Role of CS in Managing SME IPO Through BSE SME Stock Exchange Compatibility Mode

7/30/2019 Role of CS in Managing SME IPO Through BSE SME Stock Exchange Compatibility Mode

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ROLE OF CS IN

MANAGING

SME IPO THROUGH

BSE SME STOCK

EXCHANGE


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Classification of Micro, Small and Medium

Enterprises


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SME and Indian Economy

Backbone to the economy of developingcountries

SME constitutes bulk of Industrial base, 40% ofexports and almost 8 % to the GDP

2.6 Crore in number, provide employment toabout 6 Crore people


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The Micro, Small and Medium Enterprises Development Act, 2006

An enactmentof Governmentof India

Provides for facilitation of promotion, development and

enhancing the competitiveness of MSMEs

Introduction of statutory consultative and recommendatorybodies on MSME polices

Statutory basis for purchase preference and creditpolicies

Improve realization of payments of MSMEs


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SME Exchange

J an 2010: The Prime Minister's Task Force recommended to set-up a dedicatedStock Exchange/ Platform for SMEs.

May, 2010: SEBI issued a f inal circular for setting up a stock exchange/ tradingplatform by a recognized Stock Exchange having nationwide trading terminals for

SMEs.

SEBI also laid down the Regulations for the governance of SME Exchange/Platform.Chapter XB has been inserted in the ICDR Regulations.

ModelEquity ListingAgreementhas been issued.

May 2011: Bombay Stock Exchange Ltd received an in-principle approval fromSEBI for launching the SME Exchange.


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SME EXCHANGE-

REGULATORY

ASPECTS


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SEBI Guidelines:Chapter XB of the SEBI (ICDR) Regulations

Post Issue Face Value of

Capital

Coverage

Up to Rs. 10 Crores Covered under the SME Platform

Rs. 10 Crores to Rs. 25

Crores

May get Listed at SME Platform

Above Rs. 25 Crores Necessarily Listed at Main Board

of the Exchange

Exchange Coverage


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Chapter XB of the SEBI (ICDR) RegulationsOther Provisions

Provision for Migration to/ from Main Board

Minimum Application Amount/ Trading Lot Rs. 1,00,000

Eligibility of Existing Members Without any further registration

100% underwritten issues

15% mandatory underwriting by Merchant Bankers

Minimum market making for 3 years by Merchant Banker through

Registered Stock broker


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Exempt from Regulations 25, 26 and 27 of ICDR Regulations

Reg. 25 provides for the reference dates on which theprovisions of Chapter III of the ICDR Regulations must be

satisfied.

Reg. 26 provides for the conditions of the Init ial Publ ic Offer. A

brief is as under:

Minimum Net tangible assets to be Rs. 3 Crores Track record of distributable profits for minimum 3 out of 5

years

Net worth of at least Rs. 1 Crore

Reg. 27 provides for the conditions which shall be satisfied in

case of Further Public Offer

Minimum 50 investors at the IPO Stage and no continuous

requirement of minimum shareholders.


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BSE Eligibility NormsNet Tangible Assets At least Rs. 1 Crore as per latest

audited financial results

Net Worth (Excluding

Revaluation Reserve)

At least Rs. 1 Crore as per latest

audited financial results

Track Record of

Distributable Prof its

in terms of Section

205 of Companies

Act, 1956

At least 2 years out of immediately

preceding 3 financial years (financial

year to be of 12 months) (Excluding

Extraordinary Income)

Other Requirements Post Issue Paid up capital of at least

Rs. 1 Crores

MandatorilyDEMAT trading facility

Website


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Chapter XB of the SEBI (ICDR) Regulations

..contd.Filing of Offer Document

and Due Diligence

Certificate

No requirement of filing of draft Offer

document with SEBI, in case filing of offer

document through Merchant Banker.

Filing is to be done with SEBI only for recordpurposes.

SEBI not to issue any Observations.

Filing of Due Diligence Certificate and

additional confirmations along with offerdocument, by the Merchant Banker to SEBI


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Migration

In case of issue by a listed issuer in accordancewith the provisions of this chapter, it shall migrate

the existing securities to the SME Exchange

Post issue face value less than Rs. 25 Crores

then, may migrate to SME Exchange if:

Approved by Special Resolution through Postalballot

Votes cast by Shareholders other than promoters

in favour to at least two times the number of votes

cast by shareholders other than promoters against

the proposal Fulfills the eligibility criteria as laid down by SME

Exchange


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Migration Post issue face value more than Rs. 10 Crores and upto Rs. 25

Crores may migrate to main boards if:

Approved by Special Resolution through Postal bal lot

Votes cast by Shareholders other than promoters in favour to at least two

times the number of votes cast by shareholders other than promoters

against the proposal

Fulfills the eligibility criteria as laid down by main Board

In a case, where the Post issue face value is likely to increasebeyond Rs. 25 Crores by virtue of right issue, bonus issue,

preferential i ssue etc., then it shall m igrate to Main Board subject to

fulfillment of eligibility criteria laid down by the Main Board

Provided no further issue of capital be made unless:

The shareholders approval by way of special resolution through postal

ballot

Votes cast by Shareholders other than promoters in favour to at least two

times the number of votes cast by shareholders other than promoters

against the proposal

The issuer has obtained in principle approval from the main board


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Obligations andFunctions of

Merchant Bankers

The issue shall be 100% underwritten. Merchant Bankers shall underwrite atleast 15 %

of the issue size in their own account.

The issuer in consultation with the Merchant

Banker may appoint underwriters.

Merchant Banker may enter into an agreement

with the nominated investor(s) indicating the

number of securities which they agree to

subscribe at issue price.

Obligation of Merchant Banker to fulfill

underwriting obligations in case of failure of

other underwriters.


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Obligations andFunctions of

Merchant Bankers

Merchant Banker to be responsible for minimum 3

years market making through a Stock Brokerwho is

registered as market maker with the SME Exchange

May enter into an agreement with nominated investors

for receiving or delivering securities subject to prior

approval of SME Exchange

Minimum inventory of Market maker to be 5 %

Merchant Banker/s with responsibility of market makingat their option, be represented on the Board of the

Issuer subject to the agreement.

Complete particulars of any transaction for

acquisition of securities made in pursuance of

underwri ting or market making shall be submit ted

to the Board on quarterly basis.


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Marketmaker

Obligations

Market makers are required to providetwo way quotes for 75% of the time in a

day

There can not be more than 5 market

makers for a scripDuring the compulsory market makingperiod the promoter holding shall not be

eligible for offering to market makers

Market makers allowed to deregister onone months notice

Trading system may be either order-driven or quote driven


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ModelEquityListi

ngAgreement

Applicability of sub-clause (iv) of clause (b)

of proviso to Sec. 219 of the Companies

Act, 1956 i.e. a statement containing the

salient feature of all the documents can be

sent to shareholders instead of a full AnnualReport

Submission of Half Yearly Results instead

of Quarterly Results

No requirement of Publishing of FinancialResults


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Model Listing AgreementObligations and

Functions of

Merchant bankers

Fairness Opinion on valuation of

assets/ shares done by valuer of

the issuer, required from a

Merchant Banker in case proposed

resolution u/s 393 or u/s 100 of the

Companies Act, 1956


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Benefit of listing at SME Exchange

Equity Financing Opportunities Growth of Business

Expanded Investors Base

Enhancement of CompanysVisibility

Market Coverage

Increased Value of the Shares

Venture Capital Participation

Exit Options


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Distribution of Risk Eligibility for Transfer of Risk

Increased Financing Funds from Banking as well as

Capital Markets

Diversification of Resources ofFinance


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Liquidity for Shareholders

Becoming a listed public limited company establishes a market for acompany's shares, providing its investors with an efficient and regulatedvehicle in which to trade their shares. Greater liquidity in the stock marketcanlead to better valuation of shares than would be seen through privatetransactions.

Facilitate Growth Through Strategic Investments, Mergers AndAcquisi tions

Listed SMEs are more likely to getstrategic investments fromboth, domesticand international investors as well as companiesAs a listed public limited company, its shares can be utilized as anacquisition currency to acquire target companies, instead of a direct cash

offering. Using shares for an acquisition can be a cost- effective vehicle tofinance such a transaction.


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Other Aspects

Transparency, Efficiency and Liquidity

Involvement of Market Participants

Minimum Regulation and compliance requirements

Attraction to high Net Worth Investors


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SME Exchange - Attributes

Membership to the Existing Members Trading based on Quote/ Order/ Hybrid

Dealers Market

Based on Automatic Order Matching

T + 2 Rolling Settlement Period DEMAT connectivity

Trading System based on BSE Online Trading System

(BOLT)

Quotes by market makers and orders by investors


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SME Exchange: Key Players

Venture Capital Funds/ Banks/ Registrars/ Qualified

Sponsors/ Merchant bankers/ Market Makers

Cells for Technical & Non technical queries

Time to time mock trading Advisory:

o Preparation of Balance Sheets

oTimely Filling of Listing Requirements

o Offering Process whether IPO or Private Placement


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SME EXCHANGE & THE

COMPANYSECRETARY!!


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COMPANY POLICIES

OPERATIONAL PLANNING AND EXECUTION

DIR A DIR B DIR C DIR D DIR E

BOARD OF

DIRECTORS

CORPORATEPLANNING

LEGALFINANCE ANDACCOUNTS

HUMANRESOURCES

CORPORATECOMMUNICATION

PRODUCTIONAND OPERATIONS

MARKETINGINFORMATION

TECHNOLOGY

DEPARTMENTS IN A COMPANY

EXTERNAL STAKEHOLDERSCOMPANY

SECRETARY

INVESTORSINVESTORS

GOVERNMENT ANDREGULATORS

GOVERNMENT ANDREGULATORS

SOCIETYSOCIETY

SUPPLIERSSUPPLIERS

CUSTOMERSCUSTOMERS

LENDERSLENDERS


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Knowledge

of Securities &

Other Laws

LeadershipCommunication

Skills

Entrepreneurship

SKILLS OF A COMPANY SECRETARY.


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Keypoint between

Company &Stakeholders

StrategicPlanner

Face ofManagement

COMPANY SECRETARY

navigates the

CORPORATE GROWTHwith

GOOD GOVERNANCE

ROLE IN A LISTED COMPANY

EventManager

VigilanceOfficer

Knowledge ofVarious Securities

Laws


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Approvals

Required

By Company

Due Diligence

& Compliance

Appointment

of

Intermediaries

By

Intermediaries

Eligibility

Norms

Pricing of

securities

Contents of

Prospectus

COMPANY SECRETARY & SME

Post Issue

obligations

Compliance of

various Rules &

Regulations

Promoters

Disclosures

Migration


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ROLE IN AN UNLISTED COMPANY

Unlisted

Company

Object :

SME IPO

SME

ListedCompany


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AS PRACTISING COMPANY SECRETARY

Appearance

before :

SEBI SAT

CLB

Consent Orders

Brokers Audit

Securities

Audit

Corporate

Restructuring Capital

Restructuring

Unlocking

companys real

value

Certifications

as per Listing

Agreement

Certifications

required for

Corporate

Actions

As

PCS

As

Advisor

As

Represen

tator


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Corporate Professionals Capital Pvt. Ltd

SEBI Registered Category I Merchant Banker

D-28, South Extension -I,

New Delhi-110 049

Ph: +91.11.40622200; FAX: +91.11.40622201Contact: Anjali Aggarwal

Mobile: + 91 9971673336; Tel: +91.11.40622230

Email: [email protected]

Thank YouThank You

Documents

Role of CS in Managing SME IPO Through BSE SME Stock Exchange Compatibility Mode