Oct 12, 2004
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Informal Guidance
MANAGER
CORPORATION FINANCE DEPARTMENT
DIVISION OF CORPORATE RESTRUCTURING
Tel. (Board) : 22850451-56, 22880962-70(Extn. : 425)
email : amitk@sebi.gov.in
Fax : 22829520
CFD/DCR/AK/IG/ /2004
October 12, 2004
OCL India Ltd.,
B-47, Connaught Place,
New Delhi – 110 001.
Dear Sir,
Sub.:- Request for Informal Guidance under Securities and Exchange Board of India (Informal Guidance) Scheme, 2003.
This has reference to your letter dated 1/10/03 requesting for Informal Guidance under Securities and Exchange Board of India (Informal Guidance) Scheme, 2003 by OCL India Limited.
The request is examined as under;
In October 1996, OCL made a right issue of 18 lakhs Zero Coupon Convertible Debenture (ZCCD) to the shareholders of the Company. As per terms of offer, each ZCCD was automatically and compulsorily converted into one equity share of Rs.10/- on January 1, 1997. Further, each ZCCD had one detachable warrant attached thereto which entitles the holder thereof to apply for and seek allotment of one equity share of the Company. The company now proposed that an offer be made to the warrant holders for buy back of the entire 18,00,000 warrants. The issues are;
i) Whether the provisions of Section 77A or any other provision of Companies Act, 1956 (hereinafter referred to as "the Act") will be applicable to the buy back of ‘Warrants’?
ii) Whether the provisions of SEBI (Buy Back of Securities) Regulations, 1998 (hereinafter referred to as "the regulations") or any other Regulatory provision will be applicable to the proposed buy back of ‘Warrants’?
Section 77 A of the Act applies to buy-back of shares and "other specified securities". Explanation (a) at the end of the Section provides that "specified securities" includes Employees Stock Option or other securities as may be notified by Central Government from time to time. Since no securities have been notified by the Central Government so far, buy-backs of warrants are not covered by section 77A.
The regulations will also not apply to buy back of the warrants in this case, since section 77A itself is not applicable as clarified above. It may be noted that the regulations, which are made under section 77A of the Companies Act do not apply to transactions not covered under section 77A.
This view is confined to the applicability of section 77A of the Companies Act and the SEBI (Buy Back of Securities) Regulations, 1998, to the proposed transaction. We express no view on the applicability of "any other provision of the Companies Act" or "any other regulatory provision", since your request is vague to that extent.
This position is based on the representation made to the Department/ Division in your letter. Different facts or conditions might require a different result. This letter expresses the Departments/Division’s position on enforcement action only. It does not express decision of the Board on the questions presented. The guidance is based on the law existing as on 01st January, 2004.
Yours faithfully,
(AMIT KAPOOR)