In the matter of the Stock Exchange - Ahmedabad

Sep 15, 2005
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Orders : Orders of Corporatisation / Demutualisation Scheme

GAZETTE OF INDIA

EXTRA-ORDINARY

PART II - SECTION 3- SUB-SECTION (ii)

PUBLISHED BY AUTHORITY

SECURITIES AND EXCHANGE BOARD OF INDIA

NOTIFICATION

Mumbai, the 15th September, 2005

SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAI

 

ORDER UNDER SECTION 4B (6) READ WITH SECTION 4B (7) OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 IN THE MATTER OF THE STOCK EXCHANGE - AHMEDABAD (CORPORATISATION AND DEMUTUALISATION) SCHEME, 2005.

 

S. O.  1321  (E). 1.0 The Stock Exchange - Ahmedabad (hereinafter referred to as “ASE”), is an Association of Persons and a recognised stock exchange having its principal place of business at Kamdhenu Complex, Opposite   Sahjanand College, Panjarapole, Satellite, Ahmedabad- 380 015. It is required to be corporatised and demutualised in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as ‘SCRA’).

 

2.0       ASE, vide its letter dated January 30, 2005, submitted a scheme for its  corporatisation and demutualisation for approval to the Securities and Exchange Board of India (hereinafter referred to as the ‘SEBI’) in terms of sub-section (1) of section 4B of the SCRA. While the Scheme was under consideration, ASE, vide its letter dated March 9, 2005, informed that it has incorporated ‘Ahmedabad Stock Exchange Limited’ under the Companies Act, 1956 for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities as a recognised stock exchange, vide Certificate of Incorporation dated March 4, 2005, to succeed ASE. Thereafter, SEBI, vide its letter dated May 25, 2005, advised ASE to submit a revised scheme taking into account those provisions of the BSE (Corporatisation and Demutualisation) Scheme, 2005 which may be relevant and applicable to ASE.  

 

3.0       Accordingly, ASE, vide its letter dated June 10, 2005, submitted a revised Scheme for its corporatisation and demutualisation. SEBI made enquiries and obtained information from ASE through a meeting on June 24, 2005. Based on the discussions during the said meeting, ASE desired to submit a further revised scheme. 

 

4.0       Thereafter, ASE, vide its letter dated June 29, 2005, submitted a further revised Scheme for its corporatisation and demutualisation (hereinafter referred to as the ‘Scheme’) for approval to SEBI in accordance with the provisions of the SCRA.

 

5.0       The Scheme, inter alia, provides for the succession of ASE, being an Association of Persons, by ‘Ahmedabad Stock Exchange Limited’, a company incorporated under the Companies Act, 1956 for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities as a recognised stock exchange, segregation of ownership and management from the trading rights of the members, restriction on voting rights of shareholders who are also trading members, composition of the Governing Board etc. in accordance with the provisions of section 4B(6) of the SCRA, utilisation of assets and reserves and other matters required for the purpose of and in connection with the corporatisation and demutualisation of ASE.

 

 

6.0       Clause 7.3 of the Scheme submitted by ASE reads as under –

 

“The assets and liabilities of ASE shall be transferred to Ahmedabad Stock Exchange Limited at balance sheet value and balance in the Income & Expenditure Account of ASE shall be transferred as such to General Reserve Account of Ahmedabad Stock Exchange Limited.

 

In respect of the balance in the Capital account in the books of accounts of ASE, to the extent it represents the contribution made by past or present members as consideration for acquiring membership right, excluding the sum of Rs. 81 Lacs being forfeited Earnest Money Deposit and not representing any amount transferred from Income & Expenditure Account of ASE, as would be ascertained by the Statutory auditors of ASE, shall be credited to Share Capital Account and all the members of ASE on the record date shall be allotted equal number of equity shares of Re. 1/- each at par as fully paid up shares so as to exhaust such amount.

 

The residual amount in the Capital account after such allotment shall be transferred to capital reserve account in the books of accounts of Ahmedabad Stock Exchange Limited.

 

All earmarked funds, which were created for specific purposes by ASE, other reserves and/or other debit and credit balances, will be transferred under the same nomenclature in the books of accounts of Ahmedabad Stock Exchange Limited.

 

6.1       The said clause 7.3 of the Scheme essentially proposes allotment of shares out of assets / reserves, which is expressly prohibited under section 4B (3) of the SCRA , which reads as under –

“No scheme under sub-section (2) shall be approved by the Securities and Exchange Board of India if the issue of shares for a lawful consideration or provision of trading rights in lieu of membership card of the members of a recognised stock exchange or payment of dividends to members have been proposed out of any reserves or assets of that stock exchange”.

 

6.2       It is the spirit of section 4B (3) of SCRA that the assets and reserves of the exchange should not be used for the benefit or enrichment of the trading members at any point of time and should be used only for exchange operations. This is to ensure that the assets and reserves built from the support of the public system are used only for public purpose and that the Exchange continues to operate as an exchange. Such assets and reserves should also not be used for the benefit or enrichment of any particular section, for example the shareholders / stock brokers of the exchange.

 

6.3       Further, the said clause 7.3 is not necessary for or incidental to the purpose of and in connection with the corporatisation and demutualisation of ASE. Hence, the said clause 7.3 of the Scheme is hereby deleted.

 

7.0       SEBI, having considered the Scheme and on being satisfied that it would be in the interest of the trade and also in the public interest, hereby approves the Scheme sans the said clause 7.3 and with other minor modifications. The approved Scheme is enclosed as Annexure - A.

 

8.0       ASE shall ensure compliance with the Scheme within the time as specified in the Scheme and shall not do anything contrary to the provisions of Scheme and submit compliance report to SEBI in the manner as may be specified by SEBI.

9.0       SEBI reserves the right to amend, alter or modify the Scheme in the interest of the trade and the public interest and in furtherance of the objectives of the corporatisation and demutualisation of the stock exchange.

 

10.0   The Scheme shall come into effect on the day of its publication in the Official Gazette.

 

F. No. SEBI/MRD/  49400  /2005   

                 

                                                                             

                                                                                               

M. DAMODARAN

                                                                                                         CHAIRMAN

                                             SECURITIES AND EXCHANGE BOARD OF INDIA

 

 

 

Encl: Annexure - A


 


Annexure - A

 

THE STOCK EXCHANGE - AHMEDABAD (CORPORATISATION AND DEMUTUALISATION) SCHEME, 2005

 

1.         Title and Commencement

1.1        This Scheme shall be called The Stock Exchange - Ahmedabad (Corporatisation and Demutualisation) Scheme, 2005 (hereinafter referred to as “this Scheme”).

1.2        This Scheme shall have effect on its publication under sub-section (4) of section 4B of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as "SCRA").

1.3        The Stock Exchange - Ahmedabad (hereinafter referred to as “ASE”) shall be corporatised and demutualised in accordance with this Scheme on and from the Appointed Date as may be notified by the Securities and Exchange Board of India (hereinafter referred to as “SEBI”) in respect of ASE under section 4A of the SCRA:

Provided that the activities specified in the respective clauses of this Scheme shall be implemented as per the time schedule specified in those clauses.

 

2.         Definitions

In this Scheme, unless the context otherwise requires, -

2.1        Ahmedabad Stock Exchange Limited” (ASEL) means the company incorporated under section 12 of the Companies Act, 1956  vide certificate of incorporation dated March 4, 2005 for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities as a recognised stock exchange and to succeed ASE.

2.2        Due Date” means the date, as may be determined by the Governing Board of ASE, which shall not be later than 3 months from the date of publication of the Order under sub section (7) of section 4B of the SCRA.

2.3               Governing Board” means the Board of Directors of ASEL.

2.4               Member” means a person who is a member of ASE as per the register of members maintained by ASE under Rule 64 of the Rules, Bye-Laws and Regulations, 1957 of ASE.

2.5               Record Date” means the date, prior to the Due Date, fixed by the Governing Board of ASE for determining the Members who will be entitled to shares of ASEL pursuant to clause 4 of this Scheme.

2.6               Shareholder” means a person who holds any equity share(s) of ASEL.

2.7               The Stock Exchange - Ahmedabad” (ASE) means an unincorporated association of persons having its principal place of business at Kamdhenu Complex, Opposite Sahjanand College, Panjarapole, Satellite, Ahmedabad- 380 015, which has been recognised as a stock exchange by and under notification No. SRO 2945 dated 16th September,1957 and permanently recognised as a stock exchange by and under notification No. S.O. 107(E) vide F.No.: F.1/32/SE/80 dated 1st March, 1982 by the Central Government under the SCRA.   

2.8               Trading Member” means a stock broker of ASEL and registered with SEBI as such under the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992.

2.9               Words and expressions used and not defined in this Scheme but defined in the Securities and Exchange Board of India Act, 1992, the Depositories Act, 1996, the SCRA, the Companies Act, 1956, the rules and regulations made under these Acts or the Rules, Bye-Laws and Regulations, 1957 shall have the same meanings respectively assigned to them in the above mentioned Acts, rules, bye-laws and regulations.

 

3.         Governing Board

3.1        The Governing Board, on and from Due Date, shall be constituted in accordance with the provisions of the Articles of Association of ASEL in force from time to time:

Provided that -

(i)         the representation of Trading Members does not exceed one-fourth of the total strength of the Governing Board, and the remaining directors are appointed in the manner as may be specified by SEBI from time to time, and

(ii)        the Chief Executive, by whatever name called, is an ex-officio director.

3.2        Notwithstanding anything contained in clause 3.1, SEBI may nominate directors on the Governing Board as and when deemed fit.

 

4.         Allotment of Shares

4.1        Every Member or his nominee, as the case may be, (other than the Members who have subscribed to equity shares at the time of incorporation of ASEL) as on the Record Date shall be entitled to 10,000 fully paid-up equity shares of the face value of Re.1/- each for cash at par of ASEL.

4.2        Every Member or his nominee, as the case may be, who has more than one membership card as on the Record Date, shall be entitled to additional 10,000 fully paid-up equity shares of face value of Re.1/- each for cash at par for every additional membership card held by him

4.3        ASEL shall allot the equity shares to the entitled Members or their nominees, as the case may be, by the Due Date:

Provided that the allotment to a Member suspended by ASE or a Member whose membership is the subject matter of any proceedings before the court, tribunal or authority shall be held in abeyance till the suspension or legal proceedings continues, as the case may be.

4.4        The invitation to subscribe to, and the offer, issue and allotment of equity shares of ASEL pursuant to this clause shall not be considered as being an invitation, offer, issue or allotment to the public.

 

5.         Listing of Shares

ASEL may at any time list its securities on any recognised stock exchange.

 

6.         Transfer to ASEL

Pursuant to this Scheme, on and from the Due Date:

6.1               all assets, properties, undertakings, business, books, records, registers, funds, reserves, rights (including, in particular, intellectual property rights, leasehold rights, tenancy rights if any and all rights of nomination of former Members which have vested in ASE), powers, authorities, interests, privileges, exemptions, permissions, licenses, registrations and recognitions (including, in particular, the recognition of ASE as a recognized stock exchange under the SCRA) of or belonging to or in the possession or control of ASE or to which ASE may be entitled, including those held by any trustees in trust for ASE or for the Members  of ASE or  for the objects and purposes of ASE, and including those vested in or held by any committee of ASE, shall stand transferred to and shall vest in and shall be in the possession or control of and shall become the entitlement of ASEL, and ASEL shall have the same right, title and interest therein or thereto as ASE and such trustees or committees had immediately prior to the Due Date.

6.2               all obligations and liabilities of ASE shall stand transferred to and shall become obligations and liabilities of ASEL.

6.3               ASEL shall, in place and stead of ASE, become a party to, and shall be bound by and entitled to, all contracts, agreements and other instruments to which ASE is a party or by which ASE is bound or to which ASE is entitled, and the same may be enforced and acted upon by or against ASEL accordingly.

6.4               all notices, actions, claims and proceedings (including all legal, quasi legal, revenue, disciplinary and arbitration notices, actions and proceedings and including also disciplinary, suspension, default, delisting and other notices, actions and proceedings by ASE to or against the Members any companies and others) of, by or against ASE shall not abate and shall be deemed to be made, instituted or continued by or against ASEL in place and stead of ASE.

6.5               the employees of ASE shall become the employees of ASEL in place and stead of ASE on the same terms and conditions as existing immediately prior to the Due Date.

6.6               notices and circulars issued and acts done by the Governing Board of ASE shall, unless and until such notices and circulars are modified or rescinded by the Governing Board, continue to subsist in relation to ASEL and shall be deemed to have been issued and done by the Governing Board.

6.7               all resolutions passed and acts done by the Governing Board of ASE or general body of Members shall, unless and until modified or rescinded by Governing Board or general body of Shareholders of ASEL, as the case may be, continue to subsist in relation to ASEL and shall be deemed to have been passed and done by the Governing Board or general body of Shareholders of ASEL, as the case may be.

 

7.         Demutualisation

7.1        A Trading Member may or may not be a Shareholder.

7.2        A Shareholder may or may not be a Trading Member.

 

8.         Trading Rights

8.1        A Member, who is registered as a stock broker on the day preceding the Due Date, shall become a Trading Member on the Due Date.

8.2        A Member who is not registered as a stock broker on the day preceding the Due Date shall become a Trading Member on being registered as a stock broker under the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 within 3 months from the Due date.

8.3        After the Due Date, a person desirous of becoming a Trading Member shall be admitted if he complies with requirements and brings in specified fees and deposits as specified in the Rules, Bye-laws and Regulations of ASEL.

8.4        ASEL shall, for the purpose of admitting any person as a Trading Member, follow uniform standards in terms of capital adequacy, deposits, fees, etc. irrespective of mode of acquisition of trading right by that person:

Provided that different standards may be followed for admission of a person as a Trading Member who has acquired trading right by way of transmission.

8.5        A Trading Member may surrender his membership to ASEL in the manner specified in the Rules, Bye-laws and Regulations of ASEL.

8.6        Irrespective of the date or mode of acquisition of trading right, the Trading Members of ASEL shall have uniform rights and privileges:

Provided that ASEL may, with the prior approval of SEBI, grant additional privileges to those Trading Members who were Members on the day preceding the Due Date.

8.7        Trading Members of ASEL on the Due Date shall continue to have the same rights and privileges in respect of their clients and constituents and other members arising out of or under any act, omission or contract or law, notification, order, direction, etc. as had accrued to them while being Members on or before the Due Date.

8.8        Trading Members of ASEL shall be bound by all obligations and liabilities towards their clients and constituents, SEBI, ASE and other authorities or other persons arising out of or under any act, omission or contract or law, notification, order, direction, etc. while being Members on or before the Due Date.

 

9.         Shareholding Rights

9.1        ASEL shall ensure that at least 51% of its equity shares are held by public other than shareholders having trading rights in the manner and within the period prescribed in sub-section (8) of section 4B of the SCRA.

9.2        On and from the Appointed Date, ASEL shall ensure that public other than shareholders having trading rights continuously hold at least 51% of equity shares.

9.3        On and from Due Date, no Shareholder, who is a Trading Member of any recognised Stock Exchange, shall have voting rights (taken together with voting rights held by him and by persons acting in concert with him) exceeding 5% of the voting rights in ASEL.

 

10.        Dissolution of ASE

On and from the Due Date, ASE shall stand dissolved and ASEL shall be entitled to, and shall commence business and operations as the successor of ASE.

 

11.        Memorandum and Articles of Association, etc

11.1      The Rules, Bye-laws and Regulations of ASE on the day preceding the Due Date shall, unless contrary to or inconsistent with or excluded by this Scheme, apply to ASEL on and from the Due Date.

11.2      ASEL shall incorporate the provisions of this Scheme appropriately in its Memorandum and Articles of Association, Rules, Bye-Laws and Regulations on or before the Due Date.

11.3      Memorandum and Articles of Association, Rules, Bye-Laws and Regulations of ASEL may be amended after the Due Date in accordance with the applicable laws, provided that no such amendment is inconsistent with any provision of this Scheme.

 

 

12.        Transfer of Clearing and Settlement Functions

12.1            ASEL shall, within two years of the Due Date, subject to the prior approval of SEBI, transfer the duties and functions of its clearing house to a clearing corporation, recognised under SCRA.

12.2            Until the duties and functions of the clearing house are transferred as provided in clause 12.1, the clearing and settlement functions in relation to trading on ASEL shall be carried out by the clearing and settlement mechanism as used by ASE at present or in such other manner as the Governing Board may determine.

 

13.        Utilisation of Assets and Reserves

13.1      ASEL shall not do anything contrary to the provisions of section 4B (3) of the SCRA.

13.2      Without prejudice to the generality of the provisions in clause 13.1, ASEL shall not use the assets and reserves of ASE, as on the date of publication of this Scheme, transferred to it under clause 6.1 of this Scheme or the proceeds from disposal of such assets or the proceeds from disposal of successive species of assets acquired from the proceeds of disposal of such assets for any purpose other than discharging the current liabilities outstanding as on the date of publication of this Scheme or for the business operations of stock exchange.

 

14.        Compliance with this scheme

14.1      ASE and ASEL, as the case may be, shall ensure compliance with the provisions of this Scheme at all times and shall not do anything contrary to the provisions of this Scheme.

14.2      Without prejudice to the generality of the provisions in clause 14.1, ASE and ASEL, as the case may be, shall continuously comply with the provisions in clauses 3.1, 7, 8.3, 8.4, 8.5, 8.6, 9.2, 9.3, 11.3 and 13.

14.3      ASE and ASEL, as the case may be, shall report compliance with the provisions of this Scheme in such manner as may be required by SEBI from time to time.

 

15.        Removal of Difficulties

If any difficulty arises in giving effect to the provisions of this Scheme, SEBI may, at the written request of ASE or ASEL, as the case may be, relax any of the provisions of this Scheme.

 

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