Preliminaries about Share Capital Issue
Private Placement
- Sections 42 of Companies Act, 2013
• Rule 14 of the Companies [Prospectus and Allotment of Securities Rules], 2014
Definition of Private Placement
• Private Placement means an offer of securities or invitation to subscribe for securities. Offer to a select group of persons by a Company Other than by way of a Public Offer. Through Private Placement Offer Letter Offer/ Invitation to subscribe for shares Maximum 50 persons in one go/ 200 persons in aggregate in one financial year.
Excludes QIB’s [i.e. Qualified Institutional Buyers] and Employees being allotted shares under ESOP [Employees Stock Option Programmes or Employees Stock Option Schemes]
Minimum Value of Investment:-Investment size of not less than INR 20,000/- of face value of securities perperson
Mode of Payment By cheque or demand draft or any otherbanking channels
offer/invitation being made
• money should come from the account of the person
In case of joint holders,whose name appears first in the application form
• Details of such bank account to be maintained and preserved by the Company
Bar on making of fresh offer or invitation to subscribe for securities:-• unless allotment with respect to previous offer is completed
or if earlier offer or invitation is Private Placement Procedure withdrawn or abandoned
• Notice of Board meeting [seven clear days before the meeting]
• Convene and hold Board meeting
• Pass Board resolution approving private placement subject to approval by
members in the Members’ meeting vide special resolution
• Notice of Members’ meeting [twenty one clear days before the meeting]
• Explanatory Statement under section 102 of the Act to contain the
justification for arriving at the price [including premium amount, if any]
• Special resolution by members approving each offer/invitation
• Company to record the names of the persons to whom invitation or offer to be
made
• Company to prepare private placement offer letter in Form PAS-4
• Circulate the same to the persons entitled under the said offer within 30 days
of recording their names
• Company to maintain complete record of private placement offers in Form PAS-5
[Record of Private Placement offer to be kept by the Company]
• Company to file Form PAS-4 and PAS-5 with the Registrar of Companies along
with the necessary fees prescribed under Companies [Registration Offices and
Fees Rules], 2014 within 30 days of circulation of private placement offer
letter
• [Date of private placement offer letter shall be deemed to be the date of
circulation of private placement offer letter]
• In case of listed Company, file Form PAS-4 and PAS-5 with Securities and
Exchange Board of India [SEBI] within 30 days of circulation of private
placement offer letter
• Receive subscriptions
• Notice of Board meeting for allotment [seven clear days before the meeting]
• Convene and hold Board meeting
• Pass Board resolution approving allotment of shares pursuant to private
placement offer
• Allot shares [within 60 days of receipt of application money]
• If not allotted within 60 days, repay the same within 15 days from the end of
60 days
• If not repaid, pay interest @ 12 % p.a.
• If shares allotted, file PAS-3 [Return of allotment] including complete list
of shareholders [List of allottees] along with the full names, addresses, number
of securities, amount at which securities allotted etc., with the Registrar of
Companies [RoC] within 30 days of allotment
• Share certificates to issued
• Payment of stamp duty on share certificate to be made
• Money received under private placement offer to be kept in a separate account maintained with a scheduled bank and to be utilized for allotment of securities and/or repayment only and not for any other purpose- Allotment of securities under private placement
- • Allotment to be made within 60 days from the date of receipt of application money
- • If allotment not made within 60 days, Company to repay the application money within 15 days from the expiry of 60 days [i.e. maximum 75th day from the date of receipt of application money]
- • If money not repaid by the 75th day, pay interest @12 % p.a. from the 60th day
Penalty Provisions
If offer made or monies accepted in contravention to the provisions of section
42 and applicable rules-
Liable- Company, its promoters, its directors
Penalty- amount involved in the offer or INR 2 crores whichever is higher
Company to refund all the monies to the subscribers within 30 days of the
imposing of the penalty
Note
• Release of any public advertisement or use of any media, marketing or
distribution channels or appointment of an agent is not allowed
• Offer or invitation not in compliance with the provisions of Sections 42 and
applicable rules shall be treated as a public offer
• In case of offer or invitation for non-convertible debentures, previous
special resolution only one in a year for all the offers or invitation during
the year would suffice
• Secretarial Standards issued by the Institute of Company Secretaries of India
need to be adhered to in documentation and other procedures
________________________________________________________________
Highlights of Institutional Trading Platform(ITP):-
Opening of Institutional Trading Platform (ITP) would make Start ups beautiful,competitive and on its own Feet.Both BSE & NSE have opened this Platform.
Private Placement with prior approval of Stock Exchange is possible
Rights issue without renunciation is also possible.
To enable Promoters to Channelize Resources from Family, Relatives and Friends Securities are listed encourage QIP/QIB to Invest in the company. It is a very good idea to unlock the value of enterprise
- Company's incorporation period must be between 1 and 10years.
- Turnover must not exceed Rs.100Crore.
- Post Listing Equity Capital must not exceed Rs.25Crores.
- For listing on ITP plate form Help of Merchant Bankers, Underwriters and Market Makers is not required therefore without much expenses Company's Security Either Equity Share Capital or Convertible Bonds are listed. Based on the performance of the Company the Share would be traded on the Bourses.
- There would be no long Term Capital Gain Tax payable on transactions executed on the floor of Stock Exchange on which Securities Transaction Tax has been paid.
- Listing would provide an exit route to risk investors.
- At the same time would provide liquidity to the ESOP holding employees.
- The Shareholding would be in dematerialized Mode.
- Clause 42 of Listing agreement i.e Periodic Publication of Financial Results would be applicable
Past Listing History for Unlisted Companies:-
- Earlier SME Platform was Introduced the response was not up-to expectation. Therefore dependance of SME on Bank and Institutional Funds still continue.
- To improve upon shortcomings of SME in 2013 ITP Platform is introduced.
- As per SEBI' s Minutes of Meeting of June 2015 few more relaxations were given to attract Start ups to get listed.
- It needs more elobration whether Bank Finance to the Enterprise would be considered as Investment of Qualified Institutional Buyer(QIB).
Present Scenario:-
The Stock Markets are not attracting much Public Savings.And Savings at present are mainly deposited with Banks and Post offices.
With above relaxation only Starts Up would be benefited.
Still IPO's are not subscribing.
Unlocking Value of Family Enterprises:- Out of around Three Lac SME's only Handful 100 to 200 are only listed. That means the Companies which are financially sound are still dependent on Banks for their Funds requirement. Their Enterprise value are not unlocked.
Main procedure for Unlocking value is listing.
If One Clause of " Not more than 10years from the date of Incorporation is removed it would automatically encourage More Eligible Companies to apply for Listing.
Recalling old Golden Days:- Recall days of Reliance growth When Public has invested whole Heartedly , emptying their Pockets and creating a History of Investment in Single Enterprise. The Enterprise became an Example for the World.
At present only 9000 Companies are listed on NSE and BSE combined.
Whether more than 10years old Company is able to get Listed on this Platform? say Conditions Like Venture Capitals are Investing?
on ITP listing is without help of Merchant Banker?
25% of pre issue Share Capital is held by Qualified Institutional Buyer: Significance not clear?Whether Bank Finance is included in QIB's Investments?
A clarification on above lines would help in getting listed number of Enterprises.
Why BSE & NSE have not loaded above on their web site?
Due Diligence for Public Issue: The Lead Manager is required to submit Due Diligence Certificates at various stages of the transactions. Three Types of Due Diligence Business,Finance and Legal. Not only of the Company but also of Group Companies along-with Promoters. Detailed Scrutiny of Litigation s pending.
Compliance with SEBI(Issue of Capital and Disclosure Requirements) (ICDR)
SEBI(Prohibition of Insider Trading) Regulation 2015:- Any Scheme including ESOP must not be used as a tool for Insider Trading.
Requirements of Companies Act 2013 & Companies Rules 2014in respect of ESOPs:-
Employees under a Scheme are defined and prescribed under Rule 12(1) read with Section 2(37)& Sec.197(7)of the Companies Act Excluding Independent Directors, Promoters of Promoter Group,Directors who hold directly or indirectly more than 10% of outstanding Equity Shares.
Board Resolution >Special Resolution:Determination of Exercise Price and operation of Scheme through Trust Mechanism.
ESOPs Requirement of Income Tax Act:- Determination of Fair Market value (FMV) for this purpose. For Unlisted Companies FMV depends upon Sec.17(2) & Rule 3(8) The value must be derived by SEBI Registered Merchant Banker within 180 days before the last date of Exercising of the option.
________________________________________________________________
De-listing of Shares:-
SEBI permission is essential.
Reverse Book Building is a process where Shareholders offer their Shares at a price they think is right.
In the case of delisting offer the Company sets a price and shareholders are given a choice to take it or leave it at that price
________________________________________________________________
InvITs, allow trusts to invest in two-level SPV (special purpose vehicle).
10.To reduce the mandatory sponsor holding in InvIT to 10 per cent of the total units of such units on a post-issue basis for a period of three years, from the current requirement of 25 per cent.
11.It may lead to sponsors putting money out of their own pocket in the InvIT to maintain the required 25 per cent stake.
_____________________________________________
Poor Response from Institutional investors:-. Proved to be a tough nut to crack. Institutional investors are an informed lot and companies need to respect that,. A lukewarm response from institutional investors is often looked upon as
I invite Reader's suggestion on the above: Alternatively on Mobile no.7228805981:ashok.agarwal8@gmail.com
The Stock Markets are not attracting much Public Savings.And Savings at present are mainly deposited with Banks and Post offices.
With above relaxation only Starts Up would be benefited.
Still IPO's are not subscribing.
Unlocking Value of Family Enterprises:- Out of around Three Lac SME's only Handful 100 to 200 are only listed. That means the Companies which are financially sound are still dependent on Banks for their Funds requirement. Their Enterprise value are not unlocked.
Main procedure for Unlocking value is listing.
If One Clause of " Not more than 10years from the date of Incorporation is removed it would automatically encourage More Eligible Companies to apply for Listing.
Recalling old Golden Days:- Recall days of Reliance growth When Public has invested whole Heartedly , emptying their Pockets and creating a History of Investment in Single Enterprise. The Enterprise became an Example for the World.
At present only 9000 Companies are listed on NSE and BSE combined.
Whether more than 10years old Company is able to get Listed on this Platform? say Conditions Like Venture Capitals are Investing?
on ITP listing is without help of Merchant Banker?
25% of pre issue Share Capital is held by Qualified Institutional Buyer: Significance not clear?Whether Bank Finance is included in QIB's Investments?
A clarification on above lines would help in getting listed number of Enterprises.
Why BSE & NSE have not loaded above on their web site?
Due Diligence for Public Issue: The Lead Manager is required to submit Due Diligence Certificates at various stages of the transactions. Three Types of Due Diligence Business,Finance and Legal. Not only of the Company but also of Group Companies along-with Promoters. Detailed Scrutiny of Litigation s pending.
Compliance with SEBI(Issue of Capital and Disclosure Requirements) (ICDR)
SEBI(Prohibition of Insider Trading) Regulation 2015:- Any Scheme including ESOP must not be used as a tool for Insider Trading.
Requirements of Companies Act 2013 & Companies Rules 2014in respect of ESOPs:-
Employees under a Scheme are defined and prescribed under Rule 12(1) read with Section 2(37)& Sec.197(7)of the Companies Act Excluding Independent Directors, Promoters of Promoter Group,Directors who hold directly or indirectly more than 10% of outstanding Equity Shares.
Board Resolution >Special Resolution:Determination of Exercise Price and operation of Scheme through Trust Mechanism.
ESOPs Requirement of Income Tax Act:- Determination of Fair Market value (FMV) for this purpose. For Unlisted Companies FMV depends upon Sec.17(2) & Rule 3(8) The value must be derived by SEBI Registered Merchant Banker within 180 days before the last date of Exercising of the option.
________________________________________________________________
De-listing of Shares:-
SEBI permission is essential.
Reverse Book Building is a process where Shareholders offer their Shares at a price they think is right.
In the case of delisting offer the Company sets a price and shareholders are given a choice to take it or leave it at that price
________________________________________________________________
- Sebi has lined up Relaxations to its norms for REITs (Real Estate Investment Trusts) andInvITs (Infrastructure Investment Trusts)Regulations more attractive as follows:-
- To have up to five sponsors,
- Allow up to 20 per cent investment in under-construction projects
- Rationalise requirements under Related Party Transactions, under which approval of 60 per cent unit-holders apart from related parties, is required for passing a related party transaction.
- Further, approval is required of 75 per cent unitholders, apart from related parties, for passing special resolutions such as change in investment manager, investment strategy and delisting of units.
InvITs, allow trusts to invest in two-level SPV (special purpose vehicle).
- SPV to invest in other SPVs, thus allowing InvIT to invest in a holding company which subsequently holds stake in SPVs.
10.To reduce the mandatory sponsor holding in InvIT to 10 per cent of the total units of such units on a post-issue basis for a period of three years, from the current requirement of 25 per cent.
11.It may lead to sponsors putting money out of their own pocket in the InvIT to maintain the required 25 per cent stake.
_____________________________________________
a sign of weak fundamentals and low prospects post-listing, though there have been exceptions in the past.
Institutional, a category that comprises foreign institutional investors, mutual funds, insurance
companies and banks among others.
________________________________________________________ I invite Reader's suggestion on the above: Alternatively on Mobile no.7228805981:ashok.agarwal8@gmail.com
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