LAW UNIT IV--

8/7/2019 LAW UNIT IV--

1/86

UNIT IVUNIT IV

ISSUE OF SHARESISSUE OF SHARES


2/86

SHARESSHARES

Provisions of the Companies ActProvisions of the Companies ActRegistration & Issue of prospectusRegistration & Issue of prospectus

Minimum SubscriptionMinimum SubscriptionApplication moneyApplication money

Money to be deposited in a scheduled bankMoney to be deposited in a scheduled bank

Opening of subscription listOpening of subscription list

Statement in lieu of prospectus to be delivered to theStatement in lieu of prospectus to be delivered to theregistrarregistrar

Compulsory listing of all public issuesCompulsory listing of all public issues

Initial offer of securities to be in theInitial offer of securities to be in the dematdemat form inform in

certain casescertain cases


3/86

SHARESSHARES

Registration & Issue of prospectusRegistration & Issue of prospectusWhereWhere aa publicpublic companycompany offersoffers sharesshares &&

debenturesdebentures toto thethe publicpublic ,, aa copycopy ofofprospectusprospectus mustmust bebe dulyduly filedfiled withwith thetheregistrarregistrar

RegistrationRegistration mustmust bebe mademade onon oror beforebefore

thethe datedate ofof publicationpublication ofof thethe prospectusprospectusTheThe prospectusprospectus mustmust bebe issuedissued withinwithin 9090daysdays ofof itsits registrationregistration


4/86

SHARESSHARES

Minimum SubscriptionMinimum SubscriptionSecSec..6969((11)) NoNo allotmentallotment shallshall bebe mademade unlessunlessthethe amountamount statedstated inin thethe prospectusprospectus asasminimumminimum subscriptionsubscription hashas beenbeen subscribedsubscribedandand thethe sumsum payablepayable hashas beenbeen receivedreceived

IfIf thethe minimumminimum subscriptionsubscription isis notnot raisedraisedwithinwithin 120120 daysdays ofof thethe issueissue ofof thethe

prospectusprospectus ,, allall thethe moneymoney receivedreceived shallshall beberepaidrepaid withinwithin 130130 daysdays afterafter thethe issueissue ofofthethe prospectusprospectus otherwiseotherwise thethe directorsdirectors ofofthethe companycompany willwill havehave toto repayrepay thethe amountamount

withwith interestinterest @@ 66%% pp..aa


5/86

SHARESSHARES

MinimumMinimum SubscriptionSubscriptionAsAs perper SEBISEBI guidelinesguidelines aa companycompany mustmust

receivereceive aa minimumminimum ofof 9090%% subscriptionsubscriptionagainstagainst thethe entireentire issueissue

IfIf thethe companycompany doesdoes notnot receivereceive minimumminimumsubscriptionsubscription withinwithin 6060 daysdays ofof thethe closureclosure

ofof thethe issue,issue, thethe companycompany shallshall refundrefund thetheentireentire amountamount

AnyAny delaydelay beyondbeyond 88 daysdays willwill makemake thethecompanycompany liableliable toto paypay interestinterest @@ 1515%% pp..aa


6/86

SHARESSHARES

Application moneyApplication moneyThe amount payable on application on each shareThe amount payable on application on each shareshall not be less than 5% of the nominal amount ofshall not be less than 5% of the nominal amount ofthe sharethe share

Money to be deposited in a scheduled bankMoney to be deposited in a scheduled bankAll the money received on application must beAll the money received on application must bedeposited in a scheduled bank tilldeposited in a scheduled bank till

The certificate to commence business is obtained orThe certificate to commence business is obtained or

The entire amount payable on application is received byThe entire amount payable on application is received bythe company in respect to minimum subscriptionthe company in respect to minimum subscription


7/86

SHARESSHARES

OpeningOpening ofof subscriptionsubscription listlistNoNo allotmentallotment cancan bebe mademade untiluntil thethe beginningbeginning ofof thethe

55thth dayday afterafter thethe publicationpublication ofof thethe prospectusprospectus oror

SomeSome otherother timetime asas maymay bebe prescribedprescribed inin thetheprospectusprospectus

TheThe companycompany maymay keepkeep thethe subscriptionsubscription listlist openopen forfor

anyany lengthlength ofof timetime


8/86

SHARESSHARES

Statement in lieu of a prospectus to beStatement in lieu of a prospectus to bedelivered to the registrardelivered to the registrar

A company with a share capital which has not issuedA company with a share capital which has not issueda prospectus, shall not allot any of its shares ora prospectus, shall not allot any of its shares or

debentures unless a statement in lieu of prospectusdebentures unless a statement in lieu of prospectushas been filed with the Registrar at least 3 dayshas been filed with the Registrar at least 3 daysbefore the first allotmentbefore the first allotment

This is not applicable to a private companyThis is not applicable to a private company


9/86

SHARESSHARES

CompulsoryCompulsory listinglisting ofof allall publicpublic issuesissuesSecSec.. 7373 providesprovides thatthat everyevery companycompany intendingintending toto offeroffer

sharesshares oror debenturesdebentures toto publicpublic byby thethe issueissue ofof aaprospectusprospectus hashas toto makemake anan applicationapplication toto oneone oror moremore ofof

thethe recognisedrecognised stockstock exchangesexchanges forfor permissionpermission forfor thethesharesshares oror debenturesdebentures toto bebe dealtdealt withinwithin thethe stockstockexchangeexchange

TheThe prospectusprospectus mustmust specifyspecify thethe namename ofof thethe stockstockexchangeexchange

AnyAny allotmentallotment mademade inin pursuancepursuance ofof suchsuch aa prospectusprospectusshallshall bebe voidvoid ifif anyany suchsuch stockstock exchangeexchange doesdoes notnot grantgrantpermissionpermission withinwithin 1010 weeksweeks fromfrom thethe closingclosing ofof suchsuch aasubscriptionsubscription


10/86

GENERAL PROVISIONSGENERAL PROVISIONS

(Allotment of shares)(Allotment of shares)AllotmentAllotment mustmust bebe inin accordanceaccordance withwith thetheprovisionsprovisions ofof thethe ArticlesArticles

AllotmentAllotment mustmust bebe communicatedcommunicated

AllotmentAllotment mustmust bebe mademade withinwithin reasonablereasonabletimetime

AllotmentAllotment mustmust bebe absoluteabsolute && unconditionalunconditional


11/86

ISSUE OF SHARES AT PARISSUE OF SHARES AT PAR

SEBI GUIDELINES for par value of sharesSEBI GUIDELINES for par value of shares

At any point of time the par shall beAt any point of time the par shall be 1 or1 or

multiples of 1multiples of 1

All the shares should be of the same parAll the shares should be of the same par

valuevalue


12/86

ISSUE OF SHARES AT A DISCOUNTISSUE OF SHARES AT A DISCOUNT

(SEC.79)(SEC.79)

TheThe issueissue ofof sharesshares atat aa discountdiscount mustmust bebeofof aa classclass ofof sharesshares alreadyalready issuedissued

AtAt leastleast oneone yearyear shouldshould havehave elapsedelapsed atatthethe datedate ofof issueissue fromfrom thethe datedate ofofcommencementcommencement ofof businessbusiness byby thethe companycompany

TheThe issueissue isis authorizedauthorized byby aa resolutionresolution ininthethe GM,GM, whichwhich mustmust statestate thethe maximummaximumraterate ofof discountdiscount


13/86

ISSUE OF SHARES AT A DISCOUNTISSUE OF SHARES AT A DISCOUNT

(SEC.79)(SEC.79)

ItIt isis sanctionedsanctioned byby thethe NCLTNCLT

SharesShares areare issuedissued withinwithin 22 monthsmonths ofof thethedatedate onon whichwhich thethe issueissue isis sanctionedsanctioned bybythethe NCLTNCLT oror withinwithin suchsuch extendedextended timetime asasthethe NCLTNCLT maymay allowallow

TheThe raterate ofof discountdiscount mustmust notnot exceedexceed1010%%,, exceptexcept withwith thethe approvalapproval ofof thetheNCLTNCLT


14/86

ISSUE OF SHARES AT A PREMIUMISSUE OF SHARES AT A PREMIUM

(SEC.78)(SEC.78)

IssueIssue ofof sharesshares atat aa priceprice higherhigher thanthan thethefaceface valuevalue

TotalTotal premiumpremium amountamount isis transferredtransferred totoSecuritiesSecurities PremiumPremium AccountAccount


15/86


(SEC.78)(SEC.78)

TheThe securitiessecurities premiumpremium maymay bebe utilizedutilizedforfor thethe followingfollowing purposespurposes ::

ToTo issueissue fullyfully paidpaid bonusbonus sharesshares toto membersmembers

ToTo writewrite offoff preliminarypreliminary expensesexpenses

ToTo writewrite offoff expensesexpenses oror commissionscommissions paidpaid oror

discountsdiscounts allowedallowed onon anan issueissue ofof sharesshares orordebenturesdebentures

ToTo provideprovide forfor thethe premiumpremium payablepayable ononredemptionredemption ofof anyany redeemableredeemable preferencepreference

sharesshares oror debenturesdebentures


16/86


(SEC.78)(SEC.78)

TheThe securitiessecurities premiumpremium maymay bebe utilizedutilizedforfor thethe followingfollowing purposespurposes ::

ForFor buybuy backback ofof ownown securitiessecurities (( 7777--AA ))

EvenEven whenwhen thethe securitiessecurities areare issuedissued atat aa

premiumpremium forfor considerationconsideration otherother thanthancash,cash, aa sumsum equalequal toto thethe amountamount ofofpremiumpremium mustmust bebe transferredtransferred toto thethe

securitiessecurities premiumpremium accountaccount


17/86

CALLS ON SHARESCALLS ON SHARES

AA callcall maymay bebe defineddefined asas aa demanddemand byby thethecompany,company, inin pursuancepursuance ofof aa resolutionresolution ofofthethe BODBOD && inin accordanceaccordance withwith thetheregulationsregulations ofof thethe articlesarticles uponupon itsitsshareholders,shareholders, toto paypay thethe wholewhole oror partpart ofof

thethe balancebalance remainingremaining unpaidunpaid onon theirtheirsharesshares duringduring thethe lifetimelifetime ofof thethecompanycompany..


18/86

CALLS ON SHARESCALLS ON SHARES

RequisitesRequisites ofof aa ValidValid callcallResolutionResolution ofof thethe BODBOD

TheThe amountamount && timetime ofof paymentpayment

CallsCalls onon sharesshares ofof thethe samesame classclass toto bebe mademadeonon aa uniformuniform basisbasis

BonaBona fidefide && forfor thethe benefitbenefit ofof thethe companycompany

InIn accordanceaccordance withwith thethe provisionsprovisions ofof thethearticlesarticles ofof thethe companycompany (Regulations(Regulations 1313--1818ofof TableTable A)A)


19/86

FORFEITURE OF SHARESFORFEITURE OF SHARES

CompulsoryCompulsory terminationtermination ofof membershipmembership &&takingtaking awayaway thethe sharesshares fromfrom aa membermember bybywayway ofof penaltypenalty forfor nonnon--paymentpayment ofof anyany

call,call, installmentinstallment oror premiumpremium onon sharesshares


20/86


EssentialsEssentials ofof ValidValid ForfeitureForfeiture::ForfeitureForfeiture forfor nonnon--paymentpayment ofof callscalls

NoticeNotice precedentprecedent toto forfeitureforfeiture

ResolutionResolution ofof forfeitureforfeitureBonaBona fidefide


21/86


EffectEffect ofof ForfeitureForfeiture::DefaultingDefaulting shareholdershareholder ceasesceases toto bebe aa membermemberofof thethe companycompany

HeHe alsoalso losesloses thethe moneymoney paidpaid byby himhim


22/86


ReissueReissue ofof ForfeitedForfeited SharesShares::AA forfeitedforfeited shareshare maymay bebe soldsold oror otherwiseotherwisedisposeddisposed ofof onon suchsuch termsterms asas thethe boardboard thinksthinks

fitfitNoNo returnreturn ofof allotmentallotment isis requiredrequired toto bebe filedfiledforfor thethe reissuereissue ofof forfeitedforfeited sharesshares

TheThe titletitle ofof thethe purchaserpurchaser ofof forfeitedforfeitedsharesshares willwill notnot bebe affectedaffected byby anyany irregularityirregularityinin proceedingsproceedings withwith referencereference toto thetheforfeitureforfeiture oror salesale ofof thethe sharesshares


23/86


AnnulmentAnnulment ofof ForfeitureForfeiture

AtAt anyany timetime beforebefore thethe salesale ofof forfeitedforfeited

shares,shares, thethe boardboard maymay cancelcancel thethe forfeitureforfeitureonon suchsuch termsterms asas itit thinksthinks fitfit

ThisThis powerpower cannotcannot bebe exercisedexercised withoutwithout thetheconsentconsent ofof thethe forfeitingforfeiting membermember


24/86

SURRENDER OF SHARESSURRENDER OF SHARES

WhenWhen aa shareholdershareholder abandonsabandons hishis sharessharesinin favourfavour ofof thethe companycompany itit isis knownknown asassurrendersurrender ofof sharesshares

ArticlesArticles maymay provideprovide forfor thethe acceptanceacceptanceofof aa surrendersurrender ofof sharesshares underundercircumstancescircumstances whichwhich wouldwould justifyjustify

forfeitureforfeiture


25/86


DirectorsDirectors powerspowers toto acceptaccept surrendersurrender ofofsharesshares

AA validvalid callcall && defaultdefault mustmust existexist

SurrenderSurrender shouldshould notnot bebe usedused asas aa devicedevice totorelieverelieve anyany membermember fromfrom hishis liabilityliability

SurrenderSurrender ofof sharesshares isis ultraultra viresviresifif thethesharesshares areare notnot liableliable toto forfeitureforfeiture


26/86


EffectEffectMemberMember ceasesceases toto bebe thethe membermember ofof thethe companycompany

HeHe remainsremains liableliable asas aa contributorycontributory asas aa pastpastmembermember ofof thethe company,company, ifif thethe companycompany isis woundwoundupup withinwithin 1212 monthsmonths ofof hishis surrenderingsurrendering ofof sharesshares

PartlyPartly paidpaid upup sharesshares whichwhich areare surrenderedsurrendered cancanbebe reissuedreissued inin thethe samesame mannermanner asas forfeitedforfeitedsharesshares

WhereWhere thethe surrendersurrender ofof sharesshares isis illegal,illegal, thetheshareholdershareholder isis justifiedjustified inin applyingapplying toto havehave thetheregisterregister ofof membersmembers rectifiedrectified byby placingplacing hishis namenamethereonthereon


27/86

TRANSFER OF SHARESTRANSFER OF SHARES

SectionSection 8282 providesprovides thatthat thethe sharesshares ofofthethe membermember inin aa companycompany shallshall bebe aamovablemovable property,property, transferabletransferable inin thethe

mannermanner providedprovided byby thethe ArticlesArticles ofof thethecompanycompany


28/86

TRANSFER OF SHARESTRANSFER OF SHARES

PROCEDUREPROCEDUREInstrumentInstrument ofof transfertransfer toto bebe delivereddelivered toto thethecompanycompany

InstrumentInstrument ofof transfertransfer toto bebe inin thetheprescribedprescribed formform

TransferTransfer byby legallegal representativerepresentative

NoticeNotice toto transfereetransferee


29/86

TRANSMISSION OF SHARESTRANSMISSION OF SHARES

WhenWhen sharesshares passpass byby operationoperation ofof lawlawfromfrom oneone personperson toto another,another, itit isis knownknown asastransmissiontransmission ofof sharesshares

ThisThis happenshappens whenwhen aa membermember dies,dies,becomesbecomes insolventinsolvent oror goesgoes insaneinsane

InIn allall suchsuch casescases thethe legallegal representativerepresentativeoror thethe OfficialOfficial AssigneeAssignee oror ReceiverReceiver ororAdministratorAdministrator appointedappointed byby thethe court,court,

shallshall bebe entitledentitled toto thethe sharesshares


30/86


RegulationRegulation 2525--2828 ofof TableTable AAOnOn thethe deathdeath ofof aa member,member, thethe survivor,survivor,wherewhere thethe membermember waswas aa jointjoint holder,holder, shallshallbebe thethe onlyonly personperson recognizedrecognized byby thethe companycompany

asas havinghaving anyany titletitle toto hishis interestinterest inin sharessharesAA personperson becomingbecoming entitledentitled toto aa shareshare onon aadeathdeath oror insolvencyinsolvency ofof aa member,member, ononproductionproduction ofof aa satisfactorysatisfactory proofproof asas toto hishis

title,title, maymay electelect eithereitherToTo registerregister himselfhimself asas thethe holderholder ofof sharesshares oror

ToTo transfertransfer thethe sharesshares asas thethe originaloriginal membermembercouldcould havehave donedone


31/86


RegulationRegulation 2525--2828 ofof TableTable AAIfIf aa personperson concernedconcerned electselects toto becomebecome aamember,member, hehe shallshall sendsend aa writtenwritten && signedsignednoticenotice toto thethe companycompany notifyingnotifying hishis electionelection..

IfIf hehe electselects toto transfer,transfer, hehe shallshall notifynotify thetheelectionelection byby executingexecuting aa transfertransfer

AA personperson becomingbecoming entitledentitled toto aa shareshare onontransmissiontransmission shallshall havehave thethe samesame rightright asas toto

dividenddividend && otherother advantagesadvantages && privileges,privileges, asasifif hehe werewere thethe originaloriginal holderholder exceptexcept

BeforeBefore registrationregistration asas aa member,member, hehe shallshall notnotexerciseexercise anyany rightright asas membermember atat thethe meetingmeeting ofof

thethe companycompany


32/86

METHODS OF RAISING SHAREMETHODS OF RAISING SHARE

CAPITALCAPITAL

METHODS

IPO

PrivatePlacementof Shares

PreferentialAllotment

FPO


33/86

ISSUES

PUBLICISSUE

BONUSISSUE

RIGHTISSUE

PRIVATEPLACEMENT

IPO FPO

PREFERENTIALALLOTMENT

QUALIFIEDINSTITUTIONALPLACEMENTFRESH

ISSUE

OFFER

FOR SALE

FRESHISSUE

OFFER

FOR SALE


34/86

INITIAL PUBLIC OFFERINGINITIAL PUBLIC OFFERING

RefersRefers toto thethe sellingselling ofofsharesshares byby aa privateprivatecompanycompany toto thethe publicpublic forfor thethe firstfirst timetime..

InitialInitial PublicPublic OfferingOffering isis aa sourcesource ofof fundsfundsraisedraised fromfrom thethe primaryprimary marketmarket..

AllAll subsequentsubsequent publicpublic offeringsofferings areare knownknown asas

FollowFollow--onon PublicPublic OfferingsOfferings oror SecondarySecondaryMarketMarket OfferingsOfferings..


35/86

IPOIPO

Initial public offer (IPO):Initial public offer (IPO): When an unlistedWhen an unlistedcompany makes either a fresh issue of securitiescompany makes either a fresh issue of securities

or offers its existing securities for sale or bothor offers its existing securities for sale or both

for the first time to the public, it is called anfor the first time to the public, it is called an

IPO. This paves way for listing and trading ofIPO. This paves way for listing and trading ofthe issuers securities in the Stock Exchangesthe issuers securities in the Stock Exchanges

F

urtherF

urther publicpublic offeroffer (F

PO)(F

PO) ororF

ollowF

ollow onon offeroffer::WhenWhen anan alreadyalready listedlisted companycompany makesmakes eithereither aa

freshfresh issueissue ofof securitiessecurities toto thethe publicpublic oror anan offeroffer

forfor salesale toto thethe publicpublic ,, itit isis calledcalled aa FPOFPO..


36/86

ISSUEISSUE

RightsRights issueissue (RI)(RI):: WhenWhen anan issueissue ofof securitiessecurities isismademade byby anan issuerissuer toto itsits shareholdersshareholders existingexisting asas

onon aa particularparticular datedate fixedfixed byby thethe issuerissuer (i(i..ee..

recordrecord date),date), itit isis calledcalled asas rightsrights issueissue.. TheThe

rightsrights areare offeredoffered inin aa particularparticular ratioratio toto thethenumbernumber ofof securitiessecurities heldheld asas onon thethe recordrecord datedate..


37/86

ISSUEISSUE

BonusBonus issueissue:: WhenWhen anan issuerissuer makesmakes anan issueissueofof securitiessecurities toto itsits existingexisting shareholdersshareholders asas onon aa

recordrecord date,date, withoutwithout anyany considerationconsideration fromfrom

them,them, itit isis calledcalled aa bonusbonus issueissue.. TheThe sharesshares areare

issuedissued outout ofof thethe CompanysCompanys freefree reservereserve ororshareshare premiumpremium accountaccount inin aa particularparticular ratioratio toto

thethe numbernumber ofof securitiessecurities heldheld onon aa recordrecord datedate..


38/86

ISSUEISSUE

PrivatePrivate placementplacement:: WhenWhen anan issuerissuer makesmakes anan

issueissue ofof securitiessecurities toto aa selectedselected groupgroup ofof

personspersons notnot exceedingexceeding 4949,, andand whichwhich isis neitherneither

aa rightsrights issueissue nornor aa publicpublic issue,issue, itit isis calledcalled aaprivateprivate placementplacement.. PrivatePrivate placementplacement ofof sharesshares

oror convertibleconvertible securitiessecurities byby listedlisted issuerissuer cancan bebe

ofof twotwo typestypes::

(i)(i) PreferentialPreferential allotmentallotment

(ii)(ii) QualifiedQualified InstitutionalInstitutional PlacementsPlacements


39/86

ISSUEISSUE

((ii)) PreferentialPreferential allotmentallotment:: WhenWhen aa listedlisted issuerissuer

issuesissues sharesshares oror convertibleconvertible securities,securities, toto aa

selectselect groupgroup ofof personspersons inin termsterms ofof provisionsprovisions ofofSEBISEBI (DIP)guidelines,(DIP)guidelines, itit isis calledcalled aa preferentialpreferential

allotmentallotment.. TheThe issuerissuer isis requiredrequired toto complycomply withwith

variousvarious provisionsprovisions whichwhich interinteraliaalia includeinclude

pricing,pricing, disclosuresdisclosures inin thethe notice,notice, locklock

inin etc,etc, ininadditionaddition toto thethe requirementsrequirements specifiedspecified inin thethe

CompaniesCompanies ActAct..


40/86

ISSUEISSUE

(ii)(ii) QualifiedQualified institutionsinstitutions placementplacement (QIP)(QIP)::WhenWhen aa listedlisted issuerissuer issuesissues equityequity sharesshares oror

securitiessecurities convertibleconvertible inin toto equityequity sharesshares toto

QualifiedQualified InstitutionsInstitutions BuyersBuyers onlyonly inin termsterms ofofprovisionsprovisions ofof SEBISEBI (DIP)(DIP) guidelines,guidelines, itit isis calledcalled aa

QIPQIP..


41/86

ADVANTAGES OF PUBLIC ISSUEADVANTAGES OF PUBLIC ISSUE

MoneyMoney nonnon--refundablerefundable exceptexcept inin thethe casecase ofofwindingwinding upup oror buybuy backback ofof sharesshares

NoNo financialfinancial burdenburden ii..ee.. nono fixedfixed raterate ofof interestinterestpayablepayable.. However,However, inin orderorder toto serviceservice thethe equity,equity,dividenddividend maymay bebe paidpaid..

EnhancesEnhances shareholder'sshareholder's valuevalue ifif thethe companycompanyperformsperforms wellwell

GreaterGreater TransferabilityTransferability

TradingTrading && ListingListing ofof securitiessecurities atat stockstock

exchangesexchanges BetterBetter LiquidityLiquidity ofof securitiessecurities

HelpsHelps buildingbuilding reputationreputation ofof promoters,promoters,companycompany && itsits productsproducts // services,services, providedprovided thethe

companycompany performsperforms wellwell


42/86

Applicable LawsApplicable Laws

AA companycompany isis requiredrequired toto complycomply withwith thethefollowingfollowing lawslaws inin connectionconnection withwith aa publicpublic issueissue ::--

ProvisionsProvisions ofof CompaniesCompanies Act,Act, 19561956

SecuritiesSecurities ContractsContracts (Regulations)(Regulations) Act,Act, 19561956

SEBISEBI rulesrules && regulationsregulations

ComplianceCompliance ofof ListingListing AgreementAgreement withwith thetheconcernedconcerned stockstock exchangesexchanges afterafter thethe listinglisting ofof

securitiessecurities.. RBIRBI regulationsregulations inin casecase ofof foreign/NRIforeign/NRI equityequity

participationparticipation..


43/86

Agencies involved in a PublicAgencies involved in a Public

IssueIssue Management of a Public Issue involves the participation of.

Managers to the Issue

Underwriters

Brokers Registrars to the issue

Solicitors

Printers

Publicity and advertising agents

Auditors Compliance officer

Depositories

Statutory agencies (ROC,SEBI,RBI AND STOCKEXCHANGES)


44/86

Documents requiredDocuments required

Offer document

Draft Offer document

Red Herring Prospectus

Abridged Prospectus

Letter of offer

Placement Document


45/86

Offer DocumentOffer Document

Offer document is a document which contains allthe relevant information about the company,promoters, projects, financial details, objects of

raising the money, terms of the issue etc and is usedfor inviting subscription to the issue being made bythe issuer.

Offer Document is called Prospectus in case of apublic issue or offer for sale andLetter of Offer in case of a rights issue.


46/86

Draft Offer DocumentDraft Offer Document

Draft offer document is an offer document filed withSEBI for specifying changes, if any, in it, before it isfiled with the Registrar of companies (ROCs).

Draft offer document is made available in publicdomain including SEBI website, for enabling public togive comments, if any, on the draft offer document.


47/86

Red Herring ProspectusRed Herring Prospectus

Red herring prospectus is an offer document used in

case of a book built public issue. It contains all the

relevant details except that of price or number of sharesbeing offered. It is filed with ROC before the issue opens.


48/86

Abridged ProspectusAbridged Prospectus

Abridged prospectus is an abridged version of offer

document in public issue and is issued along with the

application form of a public issue. It contains all thesalient features of a prospectus.


49/86

Placement DocumentPlacement Document

Placement document is an offer document for the

purpose of Qualified Institutional Placement and contains

all the relevant and material disclosures.


50/86

Price of an issuePrice of an issue

SEBIdoes not play any role in price fixation.

There are two types of issues :

One, where company and LM fix a price (calledfixed price)and

Other, where the company and LM stipulate afloor price or aprice bandand leave it to

market forces to determine the final price(price discovery throughbook building process).


51/86

Book BuildingBook Building

ItIt isis aa processprocess ofofpriceprice discoverydiscovery..

TheThe redred herringherring prospectusprospectus doesdoes notnot containcontain aapriceprice..

ItIt containscontains eithereither thethe floorfloor priceprice ofof thethe securitiessecuritiesofferedoffered throughthrough itit oror aa priceprice bandband alongalong withwith thetherangerange withinwithin whichwhich thethe bidsbids cancan movemove..

PricePrice bandband ---- TheThe spreadspread betweenbetween thethe floorfloor andand thethecapcap ofof thethe priceprice bandband shallshall notnot bebe moremore thanthan 2020%%..

InIn otherother words,words, itit meansmeans thatthat thethe capcap shouldshould notnotbebe moremore thanthan 120120%% ofof thethe floorfloor priceprice..


52/86

Vetting by SEBI/StockVetting by SEBI/Stock

ExchangesExchanges

AA companycompany cannotcannot comecome outout withwith publicpublic issueissueunlessunlessdraftdraft prospectusprospectus isis filedfiled withwith SEBISEBI..

AA companycompany cannotcannot filefile prospectusprospectus directlydirectly

withwith SEBISEBI.. ItIt hashas toto bebe filedfiled throughthrough aamerchantmerchant bankerbanker..

SEBISEBI onon receivingreceiving thethe same,same, scrutinizesscrutinizes ititandand maymay suggestsuggest changeschanges withinwithin 2121 daysdays ofofreceiptreceipt ofof prospectusprospectus..


53/86

Vetting by SEBI/StockVetting by SEBI/Stock

ExchangesExchanges IfIf thethe issueissue sizesize isis uptoupto RsRs.. 2020 crorescrores thenthen thethe

merchantmerchant bankersbankers areare requiredrequired toto filefile prospectusprospectuswithwith thethe regionalregional officeoffice ofof SEBISEBI

IfIf thethe issueissue sizesize isis moremore thanthan RsRs.. 2020 crorescrores,,merchantmerchant bankersbankers areare requiredrequired toto filefile prospectusprospectusatat SEBI,SEBI, MumbaiMumbai officeoffice..

ProspectusProspectus isis alsoalso requiredrequired toto bebe filedfiled withwith thetheconcernedconcerned stockstock exchangesexchanges alongalong withwith thethe

applicationapplication forfor listinglisting itsits securitiessecurities..


54/86

Classes of InvestorsClasses of Investors

AccordingAccording toto thethe bookbook buildingbuilding process,process, threethreeclassesclasses ofof investorsinvestors cancan bidbid forfor thethe sharesshares::

QualifiedQualified InstitutionalInstitutional BuyersBuyers:: QIBsQIBs includeinclude

mutualmutual fundsfunds andand ForeignForeign InstitutionalInstitutional InvestorsInvestors..AtAt leastleast 5050%% ofof thethe sharesshares areare reservedreserved forfor thisthiscategorycategory..

RetailRetail investorsinvestors:: AnyoneAnyone whowho bidsbids forfor sharesshares

uptoupto RsRs 11,,0000,,000000 isis aa retailretail investorinvestor.. AtAt leastleast3535%% isis reservedreserved forfor thisthis categorycategory..

TheThe balancebalance bidsbids areare offeredoffered toto highhigh netnet worthworthindividualsindividuals andand employeesemployees ofof thethe companycompany..


55/86

Procedure for the PublicIssueProcedure for the PublicIssue

PrePre--IssueIssue ObligationsObligations (i(i..ee.. beforebefore thethe openingopening ofof issue)issue) BoardBoard ResolutionResolution forfor approvingapproving thethe draftdraft

prospectusprospectus andand relatedrelated resolutionsresolutions

FilingFiling ofof formform 2323 withwith ROCROC forfor passingpassing specialspecialresolutionresolution forfor issuingissuing sharesshares asas aboveabove..

AppointmentAppointment ofof intermediariesintermediaries andand enteringentering intointoMOUMOU withwith themthem

DueDue diligencediligence byby aa merchantmerchant bankerbanker

SubmissionSubmission ofof allall requiredrequired papers/documentspapers/documents withwith

merchantmerchant bankersbankers..


56/86


PreparationPreparation ofof draftdraft prospectusprospectus inin

consultationconsultation withwith thethe merchantmerchant bankerbanker andand

submittingsubmitting thethe samesame withwithSEBISEBIalongalong withwith

thethe feesfees && otherother requirementsrequirements andandsubmittingsubmitting thethe samesame withwith stockstock exchangesexchanges

asas perper guidelinesguidelines..

ReceiptReceipt ofof queriesqueries fromfromSEBISEBI // stockstock

exchanges,exchanges, ifif anyany andand makemake changeschanges inin

prospectus,prospectus, ifif requiredrequired..


57/86


ReplyReply toto SEBISEBI /stock/stock exchangesexchanges ininconnectionconnection withwith changeschanges inin prospectusprospectus..

ObtainingObtaining inin--principleprinciple approvalapproval fromfrom stockstockexchangesexchanges

FileFile finalfinal prospectusprospectus withwithSEBISEBI // stockstockexchangesexchanges // ROCROC

StatutoryStatutory AdvertisementsAdvertisements

SubmissionSubmission ofof 11%%SecuritySecurity DepositDeposit withwith thethe

RegionalRegionalStockStockExchangeExchange.. DepositingDepositing Promoter'sPromoter's ContributionContribution inin thethe

issueissue inin aa separateseparate bankbank accountaccount..


58/86


CollectionCollection ofof ApplicationApplication formsforms andand processingprocessing thethesamesame withwith thethe RegistrarRegistrar &&ShareShare TransferTransfer AgentAgent ininconsultationconsultation withwith thethe merchantmerchant bankerbanker..

SeparateSeparate accountaccount toto bebe openedopened forfor thethe applicationsapplications

receivedreceived fromfrom publicpublic SubmittingSubmitting 33--dayday postpost issueissue monitoringmonitoring reportreport withwithSEBISEBIbyby merchantmerchant bankerbanker..

BasisBasis ofof allotmentallotment inin consultationconsultation withwith thetheregionalregional stockstock exchangeexchange..

PostPostIssueIssue AdvertisementAdvertisement

DespatchDespatch ofof shareshare certificatescertificates // refundrefund ordersorders


59/86


EnteringEntering intointo anan listinglisting agreementagreement ObtainingObtaining permissionpermission fromfromStockStockExchangesExchanges

forfor listinglisting && tradingtrading ofof securitiessecurities

CommencementCommencement ofof tradingtrading ofof securitiessecurities

7878--dayday postpost issueissue monitoringmonitoring reportreport toto bebesubmittedsubmitted byby merchantmerchant bankerbanker withwithSEBISEBI..

RedressalRedressal ofofInvestorsInvestors GrievancesGrievances

ApplicationApplication totoSEBI/StockSEBI/StockExchangeExchange forfor

refundrefund ofof securitysecurity depositdeposit


60/86

Employee Stock OptionEmployee Stock Option

AnAn optionoption givengiven toto wholewhole timetime directors,directors,officersofficers ofof employeesemployees ofof thethe companycompany

ToTo purchasepurchase thethe sharesshares ofof thethe companycompany atataa futurefuture datedate atat aa predeterminedpredetermined priceprice..


61/86


Employee means:Employee means:--

1.1. A permanent employee of the companyA permanent employee of the company

2.2. A director of the companyA director of the company3.3. An employee of a subsidiary or a holdingAn employee of a subsidiary or a holding

companycompany

I t t TI t t T


62/86

Important TermsImportant Terms

VestingVesting :: VestingVesting meansmeans thethe processprocess byby whichwhich thethe employeeemployee

getsgets thethe rightright toto applyapply forfor andand bebe issuedissued sharesshares ofof

thethe companycompany underunder thethe optionsoptions grantedgranted toto himhim..

TillTill thethe vestingvesting takestakes place,place, thethe employeeemployee doesdoes notnot

havehave aa rightright toto applyapply forfor thethe sharesshares..

UponUpon vesting,vesting, thethe employeeemployee getsgets anan unfetteredunfettered

rightright toto applyapply forfor thethe issueissue ofof sharesshares uponuponfulfilmentfulfilment ofof thethe conditionsconditions

I t t TI t t T


63/86

Important TermsImportant Terms

ActAct ofof exerciseexercise ::

TheThe actact ofof exerciseexercise impliesimplies anan applicationapplication beingbeing

mademade byby thethe employeeemployee toto thethe companycompany toto havehave thethe

optionsoptions vestedvested inin himhim issuedissued asas sharesshares uponuponpaymentpayment ofof thethe optionoption priceprice..

ExerciseExercise cancan taketake placeplace asas specifiedspecified afterafter vestingvesting..


64/86


ConditionsConditions ::

TheThe CompanyCompany shouldshould constituteconstitute aacompensationcompensation committeecommittee forfor the theadministrationadministration ofof ESOPESOP..

AA specialspecial resolutionresolution hashas toto bebe passedpassed totogetget thethe approvalapproval ofof thethe shareholdersshareholders..

ThereThere isis nono restrictionrestriction onon thethe nono ofof sharessharesissuedissued toto aa singlesingle membermember


65/86


66/86


ConditionsConditions ::

OptionOption grantedgranted toto employeeemployee shallshall notnot bebetransferabletransferable toto anyany personperson

OptionsOptions cannotcannot be be pledged,pledged,hypothecatedhypothecated oror mortgagedmortgaged

OnOn thethe deathdeath ofof thethe employeeemployee optionoption willwillvestvest withwith thethe legallegal heirheir..

TheThe DirectorsDirectors reportreport shallshall containcontain thethedetailsdetails ofof optionsoptions granted,granted, optionsoptionsvestedvested andand optionsoptions exercisedexercised..

BONUS SHARESBONUS SHARES


67/86


ConditionsConditions forfor IssueIssue ofof BonusBonus sharesshares

AOAAOA mustmust permitpermit suchsuch issueissue

SufficientSufficient undistributedundistributed profitprofit mustmust bebe presentpresent AA resolutionresolution forfor capitalizingcapitalizing thethe profitsprofits mustmust

havehave beenbeen passedpassed byby thethe BODBOD

TheThe resolutionresolution ofof thethe BODBOD mustmust bebe approvedapprovedbyby thethe shareholdersshareholders inin thethe generalgeneral meetingmeeting

SEBISEBI guidelinesguidelines inin thisthis regardregard mustmust bebe

compliedcomplied withwith



68/86


ConditionsConditions forfor IssueIssue ofof BonusBonus sharesshares

NoNo companycompany shall,shall, pendingpending conversionconversion ofof

FCDs/PCDs,FCDs/PCDs, issueissue anyany bonusbonus shares,shares, unlessunlesssimilarsimilar benefitbenefit isis extendedextended toto thethe holdersholders ofofsuchsuch FCDs/PCDsFCDs/PCDs throughthrough reservationreservation ofofsharesshares inin proportionproportion toto suchsuch convertibleconvertible partpart

ofof FCDs/PCDsFCDs/PCDs..



69/86


Conditions for Issue of Bonus sharesConditions for Issue of Bonus shares

TheThe companycompany mustmust filefile withwith thethe RegistrarRegistrar

aa returnreturn statingstating thethe numbernumber andand nominalnominal amountamountofof bonusbonus sharesshares issuedissued togethertogether withwith

thethe names,names, addressesaddresses && occupationsoccupations ofof thethe allotallotteestees &&

aa copycopy ofof thethe resolutionresolution authorizingauthorizing thethe issueissue ofofsuchsuch sharesshares

ThisThis mustmust bebe donedone withinwithin 3030 daysdays ofof thethe

allotmentallotment ofof suchsuch sharesshares



70/86


SEBI guidelinesSEBI guidelines TheThe bonusbonus issueissue isis mademade outout ofof thethe freefree

reservesreserves builtbuilt outout ofof thethe genuinegenuine profitsprofits oror

sharesshares premiumpremium a/ca/c TheThe declarationdeclaration ofof bonusbonus issueissue ,, inin lieulieu ofof

dividend,dividend, isis notnot mademade

TheThe bonusbonus issueissue isis notnot mademade unlessunless thethe partlypartlypaidpaid shares,shares, ifif anyany existing,existing, areare mademade fullyfullypaidpaid upup



71/86


SEBI guidelinesSEBI guidelines

TheThe companycompany ----------

HasHas notnot defaulteddefaulted inin paymentpayment ofof interestinterest oror

principalprincipal inin respectrespect ofof fixedfixed depositsdeposits && interestinterest ononexistingexisting debenturesdebentures oror principalprincipal onon redemptionredemptionthereofthereof &&

HasHas notnot defaulteddefaulted inin respectrespect ofof thethe paymentpayment ofof

statutorystatutory duesdues likelike------providentprovident fundfund etcetc..



72/86


SEBI guidelinesSEBI guidelines AA companycompany announcesannounces itsits bonusbonus sharesshares afterafter

thethe approvalapproval ofof BODBOD mustmust implementimplement thetheproposalproposal withinwithin 66 monthsmonths fromfrom thethe datedate ofofapprovalapproval && shallshall notnot havehave thethe optionoption ofofchangingchanging thethe decisiondecision

ThereThere shouldshould bebe thethe provisionprovision inin AOAAOA ofof thethe

companycompany forfor capitalisationcapitalisation ofof reservesreserves && ,if,ifnot,not, thethe companycompany shallshall passpass aa resolutionresolution iningeneralgeneral meetingmeeting makingmaking provisionprovision inin AOAAOA


73/86

RIGHTS ISSUERIGHTS ISSUE


74/86


ExistingExisting shareholdersshareholders havehave thethe privilegeprivilege toto buybuy aaspecifiedspecified numbernumber ofof newnew sharesshares fromfrom thethe firmfirm atat aa

specifiedspecified priceprice withinwithin aa specifiedspecified timetime..

AA rightsrights issueissue isis offeredoffered toto allall existingexistingshareholdersshareholders individuallyindividually andand maymay bebe rejected,rejected,

acceptedaccepted inin fullfull oror acceptedaccepted inin partpart..

RightsRights areare oftenoften transferable,transferable, allowingallowing thethe holderholdertoto sellsell themthem inin thethe openopen marketmarket..


75/86


(Notice)(Notice) TheThe companycompany mustmust givegive noticenotice toto eacheach ofof thethe

equityequity shareholders,shareholders, givinggiving himhim thethe optionoption toto taketake

thethe sharesshares againstagainst paymentpayment ofof thethe specifiedspecified moneymoney

TheThe noticenotice mustmust mentionmention thethe numbernumber ofof sharesshares thethe

shareholdershareholder hashas thethe optionoption toto taketake

MinimumMinimum ofof 1414 daysdays noticenotice mustmust bebe givengiven forfor

exerciseexercise ofof hishis optionoption


76/86


(Notice)(Notice) UnlessUnless thethe ArticleArticle providesprovides otherwise,otherwise, thethe noticenotice

mustmust alsoalso statestate thatthat thethe shareholdershareholder shallshall havehave thethe

rightright toto renouncerenounce thethe offeroffer inin wholewhole oror inin part,part, inin

favourfavour ofof somesome otherother personperson

IfIf thethe shareholdershareholder doesdoes notnot informinform thethe companycompany ofof

hishis decisiondecision withinwithin aa stipulatedstipulated time,time, hehe shallshall bebedeemeddeemed toto havehave declineddeclined thethe offeroffer


77/86


(Notice)(Notice) However,However, wherewhere somesome shareholdersshareholders ofof aa companycompany

werewere notnot givengiven noticenotice toto applyapply forfor allotmentallotment ofof

additionaladditional shares,shares, subsequentsubsequent allotmentallotment ofof sharesshares

toto otherother shareholdersshareholders atat aa meetingmeeting wouldwould bebe

invalidinvalid



78/86

RIGHTS ISSUERIGHTS ISSUE(SEBI Guidelines)(SEBI Guidelines)

ApplicabilityApplicability

ListedListed companiescompanies

WhereWhere offeroffer exceedsexceeds 5050 lacslacs WithdrawalWithdrawal ofof aa rightsrights issueissue afterafter announcementannouncement

SuchSuch companycompany shallshall notnot bebe permittedpermitted toto getget anyany ofof itsits

securitiessecurities listedlisted forfor aa minimumminimum periodperiod ofof 1212 monthsmonths

UnderwritingUnderwriting

AppointmentAppointment ofof RegistrarRegistrar

AppointmentAppointment ofof MerchantMerchant BankerBanker


79/86


(SEBI Guidelines)(SEBI Guidelines) PartlyPartly paidpaid upup sharesshares toto bebe mademade fullyfully paidpaid

DisclosureDisclosure inin letterletter ofof offeroffer

AgreementAgreement withwith depositorydepository

FilingFiling ofof letterletter ofof offeroffer withwith RegionalRegional StockStock

exchangeexchange

ClosureClosure ofof rightsrights issueissue

OpenOpen forfor 3030 daysdays butbut notnot moremore thanthan 6060 daysdays



80/86


(SEBI Guidelines)(SEBI Guidelines) MinimumMinimum subscriptionsubscription

9090 %% minimumminimum subscriptionsubscription

IfIf notnot receivedreceived thenthen entireentire amountamount collectedcollected shouldshould beberefundedrefunded withinwithin 4242 daysdays fromfrom thethe datedate ofof closureclosure ofof thethe

issueissue

InIn casecase ofof delaydelay inin refundrefund byby moremore thanthan 88 days,days, interestinterest

hashas toto bebe paidpaid @@ 1515%% pp..aa

NoNo reservationsreservations inin rightright issueissue

PromotersPromoters contributioncontribution andand locklock inin periodperiod



81/86


RightsRights ofof FCDsFCDs && PCDsPCDs holdersholders

RestrictionRestriction onon furtherfurther capitalcapital issueissue

OversubscriptionOversubscription notnot toto bebe retainedretained IssueIssue toto bebe mademade fullyfully paidpaid upup withinwithin 1212 monthsmonths

UtilisationUtilisation ofof fundsfunds inin casecase ofof rightsrights issueissue

ComplianceCompliance reportreport 33 dayday postpost issueissue monitoringmonitoring reportreport

5050thth dayday postpost issueissue monitoringmonitoring reportreport



82/86


AdditionalAdditional facilityfacility forfor applyingapplying

AdvertisementAdvertisement mustmust bebe publishedpublished atat leastleast 77 daysdays beforebefore

thethe datedate ofof openingopening ofof thethe issueissue.. ItIt mustmust containcontain thethe

followingfollowing detailsdetails ::

CentersCenters wherewhere thethe shareholdersshareholders maymay obtainobtain duplicateduplicate

copycopy ofof applicationapplication formsforms inin casecase theythey dodo notnot receivereceive

thethe originaloriginal appapp formform ShareholdersShareholders maymay makemake applicationapplication toto subscribesubscribe toto thethe

rightsrights onon plainplain paperpaper (if(if aboveabove conditioncondition isis notnot

satisfied)satisfied)



83/86


AdditionalAdditional facilityfacility forfor applyingapplying

TheThe advertisementadvertisement mustmust alsoalso containcontain aa formatformat toto enableenable

thethe shareholdersshareholders toto makemake thethe applicationapplication onon aa plainplain

paperpaper likelike namename ,, address,address, ratioratio ofof rightright issue,issue, issueissueprice,price, numbernumber ofof sharesshares heldheld etcetc..

TheThe applicationsapplications cancan bebe directlydirectly sendsend throughthrough

registeredregistered postpost alongalong withwith thethe applicationapplication moneymoney

ShareholdersShareholders makingmaking thethe applicationapplication otherwiseotherwise thanthan onon

aa standardstandard formform shallshall notnot bebe entitledentitled toto renouncerenounce theirtheir

rightsrights andand shallshall notnot utiliseutilise thethe standardstandard formform forfor anyany

purposepurpose eveneven ifif itit isis receivedreceived subsequentlysubsequently



84/86

RIGHTS ISSUERIGHTS ISSUE(Exceptions)(Exceptions)

InIn thethe followingfollowing circumstancescircumstances thethe companycompany needneed

notnot givegive thethe rightright issueissue toto thethe existingexisting

shareholdersshareholders::

InIn casecase ofof thethe allotmentallotment ofof sharesshares withinwithin 22 yearsyears ofof thethe

formationformation ofof aa companycompany oror withinwithin 11 yearyear afterafter thethe firstfirst

allotmentallotment ,, whicheverwhichever eventevent occursoccurs earlierearlier

WhereWhere aa specialspecial resolutionresolution isis passedpassed inin thethe generalgeneralmeetingmeeting providingproviding thatthat thethe sharesshares needneed notnot bebe offeredoffered

toto thethe existingexisting shareholdersshareholders

ContdContd


85/86

ContdContd..

WhereWhere nono suchsuch specialspecial resolutionresolution isis passedpassed butbut thethe

votesvotes castcast inin favourfavour ofof thethe proposalproposal containedcontained inin

thethe resolutionresolution movedmoved inin thethe GMGM exceedexceed thethe votes,votes,

ifif any,any, castcast againstagainst thethe proposalproposal && thethe CentralCentral

GovtGovt.. isis satisfied,satisfied, onon anan applicationapplication mademade byby thethe

BODBOD inin thisthis behalf,behalf, thatthat thethe proposalproposal isis mostmost

beneficialbeneficial forfor thethe companycompany

ContdContd


86/86

ContdContd..

AA privateprivate companycompany needneed notnot offeroffer itsits furtherfurther issueissuefirstfirst toto existingexisting shareholdersshareholders

InIn casecase ofof issueissue ofof sharesshares againstagainst conversionconversion ofof

loansloans oror debenturesdebentures

SecSec 8181 doesdoes notnot comecome intointo playplay wherewhere thethe

companycompany proposesproposes toto makemake allotmentallotment ofof sharesshares toto

itsits creditorscreditors