SECURITIES AND EXCHANGE BOARD OF INDIA
(ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS)
REGULATIONS, 2009
THE GAZETTE OF INDIA
EXTRAORDINARY
PART III – SECTION 4
PUBLISHED BY AUTHORITY
NEW DELHI, AUGUST 26, 2009
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, 26th August, 2009
SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF
CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009
No. LAD-NRO/GN/2009-10/15/174471.
In exercise of the powers conferred by section 30 of the Securities and
Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the
following regulations, namely:-
PRELIMINARY
Short title and commencement.
1. (1) These regulations may be called the Securities and Exchange Board of
India (Issue of Capital and Disclosure Requirements) Regulations, 2009.
(2) They shall come into force on the date of their publication in the
Official Gazette.
Definitions.
2. (1) In these regulations, unless the context otherwise requires:
(a)
“Act” means the
Securities and Exchange Board of India Act, 1992 (15 of 1992);
(b)
“advertisement”
includes notices, brochures, pamphlets, show cards, catalogues, hoardings,
placards, posters, insertions in newspaper, cover pages of offer documents,
pictures and films in any print media or electronic media, radio, television
programme;
(c)
“anchor investor" means a qualified institutional buyer an
application for a value of ten crore rupees or more in a public issue made
through the book building process in accordance with these regulations;
(d)
“Application
Supported by Blocked Amount (ASBA)” means 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;
(e)
“Board” means the
Securities and Exchange Board of India established under section 3 of the Act;
(f)
“book building”
means a process undertaken to elicit demand and to assess the price for
determination of the quantum or value of specified securities or Indian
Depository Receipts, as the case may be, in accordance with these regulations;
(g)
“book runner”
means a merchant banker appointed by the issuer to undertake the book building
process;
(h)
“composite issue”
means an issue of specified securities by a listed issuer on public-cum-rights
basis, wherein the allotment in both public issue and rights issue is proposed
to be made simultaneously;
(i)
“control” shall
have the same meaning as assigned to it under clause (c) of sub-regulation (1)
of regulation 2 of the Securities and Exchange Board of India (Substantial
Acquisitions of Shares and Takeovers) Regulations, 1997;
(j)
“convertible debt
instrument” means an instrument which creates or acknowledges indebtedness and
is convertible into equity shares of the issuer at a later date at or without
the option of the holder of the instrument, whether constituting a charge on
the assets of the issuer or not;
(k)
[1][“convertible
security” means a security which is convertible into or exchangeable with
equity shares of the issuer at a later date, with or without the option of the
holder of the security and includes convertible debt instrument and convertible
preference shares;]
(l)
“designated stock
exchange” means a recognised stock exchange in which securities of an issuer
are listed or proposed to be listed and which is chosen by the issuer as a
designated stock exchange for the purpose of a particular issue of specified
securities under these regulations:
Provided that where one or more of such stock
exchanges have nationwide trading terminals, the issuer shall choose one of
them as the designated stock exchange:
Provided further that subject to the
provisions of this clause, the issuer may choose a different recognised stock
exchange as a designated stock exchange for any subsequent issue of specified
securities under these regulations;
(m) “employee” means a permanent and full-time employee of
the issuer, working in India or abroad or a director of the issuer, whether
whole time or part time and does not include promoters and an immediate
relative of the promoter (i.e., any spouse of that person, or any parent,
brother, sister or child of the person or of the spouse);
(n)
“further public
offer” means an offer of specified securities by a listed 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 a listed issuer;
(o)
“green shoe
option” means an option of allotting equity shares in excess of the equity
shares offered in the public issue as a post-listing price stabilizing
mechanism;
(p)
“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;
(q)
“issue size”
includes offer through offer document and promoters’ contribution;
(r)
“issuer” means
any person making an offer of specified securities;
(s)
“key management
personnel” means the officers vested with executive powers and the officers at
the level immediately below the board of directors of the issuer and includes
any other person whom the issuer may declare as a key management personnel;
(t)
“listed issuer”
means an issuer whose equity shares are listed in a recognised stock exchange;
(u)
“net offer to
public” means an offer of specified securities to the public but does not
include reservations;
(v)
“net worth” means
the aggregate of the paid up share capital, share premium account, and reserves
and surplus (excluding revaluation reserve) as reduced by the aggregate of miscellaneous expenditure (to the extent not
adjusted or written off) and the debit balance of the profit and loss account;
(w) “non institutional investor” means an investor other
than a retail individual investor and qualified institutional buyer;
(x)
“offer document”
means a red herring prospectus, prospectus or shelf prospectus and information
memorandum in terms of section 60A of the Companies Act, 1956 in case of a
public issue and letter of offer in case of a rights issue;
(y)
"offer
through offer document” means net offer to public and reservations;
(z)
“preferential
issue” means an issue of specified securities by a listed issuer to any select
person or group of persons on a private placement basis and does not include an
offer of specified securities made through a public issue, rights issue, bonus
issue, employee stock option scheme, employee stock purchase scheme or
qualified institutions placement or an issue of sweat equity shares or
depository receipts issued in a country outside India or foreign securities;
(za) “promoter” includes:
(i)
the person or
persons who are in control of the issuer;
(ii)
the person or
persons who are instrumental in the formulation of a plan or programme pursuant
to which specified securities are offered to public;
(iii)
the person or
persons named in the offer document as promoters:
Provided that a
director or officer of the issuer or a person, if acting as such merely in his
professional capacity, shall not be deemed as a promoter:
Provided
further that a financial institution, scheduled bank, foreign institutional
investor and mutual fund shall not be deemed to be a promoter merely by virtue
of the fact that ten per cent. or more of the equity share capital of the
issuer is held by such person;
Provided
further that such financial institution, scheduled bank and foreign
institutional investor shall be treated as promoter for the subsidiaries or
companies promoted by them or for the mutual fund sponsored by them;
(zb) “promoter group” includes:
(i)
the promoter;
(ii)
an immediate
relative of the promoter (i.e., any spouse of that person, or any parent,
brother, sister or child of the person or of the spouse); and
(iii)
in case promoter
is a body corporate:
(A) a subsidiary or holding company of such body
corporate;
(B) any body corporate in which the promoter holds ten per
cent. or more of the equity share capital or which holds ten per cent. or more
of the equity share capital of the promoter;
(C) any body corporate in which a group of individuals or
companies or combinations thereof which hold twenty per cent. or more of the
equity share capital in that body corporate also holds twenty per cent. or more
of the equity share capital of the issuer; and
(iv) in case the promoter is an individual:
(A) any body corporate in which ten per cent. or more of
the equity share capital is held by the promoter or an immediate relative of
the promoter or a firm or Hindu Undivided Family in which the promoter or any
one or more of his immediate relative is a member;
(B) any body corporate in which a body corporate as
provided in (A) above holds ten per cent. or more, of the equity share capital;
(C) any Hindu Undivided Family or firm in which the
aggregate shareholding of the promoter and his immediate relatives is equal to
or more than ten per cent. of the total; and
(v)
all persons whose
shareholding is aggregated for the purpose of disclosing in the prospectus
under the heading "shareholding of the promoter group":
Provided that a
financial institution, scheduled bank, foreign institutional investor and
mutual fund shall not be deemed to be promoter group merely by virtue of the
fact that ten per cent. or more of the equity share capital of the issuer is
held by such person:
Provided further
that such financial institution, scheduled bank and foreign institutional
investor shall be treated as promoter group for the subsidiaries or companies
promoted by them or for the mutual fund sponsored by them;
(zc) “public issue” means an initial public offer or
further public offer;
(zd) “qualified institutional buyer” means:
(i)
a mutual fund,
venture capital fund and foreign venture capital investor registered with the Board;
(ii)
a foreign
institutional investor and sub-account (other than a sub-account which is a
foreign corporate or foreign individual), registered with the Board;
(iii)
a public
financial institution as defined in section 4A of the Companies Act, 1956;
(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 Insurance Regulatory and Development Authority;
(viii)
a provident fund
with minimum corpus of twenty five crore rupees;
(ix)
a pension fund
with minimum corpus of twenty five crore rupees;
(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)
[2][insurance funds
set up and managed by army, navy or air force of the Union of India;]
(ze) “retail individual investor” means an investor who
applies or bids for specified securities for a value of not more than one lakh
rupees;
(zf) “retail individual shareholder” means a shareholder of
a listed issuer, who:
(i)
as on the date
fixed for the purpose of determining shareholders eligible for reservation in
terms of regulation 41 of these regulations, is holding equity shares which, on
the basis of the closing price of the equity shares on the recognised stock
exchange in which highest trading volume in
respect of the equity shares of the issuer was recorded as on the
previous day, are worth up to one lakh rupees; and
(ii)
applies or bids
for specified securities for a value of not more than one lakh rupees;
(zg) “rights issue” means an offer of specified securities
by a listed issuer to the shareholders of the issuer as on the record date
fixed for the said purpose;
(zh) “Schedule” means schedule annexed to these
regulations;
(zi)
“Self Certified
Syndicate Bank” means a banker to an issue registered with the Board, which
offers the facility of Application Supported by Blocked Amount;
(zj) “specified securities" means equity shares and
convertible securities;
(zk) “stabilising agent” means a merchant banker who is
responsible for stabilising the price of equity shares under a green shoe
option, in terms of these regulations;
(zl)
“syndicate
member” means an intermediary registered with the Board and who is permitted to
carry on the activity as an underwriter;
(zm) “unlisted issuer” means an issuer which is not a
listed issuer.
(2) All other words and expressions used but not defined
in these regulations, but defined in the Act or the Companies Act, 1956, the
Securities Contracts (Regulation) Act, 1956, the Depositories Act, 1996 and/or
the rules and regulations made thereunder shall have the same meaning as respectively
assigned to them in such Acts or rules or regulations or any statutory
modification or re-enactment thereto, as the case may be.
Applicability of the regulations.
3. Unless
otherwise provided, these regulations shall apply to the following:
(a)
a public issue;
(b)
a rights issue,
where the aggregate value of specified securities offered is fifty lakh rupees
or more;
(c)
a preferential
issue;
(d)
an issue of bonus
shares by a listed issuer;
(e)
a qualified
institutions placement by a listed issuer;
(f)
an issue of Indian
Depository Receipts.
COMMON
CONDITIONS FOR PUBLIC ISSUES AND RIGHTS ISSUES
General conditions.
4. (1) Any
issuer offering specified securities through a public issue or rights issue
shall satisfy the conditions of this Chapter at the time of filing draft offer
document with the Board (unless stated otherwise in this Chapter) and at the
time of registering or filing the final offer document with the Registrar of
Companies or designated stock exchange, as the case may be.
(2) No issuer shall make a public issue or rights issue of
specified securities:
(a)
if the issuer,
any of its promoters, promoter group or directors or persons in control of the
issuer are debarred from accessing the capital market by the Board;
(b)
if any of the
promoters, directors or persons in control of the issuer was or also is a
promoter, director or person in control of any other company which is debarred
from accessing the capital market under any order or directions made by the
Board;
(c)
if the issuer of
convertible debt instruments is in the list of wilful defaulters published by
the Reserve Bank of India or it is in default of payment of interest or
repayment of principal amount in respect of debt instruments issued by it to
the public, if any, for a period of more than six months;
(d)
unless it has
made an application to one or more recognised stock exchanges for listing of
specified securities on such stock exchanges and has chosen one of them as the
designated stock exchange:
Provided that in case of an
initial public offer, the issuer shall make an application for listing of the
specified securities in at least one recognised stock exchange having
nationwide trading terminals;
(e)
unless it has
entered into an agreement with a depository for dematerialisation of specified
securities already issued or proposed to be issued;
(f)
unless
all existing partly paid-up equity shares of the issuer have either been fully
paid up or forfeited;
(g)
unless
firm arrangements of finance through verifiable means towards seventy five per
cent. of the stated means of finance, excluding the amount to be raised through
the proposed public issue or rights issue or through existing identifiable internal accruals, have been made.
Appointment of merchant banker and other
intermediaries.
5. (1) The issuer shall appoint one or more
merchant bankers, at least one of whom shall be a lead merchant banker and
shall also appoint other intermediaries, in consultation with the lead merchant
banker, to carry out the obligations relating to the issue.
(2) The issuer shall, in consultation with the lead
merchant banker, appoint only those intermediaries which are registered with
the Board.
(3) Where the issue is managed by more than one merchant
banker, the rights, obligations and responsibilities, relating inter alia to disclosures, allotment,
refund and underwriting obligations, if any, of each merchant banker shall be
predetermined and disclosed in the offer document as specified in Schedule I.
(4) The lead merchant banker shall, only after
independently assessing the capability of other intermediaries to carry out
their obligations, advise the issuer on their appointment.
(5) The issuer shall enter into an agreement with the lead
merchant banker in the format specified in Schedule
II and with other intermediaries as required under the respective
regulations applicable to the intermediary concerned:
Provided that such agreements may include such
other clauses as the issuer and the intermediary may deem fit without
diminishing or limiting in any way the liabilities and obligations of the
merchant bankers, other intermediaries and the issuer under the Act, the
Companies Act, 1956, the Securities Contracts (Regulation) Act, 1956, the
Depositories Act, 1996 and the rules and regulations made thereunder or any
statutory modification or statutory enactment thereof:
Provided further that in case of ASBA process,
the issuer shall take cognisance of the deemed agreement of the issuer with
Self Certified Syndicate Banks.
(6) An issuer shall, in case of an issue made through the
book building process, appoint syndicate members and in the case of any other
issue, appoint bankers to issue, at all mandatory collection centres as
specified in Schedule III and such
other collection centres as it may deem fit.
(7) The issuer shall appoint a registrar which has
connectivity with all the depositories:
Provided that if issuer itself is a registrar
to an issue registered with the Board, then another registrar to an issue shall
be appointed as registrar to the issue:
Provided further that the lead merchant banker
shall not act as a registrar to the issue in which it is also handling the post
issue responsibilities.
Explanation:
For the purpose of this regulation, in case of a book built issue, the lead
merchant banker appointed by the issuer shall act as the lead book runner.
Filing of offer document.
6. (1) No issuer shall make,
(a)
a public
issue; or
(b)
a rights
issue, where the aggregate value of the specified securities offered is fifty
lakh rupees or more,
unless a draft offer document,
along with fees as specified in Schedule IV,
has been filed with the Board through the lead merchant banker, at least thirty
days prior to registering the prospectus, red herring prospectus or shelf
prospectus with the Registrar of Companies or filing the letter of offer with
the designated stock exchange, as the case may be.
(2)
The
Board may specify changes or issue observations, if any, on the draft offer
document within thirty days from the later of the following dates:
(a)
the date
of receipt of the draft offer document under sub-regulation (1); or
(b)
the date
of receipt of satisfactory reply from the lead merchant bankers, where the
Board has sought any clarification or additional information from them; or
(c)
the date
of receipt of clarification or information from any regulator or agency, where
the Board has sought any clarification or
information from such regulator or agency; or
(d)
the date
of receipt of a copy of in-principle approval letter issued by the recognised
stock exchanges.
(3)
If the
Board specifies changes or issues observations on the draft offer document, the
issuer and lead merchant banker shall carry out such changes in the draft offer
document and comply with the observations issued by the Board before
registering the prospectus, red-herring prospectus or shelf prospectus, as the
case may be, with the Registrar of Companies or filing the letter of offer with
the designated stock exchange.
(4)
The
issuer shall, simultaneously while registering the prospectus, red herring
prospectus or shelf prospectus with the Registrar of Companies or filing the
letter of offer with the designated stock exchange or
before the opening of the issue, file a copy thereof with the Board through the
lead merchant banker.
(5)
The lead
merchant banker shall, while filing the offer document with the Board in terms
of sub-regulation (1) and
sub-regulation (4), file a copy of such
document with the recognised stock exchanges where the specified
securities are proposed to be listed.
(6)
The
offer document filed with the Board
under this regulation shall also be furnished to the Board in a soft copy in
the manner specified in Schedule V.
In-principle approval from recognised stock exchanges.
7. The issuer shall obtain in-principle approval
from recognised stock exchanges as follows:
(a)
in case
of an initial public offer, from all the recognised stock exchanges in which
the issuer proposes to get its specified securities listed; and
(b)
in case
of a further public offer and rights issue:
(i)
where
the specified securities are listed only on recognised stock exchanges having
nationwide trading terminals, from all such stock exchanges;
(ii)
where
the specified securities are not listed on any recognised stock exchange having
nationwide trading terminals, from all the stock exchanges in which the
specified securities of the issuer are proposed to be listed;
(iii) where the specified securities are listed on
recognised stock exchanges having nationwide trading terminals as well as on
the recognised stock exchanges not having nationwide trading terminals, from
all recognised stock exchanges having nationwide trading terminals.
Documents to be submitted before opening of the issue.
8. (1) The lead merchant bankers shall submit
the following to the Board along with the draft offer document:
(a)
a copy of the
agreement entered into between the issuer and the lead merchant bankers;
(b)
a copy of
inter-se allocation of responsibilities of each merchant banker, in case the
issue is managed by more than one merchant banker;
(c)
a due diligence
certificate as per Form A of Schedule
VI;
(d)
in case of an
issue of convertible debt instruments, a due diligence certificate from the
debenture trustee as per Form B of
Schedule VI;
(e)
a certificate in the format specified in Part D of Schedule VII,
confirming compliance of the conditions mentioned therein.
(2) The lead merchant bankers shall submit the following
documents to the Board after issuance of observations by the Board or after
expiry of the period stipulated in sub-regulation (2) of regulation 6 if the
Board has not issued observations:
(a)
a statement
certifying that all changes, suggestions and observations made by the Board
have been incorporated in the offer document;
(b)
a due diligence
certificate as per Form C of Schedule VI, at the time of registering the
prospectus with the Registrar of Companies;
(c)
a copy of the
resolution passed by the board of directors of the issuer for allotting
specified securities to promoters towards amount received against promoters’
contribution, before opening of the issue;
(d)
a certificate
from a Chartered Accountant, before opening of the issue, certifying that
promoters’ contribution has been received in accordance with these regulations,
accompanying therewith the names and addresses of the promoters who have
contributed to the promoters’ contribution and the amount paid by each of them
towards such contribution;
(e)
a due diligence
certificate as per Form D of Schedule VI, immediately before the opening of
the issue, certifying that necessary corrective action, if any, has been taken;
(f)
a due diligence
certificate as per Form E of Schedule VI, after the issue has opened but
before it closes for subscription.
(3) The issuer shall, at the time of filing draft offer
document with the recognised stock exchange where the specified securities are
proposed to be listed, submit the Permanent Account Number, bank account number
and passport number of its promoters to such stock exchange.
Draft offer document to be made public.
9. (1) The draft offer document filed with
the Board shall be made public, for comments, if any, for a period of at least
twenty one days from the date of such filing, by hosting it on the websites of
the Board, recognised stock exchanges where specified securities are proposed
to be listed and merchant bankers associated with the issue.
(2) The lead merchant bankers shall, after expiry of the
period stipulated in sub-regulation (1), file with the Board a statement giving
information of the comments received by them or the issuer on the draft offer
document during that period and the consequential changes, if any, to be made
in the draft offer document.