].
3. Ensure that the appeal is either in English or in Hindi and
it sets forths concisely under distinct heads, the grounds of appeal without
any argument or narrative and give consecutive numbers to such grounds
mentioned. [Rule 6(1) & Rule 10(1)].
4. Keep in mind that appeal means an appeal preferred under
section 23A of the Depositories Act, 1996. [Rule 2(1)(b)].
5. Further ensure that the appeal is accompanied by three
copies of the order of the SEBI appealed against and other documents to support
the grounds of objections mentioned in the appeal. [Rule 11(1)].
6. Keep in mind it will not be necessary to present separate
memorandum of appeal to seek interim order or direction if in the memorandum of
appeal, the same is prayed for. [Rule 10(2)].
7. Also ensure that one of the copies of the order of the SEBI
should be a certified copy and where your company is represented by authorised
representative a copy of the authorisation to act as the authorised
representative and the written consent thereto by such authorised
representative is appended to the appeal. [Rule 11(2)].
8. File the appeal in person or have it sent by registered post
or speed post addressed to the Registrar of the Appellate Tribunal in the
registry of the Appellate Tribunal within whose jurisdiction your company's
case falls. [Rule 4(1) & 13(1)].
9. Keep in mind that "Registrar" means the Registrar
of the Appellate Tribunal and includes an officer of such Appellate Tribunal
who is authorised by the Presiding Officer to function as Registrar.
10. File the appeal within a period of forty five days from the
date on which a copy of the order of the SEBI is received by your company. [Rule
3].
11. Note that the Securities Appellate Tribunal may entertain an
appeal after the expiry of the said period of forty‑five days if it is
satisfied that there was sufficient cause for not filing it within that period.
[Rule 3 proviso].
12. Further note that the memorandum of appeal sent by post will
be deemed to have been presented in the registry of the Appellate Tribunal on
the day it was received in the registry.
13. Ensure that the memorandum of appeal is accompanied with a
fee of Rs. 5000/rentitted in the form of crossed demand draft drawn on any
nationalised bank in favour of "the Registrar, Securities Appellate
Tribunal" payable at the station where the registry is located. [Rule
9(1) & (2)].
14. Further ensure that the memorandum of appeal does not seek
relief or reliefs therein against more than one order unless the reliefs prayed
for are consequential. [Rule 12].
Topic 373
1. Submit
your complaint in duplicate in the specified proforma, as given below.
(To be submitted in Duplicate and in Block Letters)
From Date:
____________
Name & Address of the Complainant Pin
: _____________
The General Manager,
Investors' Service Cell,
The Stock Exchange,
P.J. Towers, 27th Floor,
Dalal Street, Murnbai‑400 023
(i) NAME
OF TBE COMPANY
(In
Full)
(In
case of a mutual fund mention the name of the scheme)
(ii) NATURE
OF COMPLAINT (tick whichever is appropriate)
Non‑receipt of:
(a) Allotment
letter/Refund Order
(b) Certificate/endorsed/transfer/duplicatelbonus/rights
(c) Interest
Dividend (Specify Period)
(d) Interest
on delayed refund, duplicate refund order
(e) Rights/Preferential
Offer
(f) Redemption
amount
(g) Brokerage/Underwriting
Commission
(h) Other
(give details).
(iii) PARTICULARS
OF COMPLAINTS
Folio/Certificate/Debenture Nos./Appl. No. etc.
Appl. form deposited in (name of the bank and
branch)
Kindly do the needful Yours faithfully
(______________)
IN CASE OF REMINDERS ONLY BSE REF. NO. DATE
2. Please note that the specified printed proforma can be
obtained from the investors cell of Bombay Stock Exchange (27th Floor), P.J.
Towers, Dalal Street, Mumbai‑400 023 by sending a self addressed and
stamped envelope.
3. Please note that no additional enclosures should be attached
to the complaint. All the details pertaining to the complaint must be stated of
the complaint format.
4. Further note that a separate format should be used for every
complaint and two or more complaints should not be stated in one format.
5. While following up the complaint with the Exchange, the
investors should mention BSE REF. NO. & DATE in case the above mentioned
complaint has already been acted upon by the Exchange.
6. Please keep in mind that the reminder to BSE should be sent
not earlier than 45 days after the receipt of the acknowledgment letter from
BSE.
7. If you as an investor wish to lodge any complaint to SEBI
against any stock exchange or registered broker, apply to the concerned
Regional Office of SEBI as indicated below:
|
Regional Offices |
Stock Exchanges covered |
|
||
|
Northern Regional Office |
|
||
|
Regional Manager, Built‑up Space, Block No.1, Rajendra Bhavan, Rajendra Place, District Centre, New Delhi‑ 110 008. |
Delhi Stock Exchange Jaipur Stock Exchange Uttar Pradesh Stock Exchange Ludhiana Stock Exchange |
||
Eastern Regional Office
|
Regional Manager, SEBI |
Calcutta Stock Exchange |
|
|
FMC Fortuna, 5th Floor |
Gauhati Stock Exchange |
|
234/3A AJC Bose Road |
Magadh Stock Exchange |
|
Calcutta‑700 047. |
Bhubaneshwar Stock Exchange |
Southern Regional Office
|
Regional Manager, SEBI |
Madras Stock Exchange |
|
|
3rd Floor, D'monte Building No. 32, |
Hyderabad Stock Exchange |
|
D'monte Colony, |
Bangalore Stock Exchange |
|
TTK Road, Alwarpet, |
Cochin Stock Exchange |
|
Chennai‑600 018 |
Mangalore Stock Exchange |
|
|
Coimbatore Stock Exchange |
8. Send the complaint against member brokers of Bombay Stock
Exchange, Pune Stock Exchange, Vadodra Stock Exchange, Ahmedabad Stock
Exchange, M.P. Stock Exchange, Saurashtra Kutch Stock Exchange, OTC and NSE to
the SEBI Head Office, Mumbai.
[Press Release, dated 17‑8‑1994 issued by SEBI].
Topic 374
DO YOU AS AN INVESTOR WISH TO SUBMIT
COMPLAINT TO SEBI FOR REDRESSAL OF YOUR GRIEVANCES?
1. Send your grievances against companies in the Format set out
hereinbelow in duplicate to Securities & Exchange Board of India, Investor
Grievance and Guidance Division, P.B. No. 19972, Nariman Point P.O., MUMBAI‑400
021.
2. Please
ensure that separ4te forms are used for each company or for each complaint.
3. It would be advisable to address the complaint to SEBI only
if company or Registrars has not responded inspite of having sent two reminders
over a period of atleast one month.
(Use separate forms for each company/complaint)
[Please tick (3) the appropriate item and complete all columns in Capital Letters]
To
SECURITIES & EXCHANGE BOARD OF INDIA
Investor Grievance & Guidance Division,
P.B. No. 19972, Nariman Point P.O.,
Mumbai‑400 021
Dear Sirs,
Kindly take up the matter with the Company for
immediate redressal of my complaint, particulars of which are as under:
1. Name
of the Investor : _________________________
(Compulsory) _________________________
Address of the Investor _________________________
(Compulsory) _________________________
2. Name
of the Company : _________________________
(Compulsory) _________________________
Address of the Company _________________________
(Compulsory) _________________________
Submit complaint to SEBIfor redressal of your
grievances § Topic 3741273
3. E‑mail
Address (Investor) : _________________________
4. Name
of the Registrar & Transfer Agent (if any) : ______________________
5. SEBI
Acknowledgement Reference No. : __________________________
(in case of reminder)
6. Nature
of, complaint:
Type/Category
(i) Issue/Offers.‑ non‑receipt of : * Refund
Order/Allotment Advice
* Revalidation of Refund Order (RO)
* Duplicate RO for correct amount
* Duplicate RO after Indemnity
* Cancelled Stock Invest (SI)
* RO after details furnished
* Copy of encashed RO
* Duplicate RO for correct bank details
* Allot against encashed Sl
* Duplicate RO, after correction
* Short Refund
(ii) Dividend‑ non‑receipt of : *
Dividend
(iii) Shares‑ non‑receipt of
certificates in/after : *
Exchange of allotment letter
* Conversion
* Splitting
* Transfer
* Endorsement
* Bonus
* Transmission
* Consolidation
* Duplicate on submission of Indemnity bond
(iv) Debenture/Bond -
non‑receipt of Certificates in/after : *
Interest
* Transfer
*
Consolidation
*
Redemption Amount
*
Transmission
* Splitting
* Exchange of Allotment Letter
* Endorsement
* Duplicate on submission of Indemnity bond
* Interest on delayed interest payment
* Interest on delayed redemption amount
(v) Miscellaneous- non-receipt of : * Annual Report
* Interest on delayed Refund Payment
* Brokerage/Commission payment
* Offer for Rights
* Interest on delayed dividend
* Any other (specify)
___________________________
* Registration of change in address
* Non‑listing of securities on stock
exchange
7. Particulars
of the application/securities held
(a) Full
name of first applicant/security holder :
(b) Application Form No./Folio No :
(Seller's
in case of Transfer) :
(c) No. of Securities applied/held :
(d) Kind of Security : Shares _________
(e) Mode of payment details : Cash
__________
No. _____ Dated ________
Dr ______
(f) Application dcposited at : _______________
(g) Bank serial No. :
(h) Original refund order No. :
(in
case of revalidation/duplicate)
(i) Period on/for which dividend/interest/
maturity
amount/redemption amount due
(j) Date on which securities were forwarded :
to
Company/Registrars
(k) Indemnity Bond sent for issue of
duplicate : Yes If Yes, Date
No If No, Date
8. Other
details if any, in brief
____________________________________________________________________________________________________________________________________
9. Dates
of earlier correspondence with the Company/Registrars ________________
|
Submit |
Reset |
Note: It would be advisable
to address the complaints to SEBI only if Company/Registrars has not responded
inspite of having sent two reminders over a period of atleast one month.
[Source: SEBI Web page: sebi.com]
Topic 375
[SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997]
1. Check whether you have acquired shares or voting rights of a
listed company which taken together with shares or voting rights already held
by you in that company would entitle you to hold more than 5% shares or voting
rights in that company in any manner whatsoever. [Regulation 7(1)].
2. Also check whether you have acquired shares or voting rights
of a listed company under sub‑regulation (1) of regulation 11.
[Regulation 7(IA)II
3. Disclose the aggregate of shareholding or voting rights as
aforesaid [Regulation 7(2)] in that company to the company and in case of 1A
above disclose such acquisition as well as the aggregate of your pre and post
acquisition of shareholding and voting rights of the company when such
acquisition aggregates to 5% and 10% of the voting rights. [Regulation 7(1A)]
3. Ensure that the disclosures mentioned at 1A and 2 above are
made within 4 working days of
(a) the
receipt of intimation of allotment of shares, or
(b) the acquisition of shares or voting rights as the case may
be. [Regulation 7(2)].
4. Ensure that the company whose shares are acquired in the
manner as aforesaid discloses to all the Stock Exchanges on which its shares
are listed the aggregate number of shares held by each of the persons referred
above within 7 days of receipt of information from the persons holding more
than 5 per cent. [Regulation 7(3)].
Topic 376
[SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997]
1. If you hold more than 15% shares or voting rights in any
company, you should within 21 days from each financial year ending 31st March
make yearly disclosures to the company in respect of your holding as on 31st
March. [Regulation 8(1)].
2. Do not acquire shares or voting rights taken together with
shares or voting rights if any already by you or by persons acting in concert
with you 15% or in excess of 15%1 without making a public announcement to
acquire shares in accordance with the Regulations. [Regulation 10].
3. Do not acquire either by yourself or through or with persons
acting in concert with you additional shares or voting rights entitling you to
exercise more than 10' per cent of the voting rights in any period of 12 months
if you are already holding together with persons acting in concert with you 15
per cent or more but less than 75 per cent of the shares or voting rights in a
company without making a public announcement to acquire shares in accordance
with the Regulations. [Regulation 11(1)].
4. Note that the creeping acquisition limit of 10% as aforesaid
has been extended up to September 30, 2002 from March 31, 2002. [Press Release
Ref. No. PR. 67/2002, dated 28‑3‑2002]
5. Keep in mind that no acquirer who, together with persons
acting in concert with him has acquired, in accordance with the provisions of
law, 75% of the shares or voting rights in a company, should acquire either by
himself or through persons acting in concert with him any additional shares or
voting rights, unless Such acquier makes a public announcement to acquire
shares in accordance with the Regulations. [Regulation 11(2)] .
6. Keep in mind that acquisition mentioned aforesaid will mean
and in either direct acquisition in a listed company to which Regulationg,
apply or rect acquisition by virtue of acquisition of holding companies whether
listed or unlisted whether in India or abroad. [Regulation 11 Explanation] .
7. Do not acquire control over the target company irrespective of
wl or not there has been any acquisition of shares or voting rights of that con
without making a public announcement to acquire shares in accordance with the
Regulations. [Regulation 12] .
8. Keep in mind that the aforesaid step need not be taken if there
is any c in control taking place in the company in pursuance to a resolution
passed by the shareholders of that company in a general meeting. [Regulation 12
Proviso].
9. Appoint a SEBI authorised Merchant Banker to make the public
announcement who should not be an associate of or group of the acquirer or the
target company. [Regulation 13].
10. Ensure that the Merchant Banker so appointed makes the public
announcement in all editions of one national English daily with wide
circulation, on Hindi national daily, with wide circulation and a regional
language daily with wide circulation at the place where the registered office
of the target company is situated and at the place of the stock exchange where
the shares of the company are most frequently traded. [Regulation 15(1)] .
11. Submit a copy of the public announcement, mentioned above, to
the SEBI Board through the Merchant Bankers appointed as above by you at least
two working days before its issuance. [Regulation 15(2)] .
12. Simultaneously send a copy of the public announcement so mi,
aforesaid to all the Stock Exchanges on which the shares of the compay are
listed for being notified on the Notice Board and also to the target compan,
registered office address for being placed before the Board of Directors of
that company. [Regulation 15(3)] .
13. Keep in mind that the offer for the acquisition of shares or
voting at the specified percentages will be deemed to have been made on the d
which the public announcement has appeared in any of the newspapers mentioned
in item 9 above. [Regulation 15(4)] .
14. Ensure that the public announcement to be made in the
newspapers contains the following particulars, namely
(i) the paid‑up share capital of the target company, the
number of paid‑up and partly paid‑up shares;
(ii) the total number and percentage of shares proposed to be
acquired from the public, subject to a minimum as specified in sub‑regulation
(1) of regulation 21;
(iii) the
minimum offer price for each fully paid‑up or partly paid‑up share;
(iv) mode
of payment of consideration;
(v) the identity of the acquirer(s) and in case the acquirer is a
company or companies, the identity of the promoters and, or the persons having
control over such company(ies) and the group, if any, to which the company(ies)
belong;
(vi) the existing holding, if any, of the acquirer in the shares of
the target company, including holdings of persons acting in concert with him;
(vii) salient features of the agreement, if any, such as the date,
the name of the seller, the price, at which the shares are being acquired, the
manner of payment of the consideration and the number and percentage of shares
in, respect of which the acquirer has entered into the agreement to acquire the
shares of the consideration, monetary or otherwise, for the acquisition of
control over the target company, as the case may be;
(viii) the highest and the average price paid by the acquirer or
persons acting in concert with him for acquisition, if any, of shares of the
target company made by him during the twelve month period prior to the date of
public announcement;
(ix) object and purpose of the acquisition of the shares andfuture
plans, if any, of the acquirer for the target company, including disclosures
whether the acquirer proposes to dispose of or otherwise encumber any assets of
the target company in the succeeding two years except in the ordinary course of
business of the target company:
Provided that where the future plans are set out
the public announcement shall also set out how the acquirers propose to
implement such future plans;
(x) the
'specified date' as mentioned in regulation 19;
(xi) the date by which individual letters of offer would be posted
to each of the shareholders;
(xii) the date of opening and closure of the offer and the manner in
which and the date by which the acceptance or rejection of the offer would be
communicated to the shareholders;
(xiii) the date by which the payment of consideration would be made
for the shares in respect of which the offer has been accepted;
(xiv) disclosure to the effect that firm arrangement for financial
resources required to implement the offer is already in place, including
details regarding the sources of the funds whether domestic i.e., from banks,
financial institutions, or otherwise or foreign i.e. from non‑resident
Indians or otherwise;
(xv) provision for acceptance of the offer by person(s) who own the
shares but are not the registered holders of such shares;
(xvi) statutory approvals, if any, required to be obtained for the purpose
of acquiring the shares under the Companies Act, 1956 (1 of 1956), the
Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969), the Foreign
Exchange Regulation Act, 1973 (46 of 1973) and/or any other applicable laws;
(xvii) approvals
of banks or financial institutions required, if any;
(xviii) whether the offer is subject to a minimum level of acceptance
from the shareholders; and
(xix) such other information as is essential for the shareholders to
make an informed decision in regard to the offer. [Regulation 16].
15. Ensure that the public announcement of the offer or any other
advertisement, circular, brochure, publicity material or letter of offer issued
in relation to the acquisition of shares does not contain any mis‑leading
information. [Regulation 17].
16. If you are proposing to acquire shares through negotiation
ensure that the public announcement to be made by the merchant banker is made
not later than 4 working days of entering into an agreement for acquisition of
shares or voting rights or deciding to acquire shares or voting rights
exceeding the respective percentage specified in item 2 above. [Regulation
14(1)].
17. Keep in mind that in case of disinvestment of a public sector
undertaking, the public announcement shall be made by the merchant banker not
later than four working days of the acquirer executing the share purchase
agreement or shareholders agreement with the Central Government for the
acquisition of shares or voting rights exceeding the percentage of shareholding
referred to in regulation 10 or regulation 11 or the transfer of control over a
target public sector undertaking.
18. If you are acquiring securities including Global Depository
Receipts (GDR) or American Depository Receipts (ADR) which would taken together
with the voting rights, if any, already held by you or persons acting in
concert with you would entitle you to voting rights exceeding the specified
percentages, make the public announcement not later than 4 working days before
you acquire voting rights on such securities upon conversion, or exercise of
option as the case may be. [Regulation 14(2)].
19. If you propose to acquire shares which will result in control
over the target company make the public announcement not later than 4 working
days after the changes are decided to be made amounting to acquisition of
control over the target company by you. [Regulation 14(3)].
20. Make the announcement of public offer to acquire shares only
when you are able to implement the offer. [Regulation 22(1)].
21. Ensure that the public announcement made under Regulation 15
specifies a date which will be the "specified date" for the purpose
of determining the names of the shareholders to whom the letter of offer should
be sent and see that such specified date is not later than the thirtieth day
from the date of the public announcement. [Regulation 19].
22. Send a copy of the draft letter of offer to the SEBI Board
and also to the target company at its registered office address for being
placed before the Board of Directors and to all the Stock Exchanges where
shares of that company are listed within 14 days of the public announcement of
the offer. [Regulation 18(1) read with 22(2)].
23. Ensure that a copy of the letter of offer is sent to all the
shareholders of the target company whose names appear on the register of
members of the company as on the specified date mentioned in the public
announcement so that they reach them within 45 days from the date of public
announcement which should be despatched to them not earlier than 21 days from
the date it is submitted to the SEBI Board which should include the changes if
any made by the SEBI Board in the draft letter of offer within 21 days from the
date of submission ensure to carry out such changes before the letter of offer
is despatched to the shareholders. [Regulation 22(3) read with Regulation 18(2)
and proviso].
24. Send the letter of offer to shareholders other than the
parties to the agreement where the public announcement is made pursuing to an
agreement to acquire shares or control over the target company. [Regulation
22(3) Proviso].
25. Send a copy of the letter of offer to the custodian of GDR or
ADR to enable them to participate in the open offer if they want to do so.
[Regulation 22 Explanation (i)].
26. Also send a copy of the letter of offer to warrant‑holders
or convertible debentures‑holders where the period of exercise of option
or conversion falls within the offer period. [Regulation 22 Explanation (ii)].
27. File with the SEBI Board through a Merchant Banker the draft
of the letter of offer within 14 days of the public announcement along with a
fee of Rs. 50,000/- by way of bankers cheque or Demand Draft in favour of SEBI
and payable at Mumbai. [Regulation 18(1) & (3)].
28. Determine
the minimum offer price as the highest of the following
(a) the negotiated price under the agreement referred to in sub‑regulation
(1) of regulation 14;
(b) highest price paid by the acquirers or persons acting in
concert with him for any acquisitions, including by way of allotment in a
public or rights issue, if any, during the 26 weeks period prior to the date of
public announcement;
(c) the price paid by
the acquirer under a preferential allotment made to him or to persons acting in
concert with him at any time during the twelve months period upto the date of
closure of the offer;
(d) the average of the weekly high and low of the closing prices
of the shares of the target company as quoted on the stock exchange where the
shares of the company are most frequently traded during the 26 weeks preceding
the date of public announcement. [Regulation 20(2)].
29. Keep in mind that where the shares of the target company are
infrequently traded, the offer price should be determined by the issuer and
the merchant banker taking into account the following factors:
(a) the negotiated price under the agreement referred to in sub‑regulation
(1) of regulation 14;
(b) highest price paid by the acquirer or persons acting in
concert with him for acquisitions, including by way of allotment in a public or
rights issue, if any, during the 26 weeks period prior to the date of public
announcement;
(c) the price paid by the acquirer under a preferential allotment
made to him or to persons acting in concert with him at any time during the 12
months period upto the date of closure of the offer; and
(d) other parameters including return on networth, book value of
the shares of the target company earning per share, price earning multiple
vis-à-vis the industry average. [Regulation 20(3)].
30. Please
note that the minimum offer price is payable
(a) in
cash; or
(b) by exchange and/or transfer of shares if you are seeking to
acquire the shares as a listed body corporate; or
(c) by exchange and/or transfer of secured instruments with a
minimum of 'A' grade rating from a credit rating agency;
(d) a
combination of (a), (b) or (c). [Regulation 20(1)].
31. Ensure that where the payment has been made in cash to any
class of shareholders for acquiring their shares under any agreement or
pursuant to any acquisition in the open market or in any other manner during
the preceding 12 months from the date of public announcement, the offer
document provides that the shareholders have the option to accept payment
either in cash or by exchange of shares or other secured instruments referred
to above. [Regulation 20(1) proviso].
32. Keep in mind that where the acquirer has acquired shares in
the open market or through negotiation or otherwise, after the date of public
announcement at a price higher than the minimum offer price stated in the
letter of offer, then the highest price paid for such acquisition should be
payable for all acceptances received under the offer. [Regulation 20(4)].
33. Ensure that the acquirer does not make any such acquisition
during the last 7 working days prior to the closure of the offer. [Regulation
20(4) proviso].
34. Also keep in mind that if the shares or secured instruments
of the acquirer company are offered in lieu of cash payment, the value of such
shares or secured instruments should be determined in the same manner as
mentioned in items 26 and 27 to the extent applicable as duly certified by an
independent Merchant Banker, other than the managers to the offer or an
independent Chartered Accountant of 10 years standing. [Regulation 20(5)].
35. Make the public offer to the shareholders of the company, to
acquire from them an aggregate minimum of 20 per cent of the voting capital of
that company. [Regulation 21(1)].
36. Make the public offer for such percentage of the voting capital
of the company as may be decided by the company where the open offer is made in
pursuance of the acquirer entitled to exercise 75% of the voting shares or
rights of that company. [Regulation 21(1) Proviso].
37. In case the offer is conditional upon minimum level of
acceptances from the shareholders the requirement of acquiring aggregate
minimum of 20% of voting capital from the shareholders will not apply if you
have deposited in the escrow account in cash a sum of 50% of the consideration
payable under the public offer. [Regulation 21(2)] .
38. Ensure that the public offer does not result in the public
shareholding being reduced to 10 per cent or less of the voting capital of the
company. [Regulation 21(3)].
39. If the public offer results in the public shareholding being
reduced to 10 per cent or less of the voting capital of the company and if the
public shareholding in the company is less than 10 per cent of the voting
capital of the company then do the following:
(a) within a period of 3 months from the date of closure of the
public offer, make an offer to buy out the outstanding shares remaining with
the shareholders at the same offer price, which may result in delisting of the
target company; or
(b) undertake to disinvest through an offer for sale or by a
fresh issue of capital to the public, which shall open within a period of 6
months from the date of closure of the public offer, such number of shares so
as to satisfy the listing requirements. [Regulation 21(3)].
40. Ensure that the letter of offer states clearly the, option
available to you as mentioned above. [Regulation 21(4)].
41. Please keep in mind that while computing the percentages
referred in item numbers 29, 30, 31, 32 and 33 the voting rights as at the
expiration of the 30 days after closure of the public offer should be taken
into account. [Regulation 21(5)].
42. If the number of shares offered for sale by the shareholders
are more than the shares agreed to be acquired by you, accept the offers
received from the shareholders on a proportionate basis in consultation with
the merchant banker taking care that the basis of acceptance is decided in a
fair and equitable manner and does not result in non‑marketable lots.
[Regulation 21(6)].
43. Do not acquire shares from shareholders in less than the
minimum marketable lot for the entire holding if it is less than the marketable
lot. [Regulation 21(6) Proviso].
44. Draft
letter of offer in consultation with the Merchant Banker.
Topic 377
[SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997]
1. Ensure that the public announcement of offer, brochure,
circular, letter of offer or any other advertisement or publicity material
issued to shareholders in connection with the offer states, inter alia,
(a) that the directors of the acquirer company accept the
responsibility for the information contained therein; and
(b) a statement to that effect if any director has desired to
exempt himself from such responsibility with reasons thereof. [Regulation
22(6)].
2. Submit a draft of the Letter of Offer (LOO) to SEBI through
the Merchant Banker for its approval within 14 days of the public announcement
[Regulation 18(1)], in the formae given in Appendix 68 together with a fee of
Rs. 50,000/‑ by a banker's cheque or demand draft in favour of SEBI and
payable at Mumbai [Regulation 18(3)] and a 'Due Diligence Certificate' from the
Merchant Banker. [Regulation 24(2)].
3. Within 14 days of the public announcement, ensure that the
acquirer submits the letter of offer to the board of directors of the company
whose shares are proposed to be acquired at its registered office address for
being placed before the Board of directors and to all stock exchanges where the
shares of the company are listed. [Regulation 22(2)].
4. Ensure that the date of the opening of the offer is not
later than the 60th day from the date of public announcement.
[Regulation 22(4)].
5. Keep the offer open for a period of not less than 30 days
from the date of opening of the offer. [Regulation 22(5)].
6. Create an escrow as per regulation 28 on or before the date
of issue of 3 public announcement of offer. [Regulation 22(10)].
7. Fix the specified date for the purpose of determining the
names of the shareholders to whom the letter of offer should be sent which
should be specified in the public announcement and such specified date should
not be later than the 30th day from the date of the public announcement.
[Regulation 19].
8. Send a copy of the letter of offer to all the shareholders
of the target company whose names appear on the register of members of the
company as on the specified date mentioned in the public announcement, so as to
reach them within 45 days from the date of public announcement. [Regulation
22(3)].
9. Keep in mind to send the letter of offer to shareholders
other than the parties to the agreement where the public announcement is made
pursuing to an agreement to acquire shares or control over the target company.
[Regulation 22(3) Proviso].
10. Send a copy of the letter of offer to warrant‑holders
or convertible debenture‑holders where the period of exercise of option
or conversion falls within the offer period. [Regulation 22(3) Explanation
(ii)].
11. Also send a copy of the letter of offer to the custodian of
Global Depository Receipts or American Depository Receipts to enable such
person to participate in the open offer if they are entitled to do so.
[Regulation 22(3) Explanation (i)].
12. Keep in mind that during the offer period you being an
acquirer or any person acting in concert with him is not to be appointed on the
Board of Directors of the target company. [Regulation 22(7)].
13. Note that in case of acquisition of shares or voting rights
or control of public sector undertaking pursuant to a public announcement made
under the proviso to sub‑regulation (1) of regulation 14, the provisions
of sub‑regulation (8) of regulation 23 shall be applicable. [Regulation
22(7) Proviso]
14. Complete all procedures relating to the offer including
payment of consideration to the shareholders who have accepted the offer
within a period of 30 days from the date of closure of the offer. [Regulation
22(12)].
15. Keep in mind that the completion of all the procedures
relating to the offer as mentioned above will include the following
(i) Opening of a special account with the bankers to an issue
registered with the SEBI Board within 21 days from the date of closer of the
offer and depositing therein such sum as would together with 90% of the amount
lying in the escrow account, if any, makes up the entire sum due and payable to
the shareholders as consideration for acceptances received and accepted.
[Regulation 29(1)].
(ii) Transfer the necessary fund to the special account from the
escrow account. [Regulation 29(1)].
(iii) Paying interest to the shareholders for delay beyond 30 days
as may be specified by the SEBI Board if the payment to the shareholders who
have accepted the offer is not made within the period of 30 days due to non‑receipt
of requisite statutory approvals. [Regulation 22(12)].
(iv) Making application to the SEBI Board for granting extension of
time for payment to the shareholders with interest as the SEBI Board may think
fit, after the period of 30 days. [Regulation 22(12)].
16. Ensure that the contents of the letter of offer are true,
fair and adequate and based on reliable sources, quoting the source wherever
necessary. [Regulation 24(4)].
Topic 378
[SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations 1997]
1. Convene a Board Meeting after giving Notices to all the
Directors of your company as per Section 286 and fix up the date, time, place
and agenda for the General Meeting to pass a Special Resolutiont after the date
of the public announcement of the offer to acquire shares of your company by the
acquirer.
2. Please keep in mind that every officer of the company whose
duty is to give notice of the Board Meeting as aforesaid and who fails to do so
will be punishable with fine of upto Rs. 1000/‑. [Section 286(2)].
3. Issue Notices in writing atleast twenty one days before the
date of the General Meeting proposing the Special Resolution with a suitable
explanatory statement. [Section 171(1) read with Section 173(2)].
4. Hold the General Meeting and passed the Special Resolution
by threefourth majority [Section 189(2)] and obtain the approval of the General
Body of shareholders for acquisition of shares by acquirer.
5. File the Special Resolution in Form No. 23,t with the
concerned Registrar of Companies within thirty days of its passing [Section 192(1)
& (4)(a)] after paying requisite fees prescribed under Schedule X to the
Companies Act, 1956, either in cash or treasury challan. [Rule 22].
6. Please also keep in mind that if default is made in
complying with the aforesaid requirement, the company and every officer of the
company who is in default will be punishable with fine upto Rs. 200/- for every
day during which the default continues [Section 192(5)].
7. Please keep in mind that the approval of the General Body of
the shareholders should be obtained by your company after the date of the
public announcement of the offer. [Regulation 23(1)].
8. Also keep in mind that the Board of Directors of your
company does not take the following actions during the offer period:
(i) sell, transfer, encumber or otherwise dispose of or enter
into an agreement for sale, transfer, encumbrance or for disposal of assets
otherwise, not being sale or disposal of assets in the ordinary course of
business, of the company or its subsidiaries; or
(ii) issue any authorised but unissued securities carrying voting
rights during the offer period; or
(iii) enter
into any material contracts. [Regulation 23(1)].
9. Further keep in mind that restriction on issue of securities
as mentioned above will not affect the right of your company to issue and allot
shares carrying voting rights upon conversion of debentures already issued or
upon exercise of option against warrant as per pre‑determined terms of
conversion/exercise of option. [Regulation 23(1) Explanation].
10. Furnish to the acquirer within seven days of the request of
the acquirer or within seven days from the specified date whichever is later, a
list of shareholders or warrant holders or convertible debenture holders where
the period of exercise of option for conversion falls within the offer period
containing names, addresses, shareholding and folio number. [Regulation
23(2))].
11. Also furnish to the acquirer within the period of seven days
mentioned above, a list of those persons whose application for registration of
transfer of shares are pending with your company. [Regulation 23(2)].
12. Keep in mind that once the public announcement has been made
your Board of Directors should not do the following:
(i) appoint as additional director or fill in any casual vacancy
on the board of directors, by any person(s) representing or having interest in
the acquirer, till the date of certification by the merchant bankers as
provided under sub‑regulation (6) below;
(ii) upon closure of the offer and the full amount of consideration
payable to the shareholders being deposited in the special account, changes as
would give the acquirer representation on the Board or control over the company
can be made by the target company;
(iii) allow any person or persons representing or having interest in
the acquirer, if he is already a director on the board of the target company
before the date of the public announcement, to participate in any matter
relating to the offer, including any preparatory steps leading thereto.
[Regulation 23(3)].
13. Note that the board of directors of your company, if they so
desire, can send their unbiased comments and recommendations on the offer to
the share holders. Keep in mind that the fiduciary responsibility of your
directors to the shareholders and for this purpose seek the opinion of an
independent merchant banker or a Committee of Independent Directors.
[Regulation 23(4)].
14. Further note that if the acquirer's comments or
recommendations contain any misstatement or any concealment of material information,
the directors of your company will be liable for action in terms of the
Regulations and the SEBI Act. [Regulation 23(4) proviso].
15. Allow and facilitate the acquirer in verification of your
company's securities tendered for acceptances. [Regulation 23(5)].
16. Once your company obtains a certificate from the merchant
banker of the acquirer company that all the obligations have been fulfilled by
the acquirer, transfer the securities acquired by the acquirer, whether under
the agreement or from open market purchases in the name of the acquirer and/or
allow such changes in the board of directors of your company as would give the
acquirer representation on the board or control over your company. [Regulation
23(6)].
17. Ensure that where the acquirer in pursuance to an agreement
acquires shares along with his existing holding, if any, increases his
shareholding beyond 15% then such an agreement for sale of shares contains a
clause that in case of non‑compliance of any provision of the Regulation,
the agreement for sale will not be acted upon by the seller or the acquirer.
[Regulation 23(7) read with Regulation 22(16)].
18. Keep in mind that in the case of acquisition of shares of a
public sector undertaking pursuant to a public announcement made under the
regulation, the provisions of sub‑regulation (8) of regulation 23 shall
be applicable.
Topic 379
[SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997].
1. Please keep in mind that you can make any upward revision in
your offer in respect to the price and the number of shares to be acquired at
any time upto 7 working days prior to the date of the closure of the offer
irrespective of whether or not there is a competitive bid. [Regulation 26].
2. Further keep in mind that such upward revision can be made
only by the acquirer who has made the public announcement. [Regulation 26].
3. Note that the upward revision of the offer can be made only
after fulfilling the following conditions:
(a) make a public announcement in respect of such changes or
amendments in all the newspapers in which the original public announcement was
made;
(b) simultaneously with the issue of such public announcement,
inform the Board, all the stock exchanges on which the shares of the company
are listed, and the target company at its registered office;
(c) increase the value of the escrow account as provided under
subregulation (9) of regulation 28. [Regulation 26].
4. Please note that no public offer once made could be
withdrawn except under the following circumstances :-
(a) the
withdrawal is consequent upon any competitive bid;
(b) the
statutory approval(s) required have been refused;
(c) the
sole acquirer, being a natural person, has died;
(d) such circumstances as in the opinion of the Board merit
withdrawal. [Regulation 27(1)].
5. In case of withdrawal of the offer under any of the
circumstances specified in item 4 above, make a public announcement in the same
newspapers in which the public announcement of offer was published, indicating
the reasons for withdrawal of the offer. [Regulation 27(2)(a)].
6. Inform the SEBI Board simultaneously with the issue of the
public announcement, as aforesaid, all the stock exchanges on which the shares
of the company are listed and also the target company at its registered office.
[Regulation 27(2)(b)].
7. Note that both the actions mentioned in items 5 and 6 above
can be taken either by the acquirer or by the Merchant Banker.
Topic 380
[SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997]
1. Note that where proposals for acquisition of shares in
respect of a financially weak company is made by a State level public financial
institution, the provisions of these regulations in so far as they relate to
scheme of rehabilitation prepared by a public financial institution, shall
apply except that in such a case the Industrial Development Bank of India, a
corporation established under the Industrial Development Bank of India Act,
1964 shall be the agency for ensuring the compliance of these regulations for
acquisition of shares in the financially weak company. [Regulation 37].
2. Keep in mind that the bail out takeover will not apply to a
sick industrial company but only to a financially weak company. [Regulation
30(1)]
3. Further
note that-
(a) 'lead institution' means a "public financial
institution" within the meaning of section 4A of the Companies Act, 1956
or a scheduled bank. [Regulation 30(1) read with Regulation 2(4)(i) ];
(b) 'financially weak company' is a company which has at the end
of the previous financial year accumulated losses resulting in erosion of more
than 50% but less than 100% of its net worth, that is, the sum total of the
paid‑up capital and free reserves. [Regulation 30 (Explanation)];
(c) 'sick industrial company' will have the same meaning as
assigned to it in clause (6) of sub‑section (1) of section 3 of the Sick
Industrial Companies (Special Provisions) Act, 1985, or any statutory
reenactment thereof. [Regulation 2(1)(e)];
(d) the lead institution is responsible for compliance with the provisions
of bail out takeover. [Regulation 30(2)].
4. Appraise the financially weak company taking into account
the financial viability, and assess the requirement of funds for revival and
draw up the rehabilitation package on the principle of protection of interests
of minority share holders, good management, effective revival and
transparency. [Regulation 30(3)].
5. Ensure that the rehabilitation scheme specifically provides
the details of any change in management. [Regulation 30(4)].
6. Please note that the scheme can provide for acquisition of
shares in the financially weak company by
(a) outright
purchase of shares, or
(b) exchange
of shares, or
(c) a
combination of both. [Regulation 30(5)].
7. See that the scheme, as far as possible ensures that, after
the proposed acquisition, the erstwhile promoters do not own any shares in case
such acquisition is made by the new promoters pursuant to such scheme.
[Regulation 30(5) Proviso].
8. Ensure that the scheme contains a provision enabling you as
the lead institution to offer your shareholdings to the financially weak
company, as part of the scheme of rehabilitation if so considered necessary.
[Regulation 33 (Explanation)].
9. Before giving effect to any scheme of rehabilitation, invite
offers for acquisition of shares from at least three parties. [Regulation
31(1)].
10. Select one of the parties having regard to the managerial
competence, adequacy of financial resources and technical capability of the
person acquiring shares to rehabilitate the financially weak company.
[Regulation 31(2)].
11. Provide necessary information to any person intending to make
an offer to acquire shares about the financially weak company and particularly
in relation to its present management, technology, range of products
manufactured, shareholding pattern, financial holding and performance and
assets and liabilities of such company for a period covering five years from
the date of the offer as also the minimum financial and other commitments
expected of from the person acquiring shares for such rehabilitation.
[Regulation 31(3)].
12. Evaluate the bids received with respect to the purchase price
or exchange of shares, track record, financial resources, reputation of the
management of the person acquiring
shares and ensure fairness and transparency in the process. [Regulation 32(1)].
13. After making evaluation, list the offers received in order of
preference and, after consultation with the persons in the affairs of the
management of the financially weak company, accept one of the bids. [Regulation
32(2)].
14. Inform
the person whose bid has been accepted. [See Regulation 33].
15. Ensure that no person makes a competitive bid for acquisition
of shares of the financially weak company once the lead institution has evaluated
the bid and accepted the bid of the acquirer who has made the public
announcement of offer for acquisition of shares from the shareholders other
than the promoters or the persons incharge of the management of the financially
weak company. [Regulation 35].
16. Also make an application to the SEBI Board for exempting the
acquisition of shares from complying with the requirements of Chapter III of
the Regulations.
[As to the procedure to be followed by the acquirer
identified under 11 above, see Topic 378].
17. Keep in mind that if you are aggrieved by an order of SEBI
made on and after the commencement of the Securities Laws (Second Amendment)
Act, 1999, you may prefer an appeal to the Securities Appellate Tribunal having
jurisdiction in the matter [Regulation 46] within 45 days from the date on
which a copy of the order against which the appeal is proposed to be filed is
received by you. [Rule 3(1) of the Securities Appellate Tribunal (Procedure)
Rules, 2000].
Topic 381
DO YOU WISH TO FOLLOW THE PROCEDURE AS
ACQUIRER OF SHARES OF FINANCIALLY WEAK COMPANY?
[SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997].
1. Please note that if you are identified as the acquirer of
shares of a financially weak company by the lead institution in terms of the
scheme of rehabilitation mutually agreed to in this behalf a communication will
be sent to you by the Lead Institution. [See Topic 380].
2. On receipt of a communication from the lead institution,
make a formal offer to acquire the shares from the promoters or persons in
charge of the affairs of the management of the financially weak company,
financial institutions and also other shareholders at a price determined by
mutual negotiation between you and the lead institution. [Regulation 33].
3. Please note that the lead institution can offer the
shareholdings held by it to financially weak company as part of the scheme of
rehabilitation. [Regulation 33 Explanation].
4. If the offer is made to the shareholders other than the
persons in charge of the management of the affairs of the financially weak
company, make a public announcement of your intention for acquisition of shares
containing relevant details about the offer including the information about
identity and background of the person acquiring shares, offer price, the plan
for revival of the unit and the period for which the offer shall be kept open.
[Regulation 34(1) and (2)].
5. Ensure that at no point of time the shareholding by public
is reduced to less than 10% of the paid up share capital. [Regulation 34(4)].
6. In case the offer results in the public shareholding being
reduced to 10 per cent or less of the voting capital of the company make an
offer within a period of 3 months from the date of closure of the public offer
to buy out the outstanding shares remaining with the shareholders at the same
offer price which may have the effect of delisting the target company or
undertake to disinvest through an offer for sale by fresh issue of capital to
the public which shall open within a period of 6 months from the date of
closure of public offer. Such number of shares so as to satisfy the listing
requirements. [Regulation 34(4)(a) and (b)].
7. Ensure that the letter of offer states clearly the option
available to the acquirer as mentioned above and for the purpose of computing
10 per cent or less than 10 per cent of the voting rights as at the expiration
of 30 days after the closure of the public offer should be taken into account.
[Regulation 34(5) and (6)].
8. Forward the terms of offer to each of the shareholders in
the financially weak company indicating therein the record date and also the
acquisition date of 2 the offer. [Regulation 34(3)].
9. While accepting the offer from the other shareholders, make
an offer to acquire from any individual shareholder, his entire holdings if
such holding is upto hundred shares of the facev'alue of rupees ten each or ten
shares of the face value of rupees hundred each. [Regulation 34(7)].
10. Ensure that no person makes a competitive bid for acquisition
of shares of the financially weak company once the lead institution has
evaluated the bid and accepted the bid of the acquirer who has made the public
announcement of offer for acquisition of shares from the shareholders other
than the promoters or the persons in charge of the management of the
financially weak company.[Regulation 35].
11. Make an application to SEBI in respect of the offer made in
pursuance of above for exempting such acquisition from the provisions of
Chapter III of the Regulations. [Regulation 36(1)].
12. Please note that for considering such request SEBI may call
such information from the company as also from the lead institution, in
relation to the manner of vetting the offers, evaluation of such offers and
similar other matters. [Regulation 36(2)].
13. Adhere to the time limits specified for various activities
for public offer specified in Chapter III. [Regulation 36(3)].
14. Keep in mind that if you are aggrieved by an order of SEBI
made on and after the commencemenO of the Securities Laws (Second Amendment)
Act, 1999, you may prefer an appeal to the Securities Appellate Tribunal having
jurisdiction in the matter [Regulation 46] within. 45 days from the date on
which a copy of the order against which the appeal is proposed to be filed is
received by you. [Rule 3(1) of the Securities Appellate Tribunal (Procedure)
Rules, 2000].
Topic 382
1. Make an application to the depository through the
participant who has your account in respect of such security. [Regulation 58(1)
and (10)].
2. The participant after satisfying itself that the securities
are available for pledge or hypothecation will, after making a note in its
records, of the notice of pledge or hypothecation, forward your application to
the depository for its approval. [Regulation 58(2) and (10)].
3. Keep in mind that on receipt of your application through the
participants, the depository after confirmation from the pledgee or the
hypothecatee that the securities are available for pledgor with the pledgor or
available for hypothecation with the hypothecator create and record the pledge
or the hypothecation within fifteen days of the receipt of the application send
an intimation of the same to the participants of the,pledgor and the
hypothecator and the pledgee or the hypothecatee. [Regulation 58(3)].
4. Further keep in mind that on receipt of the intimation under
item 3 above the participants of both the pledgor or the hypothecator and the
pledgee or the hypothecatee will inform the pledgor or the hypothecator and
also the pledge respectively of the entry of creation of the pledge.
[Regulation 58(4)].
5. Note that if the depository does not create the pledge or
the hypothecation it will send an intimation to the participants of the pledgor
or the hypothecator and the pledgee or the hypothecatee along with the reasons
for non‑creation of pledge or hypothecation. [Regulation 58(5)].
6. Also keep in mind that the entry of the pledge or
hypothecation mentioned under item 3 above can be cancelled by the depository
if the pledgor or the hypothecator or the pledgee or the hypothecatee makes an
application to the depository through its participants and such cancellation
will not be made without prior concurrence of the pledgee or the hypothecatee.
[Regulation 58(6)].
7. Further keep in mind that it is the duty of the depository
to inform the participant of the pledgor or the hypothecator about the
cancellation of the entry of pledge or the hypothecation. [Regulation 58(7)].
8. Note that subject to the provisions of the pledge document
or the hypothecation document, the pledgee or the hypothecatee may invoke the
pledge or the hypothecation and on such invocation the depository will register
the pledgee the hypothecatee as beneficial owner of such securities and amend
its records accordingly. [Regulation 58(8)].
9. Note further that it is the duty of the depository to
immediately inform the participants of the pledgor or the hypothecator and the
pledgee or the hypothecatee about an amendment in its record as mentioned above
and the participants in turn will make necessary changes in their records and
inform the pledgor or the hypothecator and the pledgee or the hypothecatee
respectively. [Regulation 58(9)].
10. Note also that the depository will obtain prior concurrence
of the hypothecator before registering the hypothecatee as the beneficial
owner. [Regulation 58(10)].
11. Further note that a participant will not give effect to any
transfer of security in respect of which a notice or entry of pledge or
hypothecation is in force within the concurrence of the pledgee or the
hypothecatee as the case may be. [Regulation 58(11)].
12. Note that a depository or a participant or any of their
employees shall not render directly or indirectly any investment advice about
any security in the publicly accessible media, whether real‑time or non
real‑time, unless a disclosure of his interest including long or short
position in the said security has been made, while rendering such advice.
[Regulation 458A(1)].
13. Further note that, in case an employee of the depository or
the participant is rendering such advice, he shall also disclose the interest
of his dependent family members and the employer including their long or short
position in the said security, while rendering such advice. [Regulation
458A(2)]
Topic 383
DO YOU WISH TO AVOID BEING CAUGHT AS A
PERSON INDULGING IN INSIDER TRADING?
[SEBI (Prohibition of Insider Trading) Regulations,
1992]
1. Keep in mind the definition of insider given in clause (e)
of Regulation 2 meaning any person who is or was connected with the company or
is deemed to have been connected with the company and who is reasonably
expected to have access, to unpublished price sensitive information in respect
of securities of a company, or who has received or has had access to such
unpublished price sensitive information.
2. Further keep in mind that the meaning given of unpublished
information in clause (k) of Regulation 2 means information which is not
published by the company or its agents and is not specific in nature and in its
Explanation it says that speculative reports in print or electronic media shall
not be considered as published information.
3. Also keep in mind that price sensitive information means any
information which relates directly or indirectly to a company and which if
published is likely to materially affect the price of securities of company.
[Regulation 2(na)]
4. Do not deal in securities of a company listed on any Stock
Exchange when is possession of any unpublished price sensitive information
either on your behalf or on behalf of any other person. [Regulation 3(i)].
5. Do not communicate counsel or procure directly or indirectly
any unpublished price sensitive information to any person who which in
possession of such unpublished price sensitive information shall not deal in
securities provided that nothing contained above shall be applicable to any
communication required in the ordinary course of business or under any law.
[Regulation 3(ii)].
5. Do not deal in the securities of another company or
associate of that other company while in possession of any unpublished price
sensitive information. [Regulation 3A].
6. Note that buying of bulk of shares of a particular company
from the market when in possession of the unpublished price sensitive
information that the company is being merged with another company prior to the
announcement of the merger of the company was found to be violating the
Regulation 3(i) prohibiting insider trading after investigation.
7. Further note that SEBI had directed the insider to
compensate the seller to the extent of the mandatory benefit obtained and also
directed to launch criminal prosecution against the directors of the insider.
8. Further note that the benefit enjoyed by the insider will be
calculated on the basis of the difference between the market price of the
shares of that particular company sold to the insider after the announcement of
the merger and prior to the announcement of the merger excluding premium.
9. Further note that the order of SEBI regarding prosecution
was made against those directors of the insider who had participated not only
in the board meeting where the decision on the acquisition of shares for merger
was taken but also in the board meeting where the decision to purchase bulk of
shares of a particular company was taken.
10. Keep in mind that SEBI Board will investigate when it is of
prima facie opinion that it is necessary to find out whether a person is
indulging in insider trading or not by taking advantage of unpublished price
sensitive information after investigating the books of account, records and
documents of an alleged insider. [Regulation 5(1)].
11. Further keep in mind that SEBI may appoint an investigating
authority for the following purposes:
(i) to investigate into the complaints received from investors,
intermediaries or any other person on any matter having a bearing on the
allegations of insider trading; and
(ii) to investigate suo motu upon its own knowledge or information
in its possession to protect the interest of investors in securities against
breach of these regulations. [Regulation 5(2)].
12. Note that on the suspicion of the SEBI of your being an
insider you will get a notice from SEBI that investigation will be undertaken.
[Regulation 6(1)].
13. Keep in mind that where SEBI is satisfied that in the
interest of investors or in public interest, no such notice should be given, it
may by an order in writing direct that the investigation be taken up without
such notice. [Regulation 6(2)].
14. Give a reply to the notice explaining your position which
does not amount to taking any advantage on the basis of unpublished price
sensitive information as given in clause (k) of Regulation 2.
15. Note that even after receipt of your reply which does not
satisfy SEBI it will appoint investigating authority to check your books,
accounts and other documents in your custody or control.
16. Furnish to the said authority statements and information
relating to the transaction in securities market within the time frame fixed by
the said authority.[Regulation 7(1)].
17. Allow reasonable access to the premises occupied by you and
also extent reasonable facility for books, records, documents and computer data
in the possession of the stock broker or any other person and also provide
copies of documents and other material which are required by the investigating
authority being relevant. [Regulation 7(2)].
18. Allow the investigating authority to examine or record
statements of any member, director, partner, proprietor and employee of your
company in the course of its investigation if it requires so. [Regulation
7(3)].
19. See that the director, proprietor, partner or any employee of
your company provide all assistance to the investigating authority in
connection with the investigation which you are reasonably expected to give.
[Regulation 7(4)].
20. Keep in mind that within reasonable time of the conclusion of
the investigation, the investigating authority will submit its report to SEBI
and after investigation of the said report SEBI will give its findings and will
communicate such findings to you. [Regulations 8 and 9].
21. On receipt of the communication you are required to give
reply to SEBI within 21 days. [Regulation 9(2)].
22. On receipt of the aforesaid reply or explanation if any from
you, if SEBI requires you to take such measures as it may deem fit to protect
the interest of the investors and in the interest of the investors and in the
interest of the securities market, adopt those measures. [Regulation 9(3)].
23. If SEBI appoints a qualified auditor to investigate into the
books of account or the affairs of your company, give him full assistance and
co‑operation as the said auditor has the same powers as the investigating
authority is having as mentioned above. [Regulation 10].
24. If SEBI issues any order directions on the basis of the reply
provided by you follow the order which may include the following:
(i) directing the insider or such person as mentioned in clause
(i) of subsection (2) of section 11 of the SEBI Act not to deal in securities
in any particular manner;
(ii) prohibiting the insider or such person as mentioned in clause
(i) of sub‑section (2) of section 11 of the SEBI Act from disposing of
any of the securities acquired in violation of these regulations;
(iii) restraining the insider to communicate or counsel any person
to deal in securities.
(iv) declaring
the transactions in securities as null and void;
(v) directing the person who acquired the securities in violation
of these regulations to deliver the securities back to the seller;
(vi) directing the person who has dealt in securities in violation
of these regulation to transfer an amount or proceeds equivalent of the cost
price or market price of securities whichever is higher to the investor
protection fund of a Recognised Stock Exchange. [Regulation 11]
25. If you feel aggrieved by the order of SEBI made before the
commencement of the Securities Laws (Second Amendment) Act, 1999 (i.e. 16‑12‑1999)
prefer an appeal to the Central Government in terms of the SEBI (Appeal to the
Central Government) Rules, 1993 and if you feel aggrieved by the order of SEBI
made on or after such commencement prefer an appeal to the Securities Appellate
Tribunal having jurisdiction in the matter under the Securities Appellate Tribunal
(Procedure) Rules, 2000.
Topic 384
[SEBI (Prohibition of Fraudulent and Unfair Trade
Practices relating to Securities Market) Regulations, 1995]
1. Do not buy, sell or otherwise do dealings in securities in a
fraudulent manner. [Regulation 3].
2. Keep in mind that fraud includes any of the following acts
committed by a party to a contract, or with his connivance or by his agent with
intent to deceive another party thereto or his agent or to induce him to enter
into the contract:
(i) the suggestion, as to the fact, of that which is not true,
by one who does not believe it to be true;
(ii) the active concealment of a fact by one having knowledge or
belief of the fact;
(iii) a
promise made without any intention of performing it;
(iv) any
other act fitted to deceive;
(v) any such act or omission as the law specially declares to be
fraudulent; and "fraudulent" shall be construed accordingly.
[Regulation 2(1)(c)].
3. Further keep in mind that mere silence as to facts likely to
affect the willingness of a person to enter into a contract is not fraud unless
the circumstances of the case are such that regard being had to them, it is
the duty of the person keeping silence to speak, or unless this is, in itself,
equivalent to speech. [Regulation 2(1)(c) explanation].
4. Note that dealing in securities will mean an act of buying,
selling or otherwise dealing in any security or agreeing to buy, sale or
otherwise deal in any security by any person either as principal or as agent.
[Regulation 2(1)(b)].
5. Do not indulge yourself in any market manipulation or do not
give any misleading statement to induce sale or purchase of securities and do
not indulge in any unfair trade practice relating to securities. [Regulations
4, 5 & 6].
6. Keep in mind that your action will amount to market
manipulation if you indulge in any of the following activities:
(i) effect, take part in, or enter into, either directly or
indirectly, transactions in securities, with the intention of artificially
raising or depressing the prices of securities and thereby inducing the sale or
purchase of securities by any person;
(ii) indulge in any act, which is calculated to create a false or
misleading appearance of trading on the securities market;
(iii) indulge in any act which results in reflection of prices of
securities based on transactions that are not genuine trade transactions;
(iv) enter into a purchase or sale of any securities, not intended
to effect transfer of beneficial ownership but intended to operate only as a
device to inflate, depress, or cause fluctuations in the market price of
securities;
(v) pay, offer or agree to pay or offer, directly or indirectly,
to any person any money or money's worth for inducing another person to
purchase or sale any security with the sole object of inflating, depressing or
causing fluctuations in the market price of securities. [Regulation 4].
7. Note that it will amount to giving of misleading statements
to induce sale or purchase of securities if you make any statement or
disseminate any information which
(i) is
misleading in a material particular; and
(ii) is likely to induce the sale or purchase of securities by any
other person or is likely to have the effect of increasing or depressing the
market price of securities, if when he makes the statement or disseminate the
information:
(a) he does not care whether the statement or information is true
or false; or
(b) he knows, or ought reasonably to have known, that the
statement or information is misleading in any material particular. [Regulation
5] .
8. Keep in mind that if you give any general comments in good
faith in regard to the economic policy of the Government or the economic
situation in the country or trends in the securities market or any other matter
of similar nature it will not amount to giving misleading statement to induce
sale or purchase of securities. [Regulation 5].
9. Your action will amount to indulge in unfair trade practice
relating to securities if you do either of the following:
(i) in the course of his business, knowingly engage in any act
or practice which would operate as a fraud upon any person in connection with
the purchase or sale of, or any other dealing in, any securities;
(ii) on his behalf or on behalf of any person, knowingly buy, sell
or otherwise deal in securities, pending the execution of any order of his
client relating to the same security for purchase, sale or other dealings in
respect of securities.
Nothing contained in this clause shall apply where
according to the client's instruction, the transaction for the client is to be
effected only under specified conditions or in specified circumstances;
(iii) intentionally and in contravention of any law for the time
being in force delays the transfer of securities in the name of the transferee
or the despatch of securities or connected documents to any transferee;
(iv) indulge in falsification of the books, accounts and records
(whether maintained manually or in computer or in any other form);
(v) when acting as an agent, execute a transaction with a client
at a price other than the price at which the transaction was executed by him,
whether on a stock exchange or otherwise, or at a price at which it was offset
against the transaction of another client. [Regulation 6].
10. If SEBI is of the opinion that you are indulging in
fraudulent and unfair trade practices relating to securities market you will be
given a notice stating that an investigating officer appointed by SEBI will
undertake the investigation. [Regulation 8].
11. Produce to the investigating officer such books, accounts and
other documents in your custody and control and furnish him with such statement
and information as the said officer may reasonably require for the purpose of
his investigation. [Regulation 9(1)].
12. Allow the investigating officer to have access to the
premises occupied by you at all reasonable times for the purpose of
investigation. [Regulation 9(2)(a)].
13. Extent to the investigating officer reasonable facilities for
examining any ,books, accounts and other documents in your custody or control
whichever form it may be kept which are required by the officer for the purpose
of investigation. [Regulation 9(2)(b)].
14. Provide to such investigating officer copies of any such
books, accounts or records which in the opinion of the said officer are
relevant to the investigation and also allow him to take out computer out
prints thereof. [Regulation 9(2)(c)].
15. Give to the investigating officer all such assistance and
extent to such cooperation as may reasonably be required in connection with the
investigation and also furnish relevant information to the said officer as he
may reasonably seek for the purpose of investigation. [Regulation 9(4)].
16. Keep in mind that the investigating officer has power to
examine orally and to record your statement or the statement of any director,
partner, member or employee of you. [Regulation 9(3)],
17. Keep in mind that SEBI will give you a reasonable opportunity
of hearing on receipt of the report of the investigating officer and thereafter
issue directions for ensuring due compliance with the provisions of the SEBI
Act and Rules and Regulations made thereunder. [Regulation 11].
18. Note
that the directions to be issued by SEBI as aforesaid can be the following:
(i) directing
you not to deal in securities in any particular manner;
(ii) requiring to call upon any of your officers, other employees
or representative to refrain fromdealing in securities in any particular
manner;
(iii) prohibiting you from disposing of any of the securities
acquired in contravention of these Regulations;
(iv) directing you to dispose of any such securities acquired in
contravention of these regulations, in such manner as the Board may deem fit,
for restoring the status quo ante. [Regulation 12].
19. Follow
the directions of SEBI as soon as you receive them.
20. Note that for non‑compliance of the directions issued
by SEBI it can initiate action for suspension or cancellation of registration
of any intermediaries holding a certificate of registration under the SEBI Act.
[Regulation 13].
XXXIV. Collective Investment Scheme
Topic 385
DO YOU WISH TO CONTINUE TO OPERATE
EXISTING COLLECTIVE INVESTMENT SCHEMES?
[SEBI (Collective Investment Scheme) Regulations,
1999]
1. Make an application for re0stration to the SEBI before the
expiry of two months from 15th October, 1999 in Form A given in First Schedule
to the Regulations. [Regulation 68(1) read with Regulation 5(2)].
2. Attach to the aforesaid application for provisional
registration of your Collective Investment Management Company already operating
collective investment schemes an application fee of Rs. 25,000/‑ by way
of bank draft favouring 'Securities and Exchange Board of India' payable at
Mumbai or at the regional offices where the application for repistration is
submitted. See Second Schedule to the Regulations. [Regulation 6].
3. Keep in mind that you can continue to operate your existing
collective investment schemes until a certificate of registration is granted to
your company by the SEBI or rejection of application for registration is
communicated to your company. [Regulation 68(3)].
4. Further keep in mind that your company can not pending its
registration certificate launch any new collective investment scheme or can
mobilise money from the public or from the investor under your company's
existing schemes unless a certificate of registration is granted to it by SEBI
under Regulation 10. [Regulation 69].
5. Attach
to the application mentioned in item I above the following
(i) a
certified true copy of certificate of incorporation of your company;
(ii) a certified true copy of your company's Memorandum and
Articles of Of Association;
(iii) a list of major shareholders holding five per cent or more
voting rights and percentage of their shareholding as of the latest date;
(iv) certified true copies of your company's balance sheet and
profit and loss account for the immediately preceeding three years;
(v) a list of names and activities of associate companies or
concerns carrying on activities related to the securities market and granted
registration by SEBI;
(vi) a list of your company's Board of Directors, their name,
qualification, background, experience, whether directorship is on whole‑time
or part‑time and their directorships. Also indicate in the said list
whether any of your company's directors is in full time employment elsewhere.
If any director is a member of a professional body enclose a copy of the permission
furnished by the said professional body for acting as a director of your
company;
(vii) a list giving names, qualifications, experiences of your
company's key management personnel along with their proof of acceptance of
their appointment letters and salary slips;
(viii) a list of your company's employees along with their names,
qualifications and experiences;
(ix) a statement giving details of infrastructural facilities such
as office space and office equipments. Enclose certified copies of relevant
sale deed or lease deed Pr rental agreement for occupyingthe said office space.
For office equipments mention the details of electronic office equipments,
computers, fax, telephone etc. along with copies of proof of purchase of the
above equipments;
(x) a certified copy of draft Trust Deed and draft Investment
Management Agreement.
6. In case your company's application is not complete in all
respects your company will be given an opportunity to complete such formalities
within one month before rejecting your company's application. [Regulation 7].
7. Keep in mind that the application so made as aforesaid will
be‑dealt with by SEBI in the following manners:
(i) granting
provisional registration;
(ii) granting
a certificate of registration;
(iii) rejecting
the application for registration. [Regulation 68(3)].
8. Keep in mind that your company must satisfy SEBI on the
following counts for obtaining provisional registration:
(i) your existing schemes are in the nature of collective
investment schemes as defined in Regulation 2(2);
(ii) your affairs are not being conducted in a manner detroental
to the interest of existing investors;
(iii) you have at least 50% independent directors at the time of
making the application;
(iv) any person directly or indirectly connected with your existing
schemes has not been granted registration by SEBI. [Regulation 70(1)].
9. If for the purpose of grant of provisional registration SEBI
wants to inspect inter alia, the existing schemes, books of accounts, records
and documents, show them to SEBI. [Regulation 70(2)].
10. Note that once SEBI is satisfied with the aforesaid it may
grant provisional registration to you subject to the following conditions :
(i) have your existing schemes appraised by an appraising agency,
within a period of 2 year from the date of grant of provisional registration;
(ii) have your existing scheme rated by an approved credit rating
agency within 1 year from the date of grant of provisional registration;
(iii) your companys accounting and valuation norms should in
respect of schemes already floated comply with specification given in Part II
of Ninth Schedule of the Regulations, within a period of 1 year from the date
of provisional registration;
(iv) follow
conditions specified in Regulation 11 of the regulations;
(v) allow your existing collective investment schemes subject to
audit by an auditor within 1 year from the date of grant of provisional
registration;
(vi) creation of trust and appointment of trustees in the manner
specified in Chapter IV of these Regulations within a period of 1 year from the
date of grant of provisional registration;
(vii) meeting of minimum net worth of Rs. 1 crore within 1 year from
the date of grant of provisional registration which should be increased by Rs.
I crore each within 2 years, 3 years, 4 years and 5 years from the date of
grant of provisional registration;
(viii) should not dispose of the scheme property except for meeting
obligations arising under the offer document of the scheme.
(ix) any
other conditions which SEBI may impose. [Regulation 71].
11. Give a written undertaking to SEBI to comply with the
aforesaid conditions. [Regulation 7(2)] .
12. If you fail to comply with the aforesaid conditions, you are
required to wind up your existing collective investment schemes in the
following manner:
(i) send an information memorandum within a week from its date
to all the investors who have subscribed to your schemes within two months from
the date of receipt of intimation from SEBI;
(ii) state in the aforesaid information memorandum the details of
the state of affairs of the scheme, the amount repayable to each investor and
the manner in which such amount is determined;
(iii) have the said information memorandum dated and signed by all the
directors of the scheme;
(iv) state in it explicitly that investors desirous of continuing
with the scheme may send positive consent within 1 month to continue with the
scheme at their own risk and responsibility;
(v) wound up the scheme if the positive consent is received only
from 25% or less of the total number of existing investors;
(vi) make the payment to the investors within 3 months of the date
of the information memorandum. [Regulation 73(1) to (8)].
13. File with SEBI, on completion 6 of the winding up, such
reports as may be specified by SEBI. [Regulation 73(9)] .
14. If you are not desirous to obtain even the provisional
registration from SEBI then formulate a scheme of repayment and make such repa
ment to the existing investors in the manner as specified above. [Regulation
74].
15. If you are considered to be granted provisional registration
then pay the fee of Rs. 5 lakhs to SEBI by way of demand draft in the manner
mentioned in the Second Schedule to the Regulations.
Topic 386
DO YOU WISH TO OPERATE A COLLECTIVE
INVESTMENT SCHEME?
1. Note that for operating or launching a collective investment
scheme your company should be a Collective Investment Management Company which
has obtained a certificate of registration from SEBI and the scheme should be
approved by the trustee and rated from a credit rating agency and also
appraised by an appraising agency and a copy of the offer document should be
filed with SEBI. [Regulation 3 & 24(1), (2), (3)].
2. Make an application to the SEBI for registration of your
company as a collective investment management company in Form A given in First
Schedule to the Regulations before operating a collective management scheme.
[Regulation 4].
3. Attach to the aforesaid application for registration a fee of
rupees twenty five thousand by way of bank draft favouring 'Securities and
Exchange Board of India' payable at Murnbai or at the regional office where the
application for registration is submitted. [Regulation 6 read with Second
Schedule].
4. Prepare a draft of collective investment scheme in the form
of a trust and the instrument of trust must be in the form of a deed.
[Regulation 16(1)].
5. Ensure that the aforesaid trust deed contains such clauses
as mentioned in the Fourth Schedule of the Regulations and also such other
clauses necessary for safeguarding the interest of the unit holders.
[Regulation 17(1)].
6. Further ensure that the trust deed to be prepared as
aforesaid does not contain a clause which has the effect of the following:
(i) limiting or extinguishing the obligations and liabilities of
the trust in relation to any collective investment scheme or the unit holders;
or
(ii) indemnifying the trustee or the collective investment
management company for loss or damage caused to the unit holders by their acts
of negligence or acts of commissions or omissions. [Regulation 17(2)].
7. Hold a board meeting of your company after giving notice to
all the directors of the company as per section 286 and have the trust deed
approved by the said board meeting by passing a resolution.
8. Please keep in mind that every officer of the company whose
duty is to give notice of the Board Meeting as aforesaid and who fails to do so
will be punishable with fine of upto Rs. 1000/-. [Section 286(2)].
9. Further have the trust deed approved by the SEBI and also
have the trust registered under the provisions of the Indian Registration Act
1908 and have it executed in favour of the trustee named in the instrument of
trust. [Regulation 16(2)].
10. Appoint any one of the following persons as trustee who will
hold the assets of the scheme for the benefit of unitholders and who are
registered with the SEBI under the SEBI (Debenture Trustee) Regulations 1993:-
(a) a
scheduled bank carrying on commercial activity; or
(b) a public financial institution within the meaning of section
4A of the Companies Act, 1956; or
(c) an
insurance company; or
(d) any body corporate company which may be approved by the SEBI
for this purpose. [Regulation 7 of the SEBI (Debenture Trustee) Regulations,
1993].
11. Obtain particulars from the trustee so appointed as specified
in Form C mentioned in the First Schedule of the Regulations. [Regulation 18(2)
& 16(2)].
12. Keep in mind that the trustee so appointed of your company's
collective investment scheme is not directly or indirectly associated with the
persons who have control over your company. [Regulation 18 proviso].
13. Once your company receives favourable consideration from the
SEBI Board for registering your company pay to the SEBI registration fee of
rupees ten lakhs by way of a bank draft in favour of 'Securities and Exchange
Board of India' payable at Mumbai. [Regulation 10 read with Second Schedule].
14. Enter into an agreement with the trustee for managing the
scheme property, which should contain such clauses as are specified in the
Fifth Schedule of the Regulations and such other clauses as are necessary for
the purpose of fulfilling the objectives of the scheme. [Regulation 20].
15. Draft the offer document of your company's collective
investment scheme containing true and fair view of the scheme disclosures which
are adequate in order to enable the investors to make informed investment
decision and should be in conformity with the contents of the standard offer
document specified in the Sixth Schedule of the Regulations. [Regulation 26(1),
(2) & (3)].
16. Have
the offer document approved by the Board of Directors of your company.
17. Obtain rating from an approved credit rating agency before
launching the collective investment scheme. [Regulation 24(2)].
18. Get the scheme approved by an empannelled appraising agency.
[Regulation 24(3)].
19. Keep in mind that your company can launch close ended schemes
only and the.duration of the schemes should not be less than three calendar
years. [Regulation 24(4)].
20. Obtain insurance for the scheme for protection of scheme
assets. [Regulation 24(5)].
21. File the offer document of your collective investment scheme
with the SEBI along with rupees twenty five thousand as filing fee in favour of
'Securities and Exchange Board of India' payable at Mumbai or at the regional
office of SEBI where the draft offer document is submitted. [Regulation 26(1)
read with Second Schedule].
22. If SEBI requires your company to carry out any modifications
in the offer document then carry out such modifications and inforrn SEBI Board.
[Regulation 26(4)].
23. If your company does not receive any modifications suggested
by SEBI in your company's offer document within twenty one days from the date of
filing, your company may issue the offer document. [Regulation 26(5)].
24. Ensure that advertisements for your collective investment
scheme are in conformity with the advertisement code as specified in the
Seventh Schedule of the Regulations. [Regulation 27(1)].
25. Disclose in each advertisement given for any scheme the
method and periodicity of valuation of scheme property in addition to the
investment objectives. [Regulation 27(2)]
26. Do not give misleading statements or opinion which are
incorrect or false in your offer document and advertisement materials.
[Regulation 29(1)].
27. Keep
the scheme open for subscription for 90 days and not more. [Regulation 30].
28. Specify in the offer document the minimum and maximum
subscription amounts your company seeks to raise under the scheme and also
specify the process of allotment of the amounts over subscribed in case there
is over subscription. [Regulation 31(1)].
29. Keep in mind that your company will be liable to refund the
application money to the applicants if the scheme fails to receive the minimum
subscription amount given as above. [Regulation 31(2)].
30. In case any amount is refundable, as above, refund it within
a period of six weeks from the date of closure of subscription list by cheque
or demand draft marked 'account payee' to the applicants by sending it by
registered post with acknowledgement due. [Regulation 31(3)].
31. Keep in mind that if your company does not refund the amounts
within the period of six weeks, as mentioned above, your company will be liable
to pay interest to the applicants, at a rate of fifteen per cent per annum on
the expiry of six weeks from the date of closure of the subscription list.
[Regulation 31(4)].
32. Issue unit certificates to the applicants whose applications
are accepted as soon as possible but not later than six weeks from the date of
closure of the subscription list. [Regulation 32].
33. If you issue units through a depository, a receipt in lieu of
unit certificate will be issued as per provisions of Securities and Exchange
Board of India (Depositories and Participants) Regulations, 1996 and bye‑laws
of the depository. [Regulation 32 proviso].
34. Do not provide any guaranteed return in your collective
investment scheme and in case any indicative return is assessed by the
appraising agency indicate it in the offer document and express it in monetary
terms rather than in kind in the said offer document. [Regulation 25].
35. Have the units of every scheme listed on a recognised stock
exchange immediately after the allotment of units has been made to the
successful applicants and not later than 6 weeks from the date of closure of
the scheme on each of the stock exchanges as mentioned in the offer document.
[Regulation 36].
36. Keep the money received for issue of units through offer
document in a separate bank account in the name of the scheme for which the
issue has been made and utilise the said money only for the following purposes:
(i) adjustment against allotment of units only after the
trustees have received a statement from the registrars to the issue regarding
minimum subscription amount, as stated in the offer document, having been
received from the public; or [Regulation 34(1)(a)].
(ii) for refund of money either in the case where minimum subscription
amount, as stated in the offer document, has not been received or in case of
subscription over the maximum subscription amount, As stated in the offer
document. [Regulation 34(1)(b)].
37. Keep in mind that the minimum subscription amount, as specified
in the offer document, is not less than the minimum amount as specified by the
appraising agency to be needed for completion of the project for which the
scheme is being launched. [Regulation 34(2)].
38. Note that a unit certificate unless otherwise restricted or
prohibited under the scheme will be freely transferable. [Regulation 33(1)].
39. Your company should register the transfer on receipt of
instrument of transfer together with the relevant unit certificates and should
also return the unit certificate duly registered in favour of the transferee,
to the transferee within thirty days from the date of such production.
[Regulation 33(2)].
40. In case the units which are to be transferred are with the
depository then transfer the units in accordance with the provisions of the
SEBI (Depositories and participants) Regulations 1996 and the bye‑laws of
the depository. [Regulation 33(2) proviso].
Topic 387
DO YOU WISH TO SET UP AN INDU~TRIAL PARK
UNDER THE INDUSTRIAL PARK SCHEME, 2002?
1. Before setting up an industrial park check whether your
company's undertaking is eligible for an automatic approval or non‑automatic
approval.
2. Note that for seeking automatic approval your company's
undertaking should fulfil the following conditions
(a) The minimum area required to be developed for an industrial
model town should be 1000 acres, provided the minimum area for specified
industrial park referred to in clauses (b) and (c) of paragraph 4 of the scheme
may very depending upon their activities.
(b) The project for setting up an industrial model town or an
industrial park form development of industrial infrastructure or
instrastructural facilities should have provision for the location of minimum
number of industrial units which are 50 units for industrial model town and 30
units for industrial park and 30 units for Growth Centre referred to in
paragraph 4 (a), (b) and (c) of the scheme.
(c) The minimum percentage of the area to be allocated for
industrial use should not be less than 60% of the total area.
(d) The percentage of land to be earmarked for commercial use
should not be more than 10% of the allocable area.
(e) In case of an industrial model town and industrial park and
Growth Centre, the minimum investment on infrastructure development should not
be less than 50% of the total project cost.
(f) In the case of an industrial park and Growth Centre which
provides built up space for industrial use, the minimum expenditure on
infrastructure development including cost of construction of industrial space
should not be less than 60% of the total project cost.
(g) No single unit referred to in clause (b) above should occupy
more than 50% of the allocable industrial area of an industrial model town or
industrial park or Growth Centre.
(h) Every undertaking being an industrial park should obtain
approval for Foreign Direct Investment or non‑resident Indian investment
from the Foreign Investment promotion Board or Reserve Bank of India, or any
authority specified under any law for the time being in force, as the case may
be.
3. Further note that applications not eligible for automatic
approval as above will require the approval of the Empowered Committee,
constituted by the Central Government and all such applications will be placed
before the said committee within 15 days of receipt of such applications.
4. Also note that the said committee will consider each case on
its merits and grant approval subject to such other conditions as may be deemed
fit by it.
5. Remember that in all cases of rejection of proposals, the
applicants will be afforded an opportunity of being heard by the committee and
the orders will be passed by the said committee and communicated within 12
weeks.
6. Keep in mind that if an undertaking fails to comply with any
of the conditions of grant of approval, the Central Government may withdraw
the approval after giving the undertaking being an industrial park and
opportunity of being heard.
7. Also keep in mind the objectives of setting up an industrial
park which can be any one of the following:
(a) for an industrial model town for development of industrial
infrastructure for carrying out integrated manufacturing activities including
research and development by providing plots or sheds and common facilities
within its precincts; or
(b) for an industrial park for development of infrastructural
facilities or built‑up space with common facilities in any area allotted
or earmarked for the purposes of software development, gems and jewelry,
electronics hardware; or
(c) for a Growth Centre under the Growth Centre Scheme of the
Government of India.
8. In the aforesaid Growth Centre Scheme ensure that it is
implemented by an undertaking and the growth centre is distinctly developed as
a separate,profit centre.
9. Make an application in the Form No. IPS‑I along with
an affidavit certifying the details given in such application for obtaining
approval for setting up an industrial park.
10. Make the above application to the Entrepreneurial Assistance
Unit of the Secretariat for Industrial Assistance, Department of Industrial
Policy and Promotion in the Ministry of Industry, Udyog Bhawan, New Delhi‑
110 011.
11. Note that on receipt of your application the Secretariat for
Industrial Assistance will give an acknowledgement for receipt of such
application along with, registration number allotted by such Secretariat.
12. Along with the aforesaid application pay a fee of Rs. 6,000/‑
by way of demand draft drawn in favour of "Pay and Accounts Officer,
Department of Industrial Development and payable at State Bank of India, Nirman
Bhawan Branch, New Delhi‑ 110 011.
13. If your company's application is eligible for automatic
approval as mentioned above, as per the scheme it will be disposed of within 15
days of making of such application and the decision for such approval will be
communicated to your company immediately on disposal of such application.
14. If your company's application is not found eligible for
automatic approval the decision regarding the same will also be immediately
communicated to your company.
15. Note that the said scheme will be in operation for the period
beginning on the 1st day of April, 1999 and ending on the 31st
day of March, 2002 as specified in clause (iii) of sub‑section (4) of
section 80‑1A of the Income‑tax Act, 1961.
16. Keep in mind that your company making an application for
approval under the said scheme should undertake to continue to operate the
industrial model town or industrial park or growth centre during the period in
which the benefits of the Income‑tax Act, 1961 are to be availed.
17. In case your company's undertaking develops an industrial
park on or after the lst day of April, 1999 and transfers the operation and
maintenance of such industrial park to another undertaking, then the deduction
under the provisions of the Income‑tax Act will be allowed for the
remaining period to the transferee undertaking, in the manner as if the
operation and maintenance were not so transferred to the transferee
undertaking.
18. In the above case, your company being the transferorand also
the transferee should jointly intimate to the Entrepreneurial Assistance Unit
of the Secretariat for Industrial Assistance, Department of Industrial Policy
and Promotion, Udyog Bhawan, New Delhi‑ 110 011 along with a copy of the
agreement between the transferor and the transferee undertaking for the
aforesaid transfer.
19. Do not forget to furnish to the Central Government on 1st
January and 1st July of every year a report in the Form No. IPS‑II
subsequent to your company's obtaining the approval.
Protection
[Topic 388 to Topic 393]
Topic 388
1. Please go through clauses (a) to (1) of Sub‑section
(1) of Section 33 of the MRTP Act, 1969 and ascertain if the agreement to which
you are a party falls within one of those clauses.
2. Please note that there is no need for you to rush for
registration of your agreement if you are sure that your agreement does not
attract any of the aforesaid clauses.
3. In case you are sure or in case you have any doubt about the
applicability of the aforesaid clauses of Section 33(1) it would be better, to
avoid prosecution under Section 48 of the MRTP Act, to file the agreement for
registration under Section 35.
4. Please ensure, where your agreement is registerable, to
register the agreement with the Director General of Investigation and
Registration appointed by the Central Government under section 8 of the MRTP Act,
within sixty days of the making of the agreement, furnishing the particulars
laid down in rule 12 of the MRTP Rules, 1970.
5. Please furnish the particulars of any variation or
determination of the agreement within one month of the making thereof, to the
Director General.
6. Please ensure to furnish the instrument or a true copy
thereof, of any variation or determination of the agreement.
7. Please also ensure to produce a memorandum in writing signed
by you as one of the parties to the agreement where the agreement has been
varied or determined without any instrument in writing. [See R. 12 of MRTP
Rules, 1970].
8. Please note that it will be sufficient if the particulars
are furnished to the Director General by one of the parties to the agreement or
one of the parties of the variation of the agreement.
9. Please ensure that particulars are furnished by the parties
residing in India in case the agreement is between an Indian party and a party
not residing in India.
10. Please ensure to furnish particulars on behalf of the trade
association where the trade association can be said to be a party to the
agreement.
11. Please remember that merely registering the agreement does
not amount to admission that the agreement attracts the provisions of Section 33
relating to Restrictive Trade Practices and the Director General is not
necessarily entitled to initiate action under Section 10(a)(iii) of the MRTP
Act.
12. Please note that you may make an application under Section 36
of the MRTP Act to the Director General for inclusion of particulars of the
agreement in a special section which would not be open to public inspection.
13. Keep in mind that on receipt of your application the Director
General may permit the request for maintenance of particulars in the special
section with the permission of the Commission.
14. You may also make an application to the Director General for
exclusion of certain portions of the agreement from registration under Section
36 on the ground that, that part of the agreement for which special
dispensation is being sought has no substantial economic significance.
Topic 389
DO YOU WISH TO MAKE A COMPLAINT ABOUT
UNFAIR TRADE PRACTICE?
1. You may, if you are a consumer or a trade association or a
registered consumers' association, make a complaint before the MRTP Commission,
giving facts which constitute unfair trade practice.
2. Please note that the Commission can institute enquiry on a
reference made to it either by the Central Government or any State Government
or upon an application made to the Commission by The Director General or even
on its own knowledge or information.
3. Please note that the Commission may, on a complaint received
from an association, direct the Director General to cause a preliminary
investigation to be made before satisfying itself that the complaint requires
to be enquired into.
4. Please note that the Commission may enquire into the unfair
trade practice and on being satisfied that the practice is prejudicial to
public interest or to the interest of any consumer or consumers generally, it
may direct that the practice shall be discontinued or shall not be repeated
("cease and desist" order).
5. Further note that the Commission may also direct that any
agreement relating to such unfair trade practice shall be void or shall stand
modified in such manner as may be directed by the Commission in its order.
6. Also note that the Commission, instead of making the
aforesaid order, direct the concerned party to follow some modified practice
and after the party complies with that direction of the Commission, the
Commission may not pass any order.
Topic 390
DO YOU WISH TO BE RECOGNISED AS
CONSUMERS' ASSOCIATION?
1. Please go through the Monopolies and Restrictive Trade
Practices (Recognition of Consumers' Association) Rules, 1987 and Forms No. 1
and 2 given in the Schedule to the said Rules.
2. Please, for better effect, have the association registered
under the Societies Registration Act, 1860 or under Section 25 of the
Companies Act, 1956.
3. Please, for better results, wait for a period of three years
before making an application to the Central Government under the Department of
Company Affairs for being recognised as a registered consumers' association.
4. Please have a Principal Officer who should be authorised in
writing or by means of resolution to act on behalf of the association.
5. Please ensure that there are atleast ten members of the
association who are consumers.
6. Please ensure that application is made to the Central
Government in triplicate in Form No. 1.
7. Please
pay fee of rupees five hundred either by challan or by bank draft.
8. Please ensure that all the particulars, as per Form No. 1 to
the Schedule to the Rules are given in the application.
9. Take on record the certificate of recognition which will be
issued by the Department of Company Affairs.
10. Please send a copy of the certificate to the State Commission
under the Consumers' Protection Act established by the State Government with
prior approval of the Central Government.
Topic 391
DO YOU WISH TO FILE OR OPPOSE AN
APPLICATION FOR TEMPORARY INJUNCTION BEFORE THE MRTP COMMISSION?
1. Please study the provisions of Sub‑section (1) of
Section 12A' of the MRTP Act, 1969.
2. Please also study the provisions of Rules 2A to 5 of Order
XXXIX of the First Schedule to the Code of Civil Procedure, 1908 to which
references have been made in Sub‑section (2) of Section 12A of the MRTP
Act, 1969.
3. Please note that the Director General of Investigation and
Registration' can also file an application for temporary injunction under his
suo moto powers pursuant to the provisions of Section 10(a)(iv) and Section
36B(d) of the MRTP Act.
4. Please note that the Commission may grant temporary
injunction even exparte, without notice to the opposite party provided the
Commission records the reasons as to why ex‑parte injunction is required
to be granted and as to how the objective of injunction would be frustrated if
notice is given to the opposite party.
5. Please note that the applicant for injunction will be
directed by the Comn‑iission to deliver to the opposite party, by
registered post, immediately after the grant of injunction, a copy of the
application for injunction together with affidavits filed in support of the
application as also a copy of the plaint and copies of documents on which the
applicant relies.
6. Please note that the applicant would be required to file an
affidavit stating that the aforesaid documents had been delivered.
7. Please note that the application for ex‑parte temporary
injunction would be disposed of by the Commissibn within thirty days or within
such further time as the Commission may give justifying the extension of
the'period of injunction.
8. Please note that the order of temporary injunction will be
binding not only on the company but also on its officer.
9. Please note that the temporary injunction can be granted
while instituting the enquiry and on the Commission being satisfied that
certain restrictive monopolistic or unfair trade practices are being practised
and that such practice is likely to affect prejudicially not only the public
interest but also interest of the trader or class of traders or consumer or
class of consumers. The Commission also must be satisfied on the basis of the
affidavit filed.
10. Under Regulations 77(2) of the MRTPC Regulations, 1991 the
Commission will generally direct the Director General to make investigation
into the allegations made by the applicant and may be asked to submit a report.
11. An application for temporary injunction must be supported by
an affidavit of the applicant stating the facts which constitute the alleged
trade practice and also showing the circumstances to prove that public interest
or interest of any trader or consumer is likely to be affected.
12. Ensure that the aforesaid affidavit is filed with five extra
copies and one additional copy for each respondent.
13. File the application with the Secretary who shall put the
application before the Commission.
14. Please note that the words "during an enquiry before the
Commission" used in Section 12A do not connote that the enquiry must be
already in progress before injunction is granted.
15. Please note that the words "any other persons" used
in Section 12A are comprehensive enough to include any persons whatsoever if
the person can show that his cause of action lies in protecting public
interest.
16. Please also note that a complaint can be made before the
Commission by any trader or class of traders or by any other person. What is
required to be shown is prejudice to the public interest or prejudice to the
interest of any trader, class of traders or consumers generally.
17. Please note that the following three factors must be
simultaneously present before a temporary injunction can be availed of.
(i) The
petitioner should be able to show that there is a prima facie case.
(ii) Balance
of convenience lies in his favour.
(iii) Non‑granting of the injunction would put the petitioner
to irreparable loss or injury.
Topic 392
1. Please make the application to the Commission either as a
trader or as a consumer or on behalf of class of traders or class of consumers
for damages for the loss or damage caused to you by any monopolistic,
restrictive or unfair trade practice.
2. Please note that you can make the application, with the
permission of the Commission, on behalf of any class of consumers or any class
of traders.
3. Please note that any compensation already granted to you by
any court will be deductible from the award of compensation by the Commission.
4. Please note thak the Commission may direct the Director
General to make investigation into allegations made by you and await for a
report from him.
5. Please note that you will have to file an affidavit in the
form appended to the MRTP Commission Regulations, 1991 alongwith your
application under Section 12B which applications
should be in a Form, as near to the circumstances as possible, stating therein
brief facts of the claim, narration of monopolistic, restrictive or unfair
trade practices, particulars of loss, damage or injury and the amount payable
as also the particulars of proceedings, if any, under the Consumer Protection
Act or any other law in respect of the same matter.
6. Ensure that the aforesaid application is verified in the
manner set out in Appendix 2 of the said Regulations and the affidavit
should is in the form appended to the said Regulations and the said
affidavit shall also be verified in accordance with the form given
thereunder.
7. Your application should state that no other application has
been filed before the Commission or before any authority under the Consumer
Protection Act, 1986 and your application should be filed with the Secretary
with five extra copies and one additional copy for each respondent.
8. See that your application for compensation clearly sets out
the actual pecuniary loss which should be quantified with precision.
9. You may also add in your claim the indirect pecuniary loss
in the form of loss of profit, loss of reputation, loss of business or loss of
credit.
10. The value of time lost can also be quantified and you may
include. your mental suffering like anxiety, worry, tension besides any bodily
suffering like pain, illness, loss of limb as also the loss suffered from the
sense of wrong or insult.
11. Please note that consequential losses must be capable of
being quantified and should have a direct relationship with the monetary loss
suffered.
12. You may also include elements of defamation in your claim
indicating the statement which is defamatory to you and also showing how the
statement was published by the defendant and how the statement is definitely
false.
13. Please note that the Commission will make an order for award
of damage only after making a full enquiry.
14. Further note that a finding made by the Commission under
Section 36D will not be a substitute for the finding which is required to be
made by the Commission under Section 12B.
Topic 393
1. Please check if you are a consumer or a voluntary consumer
association registered under the Companies Act, 1956 or any other law for the
time being in force.
2. Please check if you have suffered loss or damage as a result
of unfair trade practice adopted by any trader.
3. Please check if the goods mentioned in the complaint
suffered from one or more defects.
4. Please check if the services mentioned in the complaint
suffered from deficiency in any respect.
5. Please check if the trader has charged for the goods
mentioned in the complaint a price in excess of the price fixed or under any
law for the time being in force or displayed on the goods or any package
containing such goods.
6. Please check if you can be called a consumer within the
meaning clause (d) of Section 2 of the Consumer Protection Act, 1996.
7. Please remember that you are a consumer even if you are user
of the goods without being the purchaser.
8. Please also remember that you are still a consumer if
consideration has only been partly paid.
9. Please ensure that there is a defect or deficiency which
forms the subject matter of the complaint like any fault, imperfection or
inadequacy or shortcoming in the quality, quantity, potency, purity, nature and
manner of performance or standard which is required to be maintained under any
law or which is claimed by the trader.
10. Please check that the cause of action for the complaint
wholly or partly arises in the district for making the complaint before the
District Forum or the opposite party or any of the opposite parties where there
are more than one actually and voluntarily resides or carries on business or
has a branch office or personally works or gain in the district at the time of
the institution of the coniplaint.
11. Further note that the District Forum has jurisdiction to
entertain complaints where the value of goods or services and the compensation
if any claimed is upto Rs. 5 lakhs.
12. Please note that a copy of your complaint would be referred
to the opposite party mentioned in the complaint directing the opposite party
to give his version of the case within a period of thirty days or by some
extended period not exceeding fifteen days.
13. Please note that the District Forum will proceed with the
case after receipt of the denial or disputation of the allegations or on
failure by the opposite party to take any action to represent his case within
the time given by the District Forum.
14. Please note that in case your complaint alleges a defect in
the goods which cannot be determined without proper analysis or test, the
District Forum will call upon the complainant to supply a sample of the goods
which the District Forum will seal and authenticate and send it to an
appropriate laboratory for tests and call upon the laboratory to furnish a
report within a period of forty‑five days or within such extended time as
may be allowed by the District Forum.
15. Please note that the complainant may be asked to pay
appropriate fees for conducting of the tests by the appropriate laboratory.
16. Please note that the District Forum, on receipt of the report
from the laboratory, furnish a copy of the report both to the complainant and
to the opposite party.
17. Please further note that the complainant or the opposite
party may submit objections to the findings of the laboratory.
18. Please also note that both the complainant and the opposite
party may be heard by the District Forum about any objections to the tests
conducted by the laboratory.
19. Please also note that where the goods or the services cannot
be subjected to laboratory test, a copy of the complaint may be forwarded to
the opposite party Airecting the opposite party to give his version of
the case within fifteen days or within such extended time as may be granted by
the District Forum.
20. Please note that the opposite party will have the opportunity
to deny or dispute the allegations but if the opposite party omits or fails to
take action, the District Forum will proceed to settle the dispute on the basis
of evidence given by both the parties or on the basis of the evidence given by
the complainant if the opposite party fails to respond.
21. Please note that every proceeding before the District Forum
is supposed to be a judicial proceeding and the District Forum has full powers
of summoning and enforcing attendance of defendant or witnesses, has power to
examine witnesses on oath, has power in respect of discovery and production of
any document or other material object, has power of receiving evidence on
affidavit, requisitioning of report of analysis or tests from appropriate
laboratory or from any other relevant source, issuing of any commission for
examination of witnesses etc.
22. Please further note that after the above procedure has been
adopted, the District Forum will be fully empowered where necessary, to direct
the opposite party to remove any defect pointed out by the appropriate
laboratory or to replace the goods with new goods free from defect or order the
opposite party to return to the complainant the price or the charges paid by
the complainant and lastly order the opposite party to pay the compensation for
loss or injury suffered.
23. Please note that the District Forum has the power to summon
books, accounts, documents or commodities in the custody or control of the
person described in the requisition.
24. Please also note that the District Forum may send any officer
for collecting information as may be required by it.
25. Please further note that the District Forum may order search
and seizure where it has reason to believe that books, papers, documents etc.
may be destroyed, mutilated, altered, falsified or secreted.
26. The District Forum may, after examination, return the books
and documents or may retain the same for further examination.
27. Please note that the complainant may present his case in
person or by his agent or by sending it by registered post.
28. Please also note that all complaints must give name,
description and address of the complainant, the name, description and address
of the opposite party or parties, the facts relating to the complaint and where
and when it arose, documents in support of the allegations and relief which the
complainant claims.
29. Please further note that the aggrieved party, whether the
complainant or the opposite party, can file an appeal before the State
Commission against the findings of the District Forum within thirty days from
the date of the order, with the State Commission having power to accept the
appeal and also beyond the period of thirty days if the State Commission is
satisfied that there is sufficient cause for not filing the appeal within the prescribed
period.
30. For preferring an appeal to the National Commission against
the order of the State Commission, the appeal should be presented in the form
of memorandum which shall be in legible handwriting preferably typed and shall
set forth concisely under distinct head the grounds of appeal without any
argument or narrative and such grounds shall be numbered consecutively.
31. Each memorandum must be accompanied by a certified copy of
the order of the State Commission and also by documents which support the
appeal.
32. Please note that although the appeal has to be filed within
the period of limitation being two years from the date on which the cause of
action has arises an ap lication may be made to the National Commission
explaining the reasons for any delay.
33. Ensure
that the memorandum of appeal is filed in six copies.
34. Both the complainant and the opposite party must appear
before the National Comnlission, and if the complainant fails to appear, the
National Commission may dismiss the appeal, but if the respondent fails to
appear, and the complainant is present, the Commission may hear the appeal ex parte.
35. Please note that the National Commission will, except in
special circumstances, rely only on the ground mentioned in the memorandum of
appeal.
36. Please note that the procedure for filing complaint before
the State Commission or the National Commission is virtually the same and the
procedure for filing appeal from a decision of the District Forum to the State
Commission is more or less same as for filing an appeal from an order of the
State Commission to the National Commission.
37. Further note that the State Commission has jurisdiction to
entertain complaints where the value of goods or services and the compensation
if any claimed is more than Rs. 5 lakhs but less than Rs. 20 lakhs and the
National Commission has jurisdiction to entertain complaints where the value of
goods or services and the compensation if any claimed exceeds Rs. 20 lakhs.
38. Please note that the District Forum, if it finds it difficult
to enforce its order, may send the order to the appropriate court for
execution, keeping in mind the situation of the registered office of the
company and the residence of the defendant.
39. Please also note that the District Forum may dismiss the
complaint if it is found to be frivolous or vexatious.
40. Please also note that non‑compliance of the order of
the District Forum is a punishable offence, being punishable with imprisonment
which shall not be less than one month and which may extend to three years or
with fine which shall not be less than two thousand rupees but may extend to
ten thousand rupees or with both.
41. Note that if telephone is disconnected for non‑payment
of bills, the subscriber can raise a dispute in the consumer forum because
telephone department renders "service" to a subscriber who is a
'consumer' and also ‑because the Consumer Protection Act is a special Act
which excludes Telegraph Act, 1885. General Manager, Telecom District &
Other v. Consumer Disputes Redressal Forum and Another, (1999) 35 CLA (Snr)
41 (Ker).
C. ‑ Sick Industrial Companies
(BIFR)
[Topic 394‑398]
Topic 394
DO YOU WISH TO REPORT TO BIFR EROSION OF
50% OF YOUR NET WORTH?
[The Sick Industrial Companies (Special Provisions)
Act, 1985],
1. Check if the peak net worth of your company being an
industrial company, owning one or more industrial undertakings has been eroded
to the extent of fifty per cent or more during the immediately preceding four
financial years. [Section 3(e) read with section 23(1)].
2. Report the fact of such erosion of net worth to the Board
for Industrial and Financial Reconstruction within sixty days of the
finalisation of duly audited accounts of the fifth financial year. [Section
23(1)(a)(i)].
3. Hold a Board Meeting after giving notice to all the
directors of the company as per section 286 to approve the report about the
erosion of net worth and the causes for such erosion and to fix the date, time,
place and agenda of the General Meeting. [Section 23(1)(b)].
4. Please keep in mind that every officer of the company whose
duty is to give notice of the Board Meeting as aforesaid and who fails to do so
will be punishable with fine of upto Rs. 1000/-. [Section 286(2)].
5. Hold a general meeting of the shareholders of the company
for considering such erosion of net worth also within sixty days from the
aforesaid date. [Section 23(1)(a)(ii)].
6. Ensure that in the notice for the General Meeting to be
held, as aforesaid, an item in the agenda which should be compulsorily included
is the removal of the directors under Section 284 of the Companies Act, 1956
and the appointment in their place, new directors of the company. [Section
23(1)(c)].
7. At least twenty‑one days before the holding of the
general meeting, as aforesaid, send and forward &e report to every member
of the company about the erosion of net worth and the causes for such erosion.
8. Keep in mind that a director removed as aforesaid will not
be entitled to any compensation or damages for termination of his appointment
as director or of any appointment terminating with thpt as director. [Section
23(2)].
9. Issue notices of the General Meeting in writing at least
twenty one days before the date of the General Meeting proposing the Ordinary
Resolution with suitable explanatory statement. [Section 171(1) read with
section 173(2)].
10. Also keep in mind that, if default is made in complying with
the provisions of section 23, then every director or other officer of the
company who is in default will be punishable with imprisonment of not less than
6 months and not more than 2 years and also with fir.e. [Section 23(3)].
11. Report the erosion of the net worth of your company in Form
'C' of the BIFR Regulations, 1987, if you are not a government company. [Regulation
36].
12. Report the erosion of the net worth of your company in Form
'CC' of the BIFR Regulations, 1987, if you are a government company.
13. Ensure that the report to be submitted to the Secretary of
BIFR is typewritten., cyclostyled or printed neatly and legibly on one side of
foolscap size paper, in double space provided that true copies of documents
prepared by any other mechanical or chemical process, including photocopying
may be filed or submitted. [Regulation 7 of BIFR Regulations, 1987].
14. Ensure further that the report so made is not in any language
other than English or Hindi provided that if the report is made in any other
language the same should be accompanied by a true trfislation thereof in
English or Hindi. [Regulation 6 of BIFR Regulations, 1987].
15. Furnish information as may be called for by the Board for
Industrid and Financial Reconstruction from time to time about the steps taken
by you to make the net worth exceed accumulated losses. [Section 23B].
Topic 395
DO YOU WISH TO FIND OUT WHETHER YOU ARE
A SICK INDUSTRIAL COMPANY?
[The Sick Industrial Companies (Special Provisions)
Act, 1985]
1. Check if you are an industrial company registered for not
less than five years and have at the end of any financial year accumulated
losses equal to or exceeding your net worth. [Section 3(1)(o)].
2. You must be owning any undertaking pertaining to the
scheduled industry carried on in one or more factories. [Section 3(1)(e)
&(f)].
3. You must not be owning an ancillary industrial undertaking
as defined in clause (aa) of Section 3 of the Industrial (Development and
Regulations) Act, 1951. [Section 3(1)(f)(i)].
4. You must not be owning a small scale industrial undertaking
as defined in clause (j) of Section 3 aforesaid. (Section 3(1)(f)(ii)].
5. Please check, to be out of the purview of the Sick
Industrial Companies (Special Provisions) Act 1985, that
(a) either you own an industrial undertaking in which the
investment in fixed assets in plant and machinery whether held on ownership
terms or on lease or by hire purchase does not exceed rupees one crore ; or
(b) the investment in fixed assets in plant andmachinery is not
more than rupees one crore provided that you undertake to export at least 30%
of the annual production by the end of the third year from the date of
commencing production; or
(c) you are an ancillary industrial undertaking, that is, an
industrial undertaking which is engaged or proposed to be engaged in the
manufacture or production of parts, components, sub‑assemblies, tooling
or intermediates or the rendering of services, and you supply or render or
propose to supply or render not more than 50% of your production or
services, to one or more other industrial undertakings and your investment in
fixed assets in plant and machinery, whether held on 5.(b)ownership terms or on lease or hire purchase, does not
exceed rupees one crore.
6. Please note that you will not be out of the purview of the
Sick Industrial Companies (Special Provisions) Act, 1985, if you are subsidiary
of, or owned or controlled by any other industrial undertaking.
7. Please also note that for seeking exemption from the
applicability of the provisions of Sick Industrial Companies (Special
Provisions) Act, 1985, you should have your undertakings registered with the
Department of Industrial Development as such within six months from the date
you are eligible to enjoy the aforesaid exemption.
Topic 396
DO YOU WISH TO TAKE STEPS ONCE YOU HAVE
BECOME A SICK INDUSTRIAL COMPANY?
[The Sick Industrial Companies (Special Provisions)
Act, 1985]
1. Convene a Board Meeting of your company after giving notice
to all the directors as per section 286 and pass a resolution within sixty days
of the date of finalisation of audited accounts for the financial year as at
the end of which your company has become a sick industrial company, for making
a reference to the Board for Industrial and Financial Re‑construction. [Section
15(1) of SICA, 1985].
2. Please keep in mind that every officer of the company whose duty
is to give notice of the Board Meeting as aforesaid and who fails to do so will
be punishable with fine of upto Rs. 1000/-. [Section 286(2)].
3. In the same Board Meeting also pass a resolution authorising
any one of the directors or the company secretary of your company to sign and
file the reference and appoint authorised representative.
4. Please make the reference to the BIFR in Form A of the BEFR
Regulations, 1987 if you are a non‑Government Company and in Form AA, if
you are a Government Company, accompanied by 5 further copies thereof along
with 4 copies each of all the enclosures thereto. [Regulation 19(1) of
BIFR Regulations, 1987].
5. File the reference either by delivering it at the office of
the BIFR or by sending it by registered post. [Regulation 19(3) of BIFR
Regulations, 1987].
6. Rectify the defect if any found in the reference while
scrutiny within such time as the Secretary or the Registrar of the Board deems
reasonable. [Regulation 19(5) of BIFR Regulations, 1987].
7. Ensure that the reference once found in order should be duly
registered, assigned a serial number and put up before the concerned Bench of
the Board. [Regulation 19(6) of BIFR Regulations, 1987].
8. In case the reference is not registered by giving a number
and date of receipt, you may file an appeal, within 15 days either to the
Secretary or to the Chain‑nan of the Board as the case may be. [Regulation
19(8) of BIFR Regulations, 1987].
9. While making the reference, you may suggest measures which
should be adopted with reference to your company.
10. You may make the aforesaid reference even before finalisation
of accounts if your board of directors have sufficient reasons to form the
opinion as aforesaid. Even for making such a reference, your board of directors
must pass necessary resolution. [Section 15(1) proviso of SICA, 1985].
11. Please answer all the queries that may be made by the Board
for Industrial and Financial Reconstruction on receipt of your reference to
the said board.
12. Please remember that, for the purpose of making the aforesaid
enquiry, the Board for Industrial and Financial Reconstruction may appoint one
or more persons as special director or special directors of the company for
safeguarding the financial and other interest of the company or public
interest. [Section 16(4) of SICA, 1985].
13. Note that the special director appointed by the Board for
Industrial and Financial Reconstruction will be outside the purview of the
provisions of the Companies Act, 1956 for appointment and removal of directors
and would hold office during the pleasure of the Board for Industrial and
Financial Reconstruction and shall not incur any obligation or liability for
discharging his duties in good faith. [Section 16(5) and (6) of SICA, 1985].
14. Please see if the Board for Industrial and Financial
Reconstruction has made a special dispensation in your case by giving you
reasonable time to make your net worth exceed the accumulated losses,
particularly with reference to the time given to you for the aforesaid purpose.
[Section 17(1) of SICA, 1985].
15. Please see that in case you have not succeeded in making your
net worth exceed the accumulated losses within the time given to you, you make
representation to the Board for Industrial and Financial Reconstruction for
issuing a fresh order modifying the earlier order so as to give you further
time to make your net worth exceed the accumulated loss. [Section 17(2) of
SICA, 1985].
16. Please comply with any order of the Board for Industrial and
Financial Reconstruction that may be passed, on your failure to increase the
net worth of your company so as to exceed the accumulated losses.
17. The Board for Industrial and Financial Reconstruction may
make any order for financial reconstruction, proper management by way of change
in the existing management or by take over of management or amalgamation of
your company with any other company or sale or lease of a part or whole of your
undertakings or rationalisation of managerial personnel supervisory staff and
workman and any other preventive and remedial measures including amalgamation
as well as incidental, consequential or supplemental measures. [Section
18(1) of SICA, 1985].
18. Any scheme prepared by any operating agency appointed by the
Board for Industrial and Financial Reconstruction may be sent to you for your
suggestions and objections, if any, within such period as may be specified.
19. The scheme as aforesaid may also be published in newspapers,
which may be modified in the light of suggestions and objections received from
you as well as from the operating agency or from the transferee company or any
other company concerned in the amalgamation or even from any shareholder,
creditor or employee.
20. Please note that, once the scheme is sanctioned by the Board
for Industrial and Financial Reconstruction, your company may have to accept
any transfer of property or any liability which the scheme may provide.
21. As soon as the scheme is sanctioned by the Board for
Industrial and Financial Reconstruction, the provisions of the scheme shall be
binding on you. [Section 18(8) of SICA, 1985].
22. The Board for Industrial and Financial Reconstruction will
still have the discretion to publish any terms and conditions for implementing
the scheme, which you will have to accept.
23. During the period of preparation or consideration of the
scheme for financial reconstruction, proper management or amalgamation, sale or
lease or rationalisation of managerial personnel or such other preventive,
ameliorative or remedial measures and during the period beginning with the
recording of the opinion of the Board for Industrial and Financial
Reconstruction for winding up of the company and upto the commencement of
winding up proceedings before the High Court, the Board for Industrial and
Financial Reconstruction may direct the sick industrial company not to dispose
of, except with the consent of the Board, any of the assets of the sick
industrial company. [Section 22A of SICA, 1985]
Topic 397
1. Convene a Board Meeting after giving notice to all the
directors of your company as per section 286 and pass a resolution for
preferring an appeal to the AAIFR against the order of the BIFR and authorise
any one of your company's directors or the company secretary to sign the
memorandum of appeal to be filed with the AAIFR and.also to appoint an attorney
to represent your case before the AAIFR.
2. Prepare the memorandum of appeal by mentioning therein full
statements of facts in numbered paragraphs set for the concisely under distinct
heads the grounds of appeal, which should be consecutively numbered.
3. Ensure that the aforesaid memorandum of appeal is prepared
either in English or in Hindi.
4. Have the memorandum of appeal neatly and legibly type‑written,
cyclostyled or printed on one side of foolscap size paper in double space and
page numbered.
5. Keep in mind that true copies of documents prepared by any
other mechanical or chemical process including photocopying may be filed or
submitted.
6. Ensure
the memorandum of appeal is accompanied by the following:
(i) a
certified true copy of the order appealed against;
(ii) true copies of all other documents relied upon by your
company the appellant;
(iii) an
index or the documents;
(iv) a
list of all respondents including parties represented before the BIFR.
(v) an affidavit on non‑judicial stamp paper of the
requisite value verifying the contents of the memorandum of appeal and the date
of receipt by your company the appellant of certified copy of the order
appealed against;
(vi) vakalatnama
or power of attorney, where necessary;
(vii) if your company being the appellant seeks condonation of delay
in filing the appeal, a separate application supported by an affidavit on non‑judicial
stamp paper;
7. The aforesaid application for condonation of delay will be
needed if the appeal is not filed within 45 days from the date on which
a copy of the order of BIFR is issued to your company. [Section 25(1) of the
Sick Industrial Companies (Special Provisions) Act, 1985].
8. Keep in mind that the AAIFR may entertain any appeal after
the period of 45 days but not after 60 days from the date aforesaid if
it is satisfied that the appellant was prevented by sufficient cause from
filing the appeal in time. [Section 25(1) proviso of the Sick Industrial
Companies (Special Provisions) Act, 1985].
9. Prepare ten
extra copies of the memorandum of appeal together with accompanying documents
mentioned at (i) to (vii) of item 6 above.
10. Present the appeal along with all the accompanying documents
and papers as mentioned above at the office of the AA1FR at 10th Floor, Jeevan
Prakash Building, 25 Kasturba Gandhi Marg, New Delhi‑110 001
between 10.00 A.M. to 4.00 P.M. on all working days from Monday to Friday.
11. Please keep in mind that after receipt of the appeal papers
in the registry of the AAIFR, same will be scrutinised to ensure that the
required formalities have been completed and all the required documents have
been filed and in case some deficiencies are found to exist, your company being
the appellant will be given an opportunity to remove the same within a period
of seven days.
12. Also keep in mind that if the appeal papers are found in
order, after removal of deficiencies, if any, the same will be submitted to the
Secretary to the AAIFR, who may call for any additional information or
documents including the following:
(i) copies
of any orders of BIFR in case not already filed by the appellant;
(ii) copies of references in Forms 'A' and 'AA' prescribed under
the BIFR Regulations, 1987, where the appellant is the sick industrial company
or its existing promoter;
(iii) additional copies of memorandum of appeal and accompanying
documents, having regard to number of respondents in the case;
(iv) any other information or documents which may be considered
necessary in the interest of expeditious listing of the appeal for hearing;
13. Further keep in mind that the Secretary to the AAIFR will
pass appropriate orders for registration of the appeal and for assigning it a
serial number and the entire process of registration of the appeal will
ordinarily be completed within a period of two weeks from the date of filing
the appeal.
14. Remember that, after registration, the Secretary to the AAIFR
will submit the appeal papers to the Chairman/Bench of the AAIFR for direction
as to listing the case for hearing or other directions.
Topic 398
1. Keep in mind that a small scale industrial (SSI) unit will
be considered sick in the following circumstances :
(a) principal or interest in respect of any of its borrowal
accounts has remained overdue for a period exceeding one year and such borrowal
account remains substandard for more than 6 months; or
(b) there is erosion in the net worth due to accumulated cash
losses to the extent of 50% of its net worth during the previous accounting
year; and
(c) the
unit has been in commercial production for at least 2 years.
2. Check the viability of the SSI unit and such a unit would be
potentially viable if it would be in a position after implementing a relief
package spread‑over a period not exceeding 5 years from the commencement
of the package from banks, financial institutions, Central or State Government
and other concerned agencies as may be necessary to continue to service its
repayment obligations as agreed upon including those forming part of the
package, without the help of the concessions after the aforesaid period.
3. Ensure that the repayment period for restructured past debts
of the SSI unit does not exceed 7 years from the date of implementation of the
revival package.
4. In the case of tiny/decentralised sector units, revise the
period of reliefs/ concessions and repayment period of restructured debts from
2 and 3 years respectively to 5 and 7 years respectively.
5. Note that the decision whether a sick SSI unit is
potentially viable or not has to be decided by the banks/financial institutions
and made known to the unit and others concerned at the earliest.
6. See that the rehabilitation package is fully implemented
within 6 months from the date the unit is declared as potentially
viable/viable.
7. Ensure that the banks/financial institutions do 'holding
operation' for a period of 6 months while identifying and implementing the
rehabilitation package so that the SSI unit can draw funds from the cash credit
account at least to the extent of their deposit of sale proceeds during the
period of such 'holding operation.
8. Keep in mind that viability and rehabilitation of sick SSI
unit would depend primarily on the unit's ability to continue to service its
repayment obligations including the past restructured debts.
9. Ensure that ordinarily there is no write‑off or
scaling down of debt such as by reduction in rate of interest with
retrospective effect except to the extent indicated in the guidelines.
10. Further ensure that if penal rates of interest or damages
have been charged on interest dues on cash credit or term loan, such charges
are waived from the accounting year of the SSI unit in which it started
incurring cash loses continuously.
11. Once the aforesaid is done, segregate.the unpaid interest on
term loans and cash credit during the aforesaid period from the total liability
and funded.
12. Do not charge any interest on funded interest and make the
repayment of such funded interest within a period not exceeding 3 years from
the date of commencement of implementation of the rehabilitation programme.
13. Have the unadjusted interest dues such as interest charges
between the date up to which rehabilitation package was prepared and the date
from which actually implemented funded on the same terms as mentioned above.
14. Reduce the rate of interest on term loans where considered
necessary by not more than 3 % in case of tiny/decentralised sector units and
by not more than 2% for other SSI units, below the document rate.
15. Treat the balance representing principal dues as irregular to
the extent it exceeds drawing power and fund this amount as working capital
term loan with a repayment schedule not exceeding 5 years and interest rate
below 1.5% to 3% points below the prevailing fixed rate/prime lending rate
wherever applicable.
16. Have the cash losses incurred in the initial stages of the
rehabilitation progtamme till the SSI unit reaches the break‑even also
funded by the bank or the financial institution and see that the interest
charged on such amount is at the rates prescribed by SIDBI under its scheme for
rehabilitation assistance.
17. Ensure that the interest on working capital is charged at
1.5% below the prevailing fixed/prime lending rate wherever applicable.
18. Further ensure that appropriate additional financial
assistance up to 15% of the estimated cost of rehabilitation by way of
contingency loan assistance is provided for meeting escalations in capital
expenditure incurred under the
rehabilitation programme and concessional rate of interest as allowed on
working capital is charged on such additional amount.
19. Obtain a term loan for meeting funds for start up expenses
and margin money for working capital from the bank at a rate of interest which
is 1.5% below the prevailing fixed/prime lending rate wherever applicable.
20. Ensure that the promoters' contribution towards the
rehabilitation package is fixed at a minimum of 10% of the additional long‑term
requirements under the rehabilitation package in the case of tiny sector units
and at 20% of such requirements for other units and see that 50% of the above
promoters' contribution is brought in immediately and the balance within 6
months.
21. Keep in mind that units becoming sick on account of wilful
mismanagement, wilful default, unauthorized diversion of funds, disputes among
partners/promoters etc., are not considered for rehabilitation and steps should
be taken for recovery of bank's dues.