role of sebi in monitoring capital market
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Role of SEBI in monitoring Indian Capital Market
04/08/23 1
2
ICDR Regulations
SEBI Takeover Regulations
Insider Trading Regulations
Buy Back Regulations
Delisting Regulations
FUTP Regulations
Merchant Bankers
Registrar Brokers and Sub-Brokers
Merchant Bankers
Regulations
Registrar and Share Transfer Agent
Regulations
Brokers and Sub-
BrokersRegulations
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3
ICDR Regulations
SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009
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4
AN OVERVIEW
SEBI (ICDR) Regulations deals with Issue of Specified Securities by a new Issuer or a Listed Issuer.
Specified Securities :
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STRUCTURE OF ICDR REGULATIONS
SEBI (ICDR) Regulations, 2009
Preferential Issue
Public Issues
General Obligations of Issuer and Merchant
Banker in Public Issue / Right Issue
Right Issues
Bonus Issue
QIP
IDR Issues
Issues by SMEs
Schedules
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WHAT ICDR DOES NOT REGULATE
• Public Issue of Debt Securities
(Regulated by SEBI (Issue and Listing of Debt Securities) Regulations, 2008)
• Issue of ADRs / GDRs
(Regulated by RBI FCCBs and Ordinary Shares [Through Depository Receipt Mechanism] Scheme, 1993 )
• Issue of FCCBs
(Regulated by RBI FCCBs and Ordinary Shares [Through Depository Receipt Mechanism] Scheme, 1993 )
• Issue of shares pursuant to ESOPs
(Regulated by SEBI (Employee Stock Option Plan and Employee Stock Purchase Scheme) Guidelines, 1999)
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704/08/23
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“Initial Public Offer” means an
offer of specified securities by an
unlisted issuer to the public
for subscription and
includes an offer for sale
of specified securities to the public
by any existing holders
of such securities in an unlisted issuer;
WHAT IS INITIAL PUBLIC OFFER?
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KEY TERMS OF ISSUE
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IMPORTANT DEFINITIONS
“Anchor Investor" - A QIB who makes an application for a value of 10 crore rupees or more in a IPO made through the book building process
Application Supported by Blocked Amount (ASBA)” - An application for subscribing to a public issue or rights issue, along with an authorisation to Self Certified Syndicate Bank to block the application money in a bank account.
“Book Building” - A process undertaken to elicit demand and to determine at what price to offer an IPO based on demand from institutional investors.
“Green Shoe Option” - An option of allotting equity shares in excess of the equity shares offered in the public issue as a post-listing price stabilizing mechanism
"Red Herring Prospectus" - A prospectus which does not have details of either price or number of shares being offered or the amount of issue.
“Retail Individual Investor” - Investor who applies or bids for specified securities for a value of maximum One Lakh Rupees.
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PUBLIC ISSUES FRAMEWORK
Book Build Issue
Fixed Issue
Type & Procedure
Eligibility Requirements
Allocation of Issue
Pricing Promoters’ Contribution
& Lock-in
Public Issue Framework under SEBI (ICDR)
Regulations
Issue Period
12
ELIGIBILITY REQUIREMENTS
Primary Eligibility Requirements
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Alternate Eligibility Requirements:
ALTERNATE ELIGIBILITY REQUIREMENTS
Issue through Book-Building Process with minimum 50% net offer to QIBs
‘Project’ has 15% participation from public financial institutions/scheduled
commercial banks of which 10% comes from appraisers and min. 10%
net offer to QIBs
10 Crores minimum post issue face value capital
2 years of compulsory market making post issue
OR
OR
AND
14
OTHER PRE-REQUISITES
• Prospective allottees to be not less than 1000.
• Compulsory IPO Grading by credit rating agency registered with SEBI before filling RHP with ROC
• No outstanding convertible securities or other right which would entitle the existing promoters or shareholders any option to receive equity shares after public offer.
• Firm arrangements of finance, through verifiable means, for 75% of the stated means of finance excluding the amount to be raised through the public issue to be made.
• Partly paid up shares to be made fully paid or forfeited in the manner specified, before the public offering.
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MINIMUM LISTING REQUIREMENTS
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MINIMUM LISTING REQUIREMENT -BSE
New Companies (IPO) Direct Listing
Small Cap Companies Large Cap Companies
Minimum issue size of Rs. 3 crore
Minimum issue size of Rs. 10 crore
No minimum issue size requirement
Market capitalization of not less than Rs. 5 crore
Market capitalization of not less than Rs. 25 crore
Minimum Market Capitalization of the listed capital shall be at least two times of the Paid Up Capital.
Minimum post-issue paid-up capital of Rs. 3 crore
Minimum post-issue paid-up capital of Rs. 3 Crores
A minimum issued and paid up equity capital of Rs. 3 crore .
Minimum income/turnover of Rs. 3 crore in preceding 3 Years
Minimum Net Worth shall be Rs. 20 crore.
Profit Making Track Record for last 3 years
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New Companies (IPO) Direct Listing
Small Cap Companies Large Cap Companies
Compulsory due diligence by CA or Merchant Banker. No Requirement of Due Diligence if FIs or SCB has appraised the project in 12 months
A dividend paying track record of atleast 10% for at least the last 3 consecutive years
Minimum No. of Public Shareholders after the Issue shall be 1000.
Minimum 25% public shareholding with not more than 0.5% shareholding with any single shareholding.
At least two years listing record with any of the Regional Stock Exchanges.
Demat trading with CDSL and NSDL.
MINIMUM LISTING REQUIREMENT -BSE
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MINIMUM LISTING REQUIREMENT -NSE
New Companies (IPO) Direct Listing
Minimum paid-up capital of Rs. 10 crore
However, if Market Capitalization > Rs. 100 Crore, then Minimum Post-issue paid-up capital is Rs. 5 Crore.
Minimum paid-up capital of Rs. 10 crore and Minimum Market capitalization of Rs. 25 croreORMinimum paid-up capital of Rs. 25 crore ORMinimum Market capitalization of Rs. 50 croreORMinimum Net worth of Rs. 50 Crores in preceding 3 years.
Minimum Market capitalization of Rs. 25 crore
Minimum 3 years of track record of Issuer Company or its promoter company.
Minimum 3 years of track record of Issuer Company or its promoter company.
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New Companies (IPO) Direct Listing
Other criteria Dividend payment record in atleast 2 out of the last 3 FY ORDistributable profits in atleast 2 out of the last 3 FY ORMinimum Net worth of Rs. 50 Crores
Other Criteria
MINIMUM LISTING REQUIREMENT -NSE
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TYPE & PROCEDURE
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A COMPARATIVE ANALYSIS
Fixed Price Issue Book-Building Issue
Pre-determination of price / price band, which is made known to the investors
Determination of price on the basis of bids received from the investors. Investors are made known only an indicative floor price / price range.
Demand for the securities offered is known only after the closure of the issue.
Demand for the securities offered can be known everyday as the book is built.
Underwriting is not compulsory in case of Fixed Price Issue
Underwriting is compulsory in case of Book-Built Issue
22
PROCEDURE
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PRICING
• Free Pricing – Price to be determined by Issuer in consultation with Lead Merchant Banker
• Differential Pricing
– Retail Individual Investor my be offered shares at less price than that of other categories
– Anchor investors can not be offered shares at less price than any that of other categories
– In case of Composite issue, the price of public issue and right issue can be different.
– In case of alternate method of book building, shares may be issued to employees at lower price.
(the differential pricing shall not be more than 10% of the floor price)
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PRICING
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PRICING
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PROMOTERS’ CONTRIBUTION
Certain specified securities are ineligible for minimum promoters’ contribution04/08/23
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SECURITIES INELIGIBLE FOR MINIMUM PROMOTERS’ CONTRIBUTION
• Securities acquired during the preceding 3 years for consideration other than cash.
• Specified securities acquired during the preceding 1 year at a price below Issue price,
However, if promoters pay the difference, or acquired pursuant to merger etc., then
such securities are eligible.
• Securities allotted to promoters acquired during the preceding 1 year at a price below
Issue price against funds brought in by them in case of conversion of partnership firm
into company.
• Securities pledged with any creditor.
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LOCK-IN OF PROMOTERS’ CONTRIBUTION
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ALLOCATION OF ISSUE – BOOK BUILDING ROUTE
Retail individual investor
QIB
Offer through offer document
Promoters’ Contribution
Issue Size
Non-institutional investor
Anchor Investor
Mutual Funds
ReservationNet offer to
public
Min. 20% of Issue Size
Min. 25% of Issue Size
Min. 15% of NOPMax. 50% of NOP Min. 35% of NOP
Min. 5% of NOP Max. 30% of QIB
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ALLOCATION OF ISSUE – FIXED PRICE ISSUE
Other investors
Offer through offer documentPromoters’ Contribution
Issue Size
Retail Individual Investors
ReservationNet offer to
public
Min. 20% of Issue Size
Min. 25% of Issue Size
Min. 50% of NOP Max. 50% of NOP
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ISSUE PERIOD
Activity Fixed Price Issue
Book-build Issue
Minimum day 3 3
Maximum days 10 7
Maximum number of days issue to be kept open in case of revision in price band
N.A. 10
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RIGHT ISSUE
Right Issue (Where the aggregate value of securities offered is 50 lacs or more)
• Meaning – Issue of shares by a company to its existing shareholders
• Free Pricing
• Issue of Letter of Offer
• Open for subscription for a minimum 15 days and for maximum 30 days
Key Considerations
• Rights Issue vs. Further Public offering
• Extent of Capital Expansion and its impact on EPS
• Increase in Promoters’ shareholding and applicability of SEBI Takeover Code.
• Reservation of rights for convertible instruments.
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ELIGIBILITY CRITERIA FOR RIGHTS ISSUE
• No Outstanding convertible instrument
• Appointment of Merchant Banker
• Clearance of Letter of Offer from Stock Exchange
• Appointment of Registrar to the Issue
• Agreement with Depository
• No Partly Paid up shares
• Application to Recognized Stock Exchange
• Appointment of Designated Stock Exchange
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• Restrictions:
– The following persons are not debarred from accessing the capital market by SEBI
• Issuer Company
• Promoters
• Promoter Group
• Directors
• Persons in control of the Issuer
• Companies in which the above persons are promoter/director
– Issuer company has not defaulted in repayment of convertible debt instruments and is
not in the list of willful defaulters published by RBI.
• Firm arrangements of finance through verifiable means towards stated 75% of the stated
means of finance, excluding the amount to be raised through Right Issue.
ELIGIBILITY CRITERIA FOR RIGHTS ISSUE
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PRICING OF RIGHTS ISSUE
• Pricing of Rights issue is not regulated by SEBI (ICDR) Regulations.
• Generally, price for Rights issue shall be lower than the Market Price, however the gap
between the Market Price and Issue Price is determined on the basis of certain criteria.
• Key Criteria:
– Price Trend of the issuer’s shares during the past 1 year and affect of corporate
announcements on price to remove impact of extra-ordinary price movement.
– Price Maintainable in the long-run
– State of Capital Market – Stable, Volatile, Bullish, Bearish.
– P/E Ratio
– Feasibility of Proposed Plans
– Dividend Policy
– Resource Position of the Company04/08/23
3704/08/23
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WHAT IS PREFERENTIAL ISSUE
Preferential issue
means
issuance of equity shares to the
promoters, promoter group or
selected group of persons or
any investor(s) on private
placement basis.
Does not include an offer of specified securities made through a public issue, rights issue, bonus issue, ESOS, ESPS or QIP or an issue of sweat equity shares or depository receipts issued in a country outside India or foreign securities.
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APPLICABILITY
The provisions shall not apply where the preferential issue of equity shares is
made:
a)pursuant to conversion of loan or option attached to convertible debt
instruments in terms of sections 81 (3)(4) of the Companies Act, 1956;
b)pursuant to a scheme approved by a High Court
c)in terms of the rehabilitation scheme approved by the BIFR under SICA
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RELEVANT DATE
4004/08/23
CONDITIONS FOR PREFERENTIAL ISSUE
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PRICING OF THE ISSUE
If shares are listed for a period of 6 months or more as on Relevant Date:
•Average of weekly high / low closing prices of shares quoted in SE during 6 months preceding the relevant date
OR
•Average of weekly high / low closing prices of shares quoted in SE during 2 weeks preceding the relevant date
Which ever is higher
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If shares are listed for a period of less than 6 months as on Relevant Date:
•Price at which shares are issued in IPO or value per share arrived in scheme of arrangement, if any
OR•Average of weekly high / low closing prices of shares quoted in SE during the period share have been listed preceding the relevant date
OR•Average of weekly high / low closing prices of shares quoted in SE during 2 weeks preceding the relevant date
Which ever is higher
PRICING OF THE ISSUE
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LOCK-IN OF SPECIFIED SECURITIES
Specified securities Time period of Lock In
Securities allotted to promoter group and the equity shares
allotted pursuant to exercise of options attached to warrants
issued on preferential basis to promoter or promoter group
Three years
Equity shares allotted in excess of the 20% of paid up capital One year
Securities allotted to persons other than promoter group and the
equity shares allotted pursuant to exercise of options attached to
warrants issued on preferential basis to such persons
One year
Shares allotted pursuant to CDR scheme One year
4404/08/23
4504/08/23
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QIP means allotment of
eligible securities by a listed
issuer to Qualified
Institutional Buyers on
private placement basis in
terms of these regulations.
QUALIFIED INSTITUTIONAL PLACEMENT (QIP)
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QUALIFIED INSTITUTIONAL BUYERS
i. a mutual fund, venture capital fund and foreign venture capital investor
ii. a foreign institutional investor and sub-account
iii. a public financial institution
iv. a scheduled commercial bank;
v. a multilateral and bilateral development financial institution;
vi. a state industrial development corporation;
vii. an insurance company registered with the IRDA
viii.a provident fund with minimum corpus of Rs. 25 crore;
ix. a pension fund with minimum corpus of Rs. 25 crore;
x. National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated
November 23, 2005 of the Government of India published in the Gazette of India;
xi. insurance funds set up and managed by army, navy or air force of the Union of India.
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RELEVANT DATE
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49
ELIGIBILITY CONDITIONS
• Eligible Securities: “Eligible Securities” include equity shares, non-convertible debt
instruments along with warrants and convertible securities other than warrants.
• Eligibility Criteria’s:
• Special Resolution
• Appointment of Merchant Banker
• Minimum Public Shareholding to be maintained
• The equity shares of the same class have been listed on a recognized stock
exchange having nation wide trading terminal for a period of at least one year
before QIP.
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OTHER KEY CONDITIONS
• Restriction on Allotment:
Issue Size
Mutual Fund Other QIBs
Min. 10%
If not Subscribed
Max 50% to single QIB
QIB belonging to the same group or who are under same control shall be deemed to be a single allottee.
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OTHER KEY CONDITIONS
• Minimum Number of Allottees:
• Tenure of convertible instruments issued through QIP is 60 Months.
• Aggregate of proposed QIP and all previous QIP in one FY shall not exceed 5 times of Networth of the Issuer of the previous financial year
• Eligible securities issued through QIP shall not be transferrable for one year except on a recognized Stock Exchange.
Issue Size Number of Allottees
Less than INR 250 Crores 2
More than INR 250 Crores 5
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BONUS ISSUE
Eligibility Criteria’s
•Authorisation in AOA.
•Not default in the payment of interest or principal in respect of fixed deposits or debt Securities.
•Not defaulted in respect of the payment of statutory dues of the employees such as contribution to
provident fund, gratuity and bonus.
•Partly paid shares, if any, are made fully paid up.
•Reservation of bonus shares in favour of the holders of outstanding convertible debt instruments in
proportion to the convertible part thereof.
Source of Bonus Issue
•Bonus issue shall be made out of free reserves built out of the genuine profits or securities premium
collected in cash only.
•Bonus Issue shall not be made out of reserves created by revaluation of fixed assets.
•Bonus Share shall not be issued in lieu of dividend.
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5404/08/23
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IMPORTANT DEFINITIONS
“Main Board” means a recognized stock exchange having nationwide trading
terminals, other than SME exchange;
“Nominated Investor” means a QIB or PE Fund who enters into an agreement with
the merchant banker to subscribe to the issue in case of under-subscription or to
receive or deliver the specified securities in the market-making process;
“SME exchange” means a trading platform of a recognised stock exchange having
nationwide trading terminals permitted by the Board to list the specified securities
issued and includes a stock exchange granted recognition for this purpose but does
not include the Main Board;
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ISSUE AND LISTING OF SHARES BY SMEs
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ISSUE AND LISTING OF SHARES BY SMES
• No need to filing DRHP with SEBI before filing it with ROC or DSE
• SEBI will not give observations on offer document
• 100% underwriting of issue is mandatory.
• Minimum 15% underwriting obligation of Merchant Banker
• Nominated Investors can also underwrite the issue
• Minimum Application Value = Rs. 1 Lac
• Minimum Number of Allottee = 50
• Compulsory Market Making for minimum 3 years
• Promoters’ holding is not eligible for being offered to market maker
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5804/08/23
POWERS OF THE BOARD
5904/08/23
6004/08/23
AMENDMENTS IN ICDR
6104/08/23
AMENDMENTS IN ICDR
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AMENDMENTS IN ICDR
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64
New SEBI Takeover Regulations (Yet to be notified)
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65
NEED OF SEBI TAKEOVER REGULATIONS
04/08/23
SALIENT FEATURES
AND
Impact
04/08/23 66
67
KEY DEFINITIONS
04/08/23
WhoWho
With PACsWith PACs
OrOr
OrOr
Voting RightsVoting Rights
InIn
Target CompanyTarget Company
EitherEither
OrOr
AcquiresAcquires
DirectlyDirectly IndirectlyIndirectly
Agrees to AcquireAgrees to Acquire
SharesShares OrOr OrOr ControlControl
HimselfHimself
ACQUIRER
As Per TRAC Report
Through PACsThrough PACs OrOr
6804/08/23
ControlControl
IncludesIncludes
Right to Right to
Control the Control the managementmanagement
ExercisableExercisable
Or withOr with
OrOr
By virtue ofBy virtue of
Appoint majority of Appoint majority of directorsdirectors
DirectlyDirectly IndirectlyIndirectly
Control of Policy Control of Policy decisiondecision
IndividuallyIndividually PACPAC
ShareholdingShareholding
CONTROL
Management Management RightsRights
Shareholders Shareholders AgreementAgreement
Voting Voting AgreementAgreement
As per SEBI Press Release dated July 28, 201104/08/23 69
04/08/23 70
CHANGE IN CONTROL
As Per TRAC Report
04/08/23 71
FREQUENTLY TRADED SHARES
As Per TRAC Report
72
IDENTIFIED DATE
Specified Date Identified Date
A date falling on the 10th business day prior
to tendering period
A date not later than the 30th day from the date of
the PA
As Per TRAC Report04/08/23
04/08/23 73
SHARES
• The scope of definition has been Broadened;
• Inclusion of Depository Receipts within the ambit of term shares.
• Holder of the depository receipts is treated at par with the one who acquired the Equity Shares carrying voting rights.
As Per TRAC Report
04/08/23 74
INITIAL THRESHOLD
AND
CREEPING ACQUISITION
04/08/23 75
INCREASE IN THRESHOLD
INITIAL THRESHOLD
Malaysia Hong Kong Australia U.K.
33% 30% 20% 30%
As per SEBI Press Release dated July 28, 2011
76
IMPACT
•A welcome step and aligns more closely with global practices in other countries;
•Beneficial for the Private Equity Players and Investors;
•No Transitional Provision for the promoters holding less than 25%;
•Hostile takeover threat to the listed companies with lower promoter shareholding.;
•Negative Control - Any large investor can acquire some shares from the market to
keep his holding upto 25% which is sufficient to block any Special Resolution and keep
a check on the management;
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77
CREEPING ACQUISITION
As Per TRAC Report04/08/23
04/08/23 78
IMPACT
• It will help the promoters in the consolidation of holdings;
•Flexibility to acquire 10% shares or voting rights within 2 days without
triggering the Open Offer requirement.
04/08/23 79
PROMOTER HOLDING IN LISTED COMPANIES
Total Promoter Holding (%)
Companies With Promoter Holding Between
Market Cap Range (Rs.
Mn)
No. of Compani
es
Mean Median 0-15% 15-20% 20-25% 25-30%
0-500 2,477(61.1%)
45.50% 46.40% 274(11.1%)
87(3.5%)
97(3.9%)
138(5.6%)
500-2,000 649(16.0%)
52.60% 54.90% 34(5.2%)
19(2.90%)
12(1.8%)
19(2.9%)
2,000-5,000 312(7.7%)
54.30% 55.00% 10(3.2%)
8(2.6%)
1(0.3%)
10(3.2%)
5,000-10,000 157(3.9%)
52.20% 54.50% 5(3.2%)
1(0.6%)
3(1.9%)
8(5.1%)
10,000 and above
459(11.3%)
55.20% 54.30% 15(3.3%)
5(1.1%)
11(2.4%)
16(3.5%)
Overall 4,054(100%)
48.90% 50.50% 340(8.4%)
120(3.0%)
124(3.1%)
191(4.7%)
Source: TRAC Report
04/08/2380
OPEN OFFER
AND
ITS RELATED CONCEPTS
04/08/2381
INCREASE IN OFFER SIZE
As per SEBI Press Release dated July 28, 2011
82
Offer size (% of total equity capital of Target Company)
FY Total <=20% >20%
2006-07 89 77 12
2007-08 118 100 18
2008-09 113 95 18
2009-10 75 65 10
Total 395 337 58
% of Cases 100% 85.32% 14.68%
OFFER SIZE ANALYSIS
Source: TRAC Report
04/08/23
04/08/2383
FREEDOM TO COMPLETE ACQUISITION UNDER SPA
Existing Regulations Proposed Regulations
Not allowed
Until the completion of offer
formalities.
Allowed
•After a period of 21 days from the date
of PA and
•Subject to acquirer depositing 100%
consideration payable under the Open
Offer in Escrow Account.
This provision will allow the acquire to have the representation in the Target Company even before the completion of open offer and
to exercise the control over it.
As Per TRAC Report
84
ACQUISITION FROM OTHER COMPETING ACQUIRER
Simplified Rules-An ease for Competitive Bidder for control change
Keeping in view the increasing trend of competitive biddings in India this may
be taken as an imperative step as compelling two warring groups to continue
in a company may not be in the interest of the company and smooth passage
to one of the competitive bidders is desirable.
As per SEBI Press Release dated July 28, 201104/08/23
85
NON COMPETE FEES
More beneficial for the shareholders as they will be entitled to get the same price as have been received by the promoters/sellers from the
acquirer.
As per SEBI Press Release dated July 28, 201104/08/23
04/08/23 86
IMPACT
Shareholder Promoter
Investor Investor + Management+ Control
Thus, Payment of Non compete fees or control premium should be allowed.
87
REDUCTION IN TIME LINE
The timeline for
completion of the open offer
has been reduced from
95 calendar days
To
57 Business Days
As Per TRAC Report04/08/23
04/08/2388
EXEMPTIONS
04/08/23 89
NEW EXEMPTIONS INTRODUCED
Increase in shareholding pursuant to Buy Back
As Per TRAC Report
04/08/2390
• Approval of the scheme by shareholders by way of
Special Resolution passed by Postal Ballot; and
• No Change in control.
NEW EXEMPTIONS INTRODUCED
Increase in shareholding pursuant to CDR Scheme
As Per TRAC Report
NEW TAKEOVER REGULATIONS-A WIN WIN SITUTAION
91
• Beneficial for Private Equity Players and Investors.
• More protection for the small shareholders.
• Simplification in the provisions.
• More transparency and removal of ambiguity.
• At par with Global Practices prevalent for M&As.
04/08/23
92
COMPARISON OF NEW AND OLD TAKEOVER REGULATIONS
Criteria Old Regulations New Regulations
Press Release dated July 28, 2011
Initial Threshold 15% 25%
Offer Size 20% 26%
Non-Compete Fees Upto 25% of the Offer Price Not allowed
Acquisition from the other
competing acquirer
No provision Available without attracting
Open Offer obligations
Recommendation on offer by
Board of Target Company
Optional Mandatory
Voluntary Offers No specific conditions Introduced subject to certain
conditions.
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93
Insider Trading Regulations
SEBI (Prohibition of Insider Trading) Regulations, 1992
04/08/23
94
It is dealing in the securities
by a Insider,
who has the knowledge of
material “inside” information
which is not known
to the general public
WHAT IS INSIDER TRADING?
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95
Used to make profit at the expense of other Investors;
Leads to loss of confidence of investor in stock market;
The process corrupts the ‘Level Playing Field’;
It is easier to identify the beneficiaries of insider dealing. But the extent of losses occurred is impossible to calculate.
HOW BAD IT IS ???
04/08/23
INSIDER
WASWASIS IS
CONNECTED WITH THE COMPANYCONNECTED WITH THE COMPANY
WHO WHO
OROR
OROR
DEEMED TO HAVE BEEN CONNECTEDDEEMED TO HAVE BEEN CONNECTED
ANDAND
WHO IS REASONABLY EXPECTED TO HAVEWHO IS REASONABLY EXPECTED TO HAVE
ACCESS ACCESS HAS RECEIVED HAS RECEIVED HAS HAD ACCESS HAS HAD ACCESS OROR OROR
TOTO
UNPUBLISHED PRICE SENSITIVE INFORMATIONUNPUBLISHED PRICE SENSITIVE INFORMATION 9604/08/23
97
Whether the Auditor and Chartered Accountant (CA) also come within the
ambit of term “Insider”?
Yes
04/08/23
98
ANY INFORMATIONANY INFORMATION
OROR
ANDAND
TO A COMPANYTO A COMPANY
LIKELY TO MATERIALLY AFFECT THE PRICE OF SECURITIES OF THE COMPANY
LIKELY TO MATERIALLY AFFECT THE PRICE OF SECURITIES OF THE COMPANY
INDIRECTLYINDIRECTLYDIRECTLY DIRECTLY
WHICH RELATESWHICH RELATES
WHICH IF PUBLISHEDWHICH IF PUBLISHED
PRICE SENSITIVE INFORMATION
04/08/23
99
DEEMED PRICE SENSITIVE INFORMATION
Periodical Financial Results of the company;
Intended declaration of dividends;
Issue of securities or buy-back of securities;
Expansion Plans / New projects;
Amalgamation, mergers or takeovers;
Disposal of undertaking;
Changes in policies of the company.
04/08/23
100
DISCLOSURE REQUIREMENT
1. On the acquisition of >5% shares and Whenever there is a change of 2% in
shareholding after the acquisition of 5%.
2. On becoming the director or officer and whenever there is a change in holding in
excess of Rs.5 Lakh in value or 25,000 shares or 1% of total shareholding or voting
rights.
Recent Development
On becoming the promoter or part of promoter group and whenever there is a
change in holding in excess of Rs.5 Lakh in value or 25,000 shares or 1% of total
shareholding or voting rights.
04/08/23
SCHEDULES – MODEL CODE OF CONDUCT
101
SCHEDULE I
MODEL CODE OF CONDUCT
FOR PREVENTION OF INSIDER TRADING
PART A - FOR LISTED COMPANIES
PART B – FOR OTHER ENTITIES
SCHEDULE II
CODE OF CORPORATE DISCLOSURE PRACTICES
FOR
PREVENTION OF INSIDER TRADING
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IMPORTANT TERMS
102
Trading Window
Company shall specify a trading period, to be called "Trading Window", for trading in the company’s securities.
The trading window shall be closed during the time the Price Sensitive information is un-published and shall opened after 24 hours the PSI is made public.
Restricted/Grey List
To restrict trading in certain securities and designate such list as restricted / grey list.
Any security which is purchased or sold by the organisation/firm on behalf of its clients / schemes of mutual funds, etc. shall be put on the restricted / grey list.
Chinese Wall
Chinese Wall policy demarcates “inside areas” from "public areas". The employees in the inside area shall not communicate any PSI to anyone in public area.
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NEED TO KNOW
103
PSI should be disclosed only to those within the company who need the information to discharge their duty.
Limited access to confidential information
Files containing confidential information shall be kept secure.
Computer files must have adequate security of login and pass word etc.
All D/O/E of the Co and their dependants as defined by the company who intend to deal in the securities beyond a limit should pre-clear the transactions.
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104
AMENDMENTS IN INSIDER TRADING REGULATIONS
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105
Buy Back of Securities
SEBI (Buy Back of Securities) Regulations, 1998
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BUY BACK..
106
The repurchase of
outstanding shares (repurchase)
by a company in order to
reduce the number of shares on the
market.
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107
REASON FOR BUY BACK
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IMPORTANT DEFINITIONS
108
“Associate” includes a person, -
i. who directly or indirectly by himself or in combination with relatives, exercises
control over the company or,
ii.whose employee , officer or director is also a director, officer or employee of
another company;
“Tender Offer” means an offer by a company to buy back its shares or other
specified securities through a letter of offer from the holders of the shares or other
specified securities of the company.
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GOVERNING PROVISIONS
109
• Section 77A, 77AA, 77B of Companies Act, 1956;
• SEBI (Buy Back of Securities) Regulations, 1998 (For Listed Companies)
• Private Limited Company and Unlisted Public Limited Company (Buy-Back of
Securities) Rules, 1999
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110
BUY BACK AT A GLANCE
• Authorization in AOA;
• Board Resolution - In case the fund utilization in buy back is ≤10%total
paid up equity capital and free reserves;
• Special Resolution - In case the fund utilization in buy back is >10% and
≤25% of the paid up capital (equity plus preference shares) and free
reserves;
• Debt equity ratio should not be more than the 2:1 after such buy-back;
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111
• Filing of Declaration of Solvency with the Registrar and SEBI.
• All the shares or other specified securities for buy-back are fully paid-up;
• Buy-back shall be completed within twelve months from the date of
passing the SR or BR.
• Minimum time of 365 days between two Buy Back offers
• Extinguish and physically destroy the securities bought-back within 7 days
of the last date of completion of buy-back.
BUY BACK AT A GLANCE
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112
SOURCES OF FUNDS
Provided that no buy-back of any kind of shares or other specified securities shall be made out of the proceeds of an earlier issue of the same kind of shares or same kind
of other specified securities.
Section 77A (1) of Companies Act, 1956 states that:
A company may purchase its own shares or other specified securities out of—
OR OR
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113
RESTRICTIONS IN BUY-BACK
• Buy-back of shares shall not be done for delisting of securities from the stock exchange.
• Buy-back shall not be done from any person through
• Negotiated Deals
• Spot Transactions
• Private Arrangements
• No insider trading in securities on the basis of unpublished information relating to buy-back of securities.
• No further issue of same kind of shares or other specified securities within a period of 6 moths except by way of bonus issue or in the discharge of subsisting obligations
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114
METHODS OF BUY-BACK
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PROCESS OF BUY-BACK – TENDER OFFER/ODD -LOT
Special Resolution, if applicable
Board Resolution and Public Notice, if
applicable
Appointment of Merchant Banker
Public Announcement
Filing of Draft Letter of Offer
and Declaration of Solvency with SEBI and STX
Specified Date
Decision for Buy-back
SEBI Clearance & Filing of Final LOO with SEBI & STX and In-
principal Approval
Dispatch of LOO and Advt. in Newspaper
Opening of offer for Buy-back
Opening of Escrow Account
Closure of offer for Buy-back
Verification and Acceptance / Rejection of securities
COMPANY
Payment to Securities
holders
Extinguishment of Certificates
115
Opening of Special Account
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PROCESS OF BUY-BACK – OPEN MARKET PURCHASE THROUGH STOCK EXCHANGE METHOD
Special Resolution, if applicable
Board Resolution and Public Notice, if
applicable
Appointment of Merchant Banker
Public Announcement
Daily disclosure to STX about shares bought
back
Filing of copy of Public
Announcement with SEBI and
STX
Decision for Buy-back
Fortnightly public notice of shares
bought-back or on 5% buy-back
Payment of Consideration
Verification and Acceptance / Rejection of securities
Extinguishment of Certificates
COMPANY
116
Buy Back to be made only on
SE having nationwide
terminal
BB only through order matching
mechanism except “all or
none”
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PROCESS OF BUY-BACK – OPEN MARKET PURCHASE THROUGH BOOK-BUILDING METHOD
Special Resolution, if applicable
Board Resolution and Public Notice, if
applicable
Appointment of Merchant Banker
Opening of Escrow Account
Filing of copy of Public
Announcement with SEBI and
STX
Public Announcement
Decision for Buy-back
Opening of offer for Buy-back
Closure of offer for Buy-back
Opening of Special Account
Determination of Price
Verification and Acceptance / Rejection of securities
Payment to Securities holders
COMPANY
Extinguishment of Certificates
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AMENDMENTS IN BUY BACK
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119
Delisting of Securities
SEBI (Delisting of Equity Shares) Regulations, 2009
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120
WHAT IS DELISTING
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121
“Delisting” is totally the reverse of listing.
To delist means permanent removal of securities of a
listed company from a stock exchange. As a
consequence of delisting, the securities of that
company would no longer be tradeable at that stock
exchange.
DELISTING
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122
SALIENT FEATURES
Public shareholders have been defined as the holders of
equity shares other than the
a) Promoters and
b) holders of depository receipts issued overseas against
underlying shares.
Not be applicable to sick companies
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123
• The companies cannot delist their securities from the Exchanges
pursuant to buyback and preferential allotment.
• No shareholders approval, in case the company continues to remain
listed at any of the exchanges having Nationwide trading terminal i.e.
BSE and/ or NSE or any other Exchange specified in this behalf.
SALIENT FEATURES
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124
• The concept of Specified Date has been introduced, which shall not be
later than 30 working days from the date of the Public Announcement.
• The Special Resolution passed for the delisting giving exit option to the
shareholders will be valid for a period of 1 year within which the final
application will be required to be made to the exchange for delisting.
• Special Resolution by way of Postal Ballot
SALIENT FEATURES
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125
• Successful Exit Offer : Under the Regulations, to get delisted, post offer,
the Promoter holding should reach the higher of the following:
– 90% of total issued shares of that class; or
– (pre offer promoter holding +50% of the Offer Size), otherwise the offer
shall be deemed to have failed.
Promoters’ option of not accepting the Offer Price
Promoters/ PAC not allowed to participation in bidding:
SALIENT FEATURES
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126
TYPES OF DELISTING
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127
HOW TO DELIST
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128
Stock Brokers/Sub Brokers Regulation
SEBI (Stock Brokers/Sub Brokers) Regulation,1992
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INTENT
The Stock brokers plays an eminent role in the development of a capital market of any
country and likewise stringent and effective regulation of these market intermediaries
becomes essential. The so called Capital Market Regulator and watchdog SEBI plays
an effective role in regulating these Market Intermediaries and ensuring the
development of a healthy market.
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COVERAGE – SEBI Regulations
130
Through Stock Exchanges
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REGISTRATION
The Registration of Stock Brokers involve two way process:
131
Registration with Stock Exchanges
Registration with SEBI
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ELIGIBILITY
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Other Requirements
133
At the time of registration, Brokers are required to identify :
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VALIDITY OF REGISTRATION
134
Registration of Stock Brokers
is on Permanent Basis
until Surrendered or Suspended
for regulatory actions
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COMPLIANCES
Brokers are required to comply the rules and regulations of the following:
• Stock Exchanges
• SEBI
The compliances of both the authorities can be broadly divided into two parts:
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REGULAR COMPLIANCES
136
SEBI through Stock Exchanges regulates the activities of Stock Brokers to ensure Capital Market integrity and protection of the
interest of the Investors
SEBI GOVERNS:
Day to trading related compliances
Dealing with clients like KYC, Contract Notes, proper authorisation, disclosures,
maintenance of funds & securities.
Compliance with respect to terminals and employee’s on the terminals.
Maintenance of books & accounts and documents
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137
Maintenance of margin requirements Ensuring proper trading (Prevention of fraudulent and unfair transactions) No dealings with unregistered entities To comply with the advertisement guidelines Adherence to Prevention of Money Laundering Guidelines
RECENT Step of SEBI towards Investor Protection and transparency in Capital Markets :SEBI vide circular dated 2nd August 2011 has directed that the details of the transactions done on each trading day shall be sent by the Stock Exchanges to the investors, by the end of each trading day, through SMS and E-mail alerts
REGULAR COMPLIANCES
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EVENT BASED COMPLIANCES
Event based compliances are as follows:
Change in status and constitution
Change in Directors
138
RECENT CIRCULAR ISSUED BY SEBI:
SEBI vide circular dated 03.06.2011 has relaxed the procedural statutory requirements and simplified the restructuring of stock brokers as under:•The requirement of prior approval of SEBI in case of change in status and constitution has been done away with.•Now the stock brokers would only be required to obtain prior approval of Stock Exchanges and SEBI prior approval will only be required in case of Change in Control.
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INSPECTIONS AND AUDITS
• To ensure the proper working by Stock Brokers SEBI as well as Stock
Exchanges from time to time conducts Inspections and Audits of dealing of
stock brokers.
• Also to ensure self governance, SEBI has mandated for all stock brokers, an half
yearly voluntary audits of their business vide circular dated 22nd August, 2008 by
independent CA’s, CS’s & ICWA’s.
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LIABILITIES
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141
FUTP Regulations
SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating To Securities Market) Regulations, 2003
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INTENT
142
Stock Exchanges provides trading platform to a enormous number of buyers and
sellers who come to trade their shares at a fair price and volume discovery, based
on the market forces of demand and supply. However, there can be situations
where a mechanism can be designed to manipulate the stock market transactions in
order to obtain gains through fraudulent and manipulative manner. Thus, stringent
and effective regulations becomes necessary to be formed by the Capital Market
Regulator to protect the interest of the investors.
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MANNER OF DEALING
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ROLE OF SEBI
144
In case of any violation in the provisions of the regulations, Stock
Exchanges intimate the same to SEBI and the capital market
regulator thereof conducts investigation to protect the interest of
investors and securities market.
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LIABILITIES
145
The board may impose the following penalties in case of any violations:
acquired in violation of the regulations
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146
Merchant Bankers Regulations
SEBI (Merchant Bankers) Regulations, 1992
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WHO IS A MERCHANT BANKER
147
Who isWho is
Issue ManagementIssue Management
Engaged in Acting as
Manager, consultant and advisor
Manager, consultant and advisor
Either by making arrangement forEither by making arrangement for
Selling, Buying or Subscribing to Securities
Selling, Buying or Subscribing to Securities
Or rendering
Corporate advisory service in relation to such
issue management
Corporate advisory service in relation to such
issue management
OR
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ELIGIBILITY CRITERIA’S
148
• A body corporate other than a NBFC
• Adequate Infrastructure
• Should have minimum two experienced employees
• Conform to the Capital Adequacy Requirement
• His partner, director or principal officer should not be involved in any litigation
connected with the Securities Market.
• Should be a fit and proper person
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149
CAPITAL ADEQUACY REQUIREMENT
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150
CATEGORIES OF MERCHANT BANKER
Earlier Now
Category 1 – To carry on the business of Issue
Management, to act as advisor, consultant,
manager, underwriter, portfolio manager.
Category 1 – To carry on the business of Issue
Management, to act as advisor, consultant,
manager, underwriter, portfolio manager.
Category 2 – To act as adviser, consultant, co-
manager, underwriter,
portfolio manager
Category 3 – To act as underwriter, adviser,
consultant to an issue.
Category 4 – To act as consultant or advisors to
an issue.
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FEES FOR REGISTRATION
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AMENDMENTS
152
Date Amendments
7 Sept 2006 • Inserted definitions
• Change in Capital Adequacy requirements. Earlier requirements were given
for different categories
• Added conditions for registration as Merchant Banker
• Period of validity of certificate for 3 years
28 May 2007 Revised fees for filing draft offer document
31 March 2008 Revised fees for filing draft offer document
13 April 2010 • Merchant Banker may ensure market making in accordance with Chapter XA
of SEBI (ICDR) Regulations
• Merchant Banker shall underwrite 15% of issue size
• To submit complete particulars of acquisition made in pursuance of
underwriting or market making to the Board on quarterly basis
16 August 2011 Due diligence records to be maintained by merchant bankers in issue
management, takeover, buyback and delisting
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153
Registrar and Transfer Agent
SEBI (Registrars To An Issue And Share Transfer Agents)Regulations, 1993
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AppointedAppointed
To carry on following activities:To carry on following activities:
Collecting Collecting
applications from applications from
investors in respect investors in respect
of an issueof an issue
REGISTRAR TO AN ISSUE
154
REGISTRAR TO AN ISSUE
Keeping proper Keeping proper
record of applications record of applications
and monies receivedand monies receivedor paidor paid
a.a. Basis of allotment Basis of allotment of securities of securities
b.b. Finalising Finalising persons entitled persons entitled to allotment;to allotment;
c.c. Processing Processing allotment letters, allotment letters, and other and other documentsdocuments
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PersonPersonOn behalf of body corporate On behalf of body corporate
MaintainsMaintains
records of holders of records of holders of
securities and deals withsecurities and deals with
transfer and redemption of transfer and redemption of
its securities;its securities;
SHARE TRANSFER AGENT
155
SHARE TRANSFER AGENT
Division of body Division of body corporatecorporate
Performing similar activities Performing similar activities
ifif
Holders of its Holders of its
securitiessecurities ≥ 1 Lakh
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156
CATEGORIES
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157
CAPITAL ADEQUACY REQUIREMENT
≥ Net worthCapital
Adequacy requirement
NET WORTH
The Registrar to an Issue or a Share Transfer Agent, who was granted a Registration certificate, prior to the commencement of the second amendment in 2011, shall raise its networth to the said minimum within a period of three years
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VALIDITY OF CERTIFICATE
Certificate of initial
Registration granted
SHALL BE VALID FOR
5 YEARS
from the date of its issue
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159
FEES
OR OR
Particulars Category I Category II
Application of registration Rs. 10,000 Rs. 10,000
At the time of grant of certificate of initial
registration.
Rs. 4,00,000 Rs. 1,33,300
A registrar to an issue and share transfer
agent who has been granted a certificate
of permanent registration, to keep its
registration in force.
Rs. 1,50,000 Rs. 50,000
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AMENDMENTS
160
Date Amendments
17 Sept 1997 Registrar to an Issue not to act as such for an associate
5 Jan 1998 Criteria of fit and proper person
7 Sept 2006 • Inserted new definitions
• Added conditions for registration as Registrar and STA
5 July 2011 Initial registration shall be valid for 5 years
Grant of certificate of permanent registration
Revision of fees
16 August 2011 Networth requirement for Category I and Category II increased to Rs.
50,00,000 and Rs. 25,00,000 respectively.
Registrar and STA shall raise its networth within 3 years from such
commencement
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161
Pavan Kumar Vijay
Managing Director
Corporate Professionals Capital Private LimitedSEBI Registered Merchant Banker
Regn. No.: INM000011435D-28, South Extension -I,
New Delhi-110 049Ph: +91.11.40622200; FAX: +91.11.40622201
THANK YOU
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