Annexure - A
THE HYDERABAD STOCK EXCHANGE LIMITED (CORPORATISATION AND DEMUTUALISATION) SCHEME, 2005
1. Title and Commencement
1.1 This Scheme shall be called The Hyderabad Stock Exchange Limited (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 Hyderabad Stock Exchange Limited (hereinafter referred to as "HSEL") 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 HSEL under Section 4A of 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 "Due Date" means the date, as may be determined by the Governing Board which shall not be later than 3 months from the date of publication of the order under sub-section (7) of section 4B of SCRA.
2.2 "Governing Board" means the Board of Directors of HSEL.
2.3 "Member" means a person who is a member of HSEL on the day preceding the date of re-registration as per the Register of Members maintained by it.
2.4 “Shareholder" means a person who holds any equity share(s) of HSEL.
2.5 “The Hyderabad Stock Exchange Limited” (HSEL) means the company limited by guarantee registered under the Companies Act, 1956, having its principal place of business at 6-3-654, Somajiguda, Hyderabad-82, and recognised as a Stock Exchange by the Central Government under SCRA as a Stock Exchange on 29.09.1958 and subsequently granted permanent recognition with effect from 29.09.1983 and which shall be re-registered as a company limited by shares pursuant to clause 3 of this Scheme.
2.6 “Trading Member” means a stock broker of HSEL and registered with SEBI as such under the SEBI (Stock Brokers and Sub-brokers) Regulations, 1992.
2.7 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, rules and regulations made under these Acts, the Memorandum and Articles of Association, Rules, Bye-Laws and Regulations of HSEL shall have the same meanings respectively assigned to them in the above mentioned Acts, the Memorandum and Articles of Association, Rules, Bye-laws and Regulations.
3. Re-Registration
3.1 HSEL shall re-register itself before the Due Date as a company limited by shares under section 12 of the Companies Act, 1956 in the name and style of “The Hyderabad Stock Exchange Limited” in accordance with section 32 of the Companies Act, 1956.
3.2 The Members, as may be identified by HSEL, shall each subscribe to and pay for 10,000 fully paid-up equity shares of the face value of Re.1/- each for cash at par of HSEL for the purpose of its re-registration.
4. Governing Board
4.1 The first Governing Board of HSEL on re-registration shall comprise of Directors as are named as first directors in the Articles of Association of HSEL, subject to the condition that the representatives of the Members do not exceed one-fourth of the total strength of the Governing Board.
4.2 The Governing Board, on and from Due Date, shall be constituted in accordance with the provisions of the Articles of Association of HSEL 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.
4.3 Notwithstanding anything contained in Clause 4.2, SEBI may nominate directors on the Governing Board as and when deem fit.
5. Allotment of Shares
5.1 Every Member or his nominee, as the case may be, (other than the members who have subscribed to equity shares pursuant to clause 3.2) shall be entitled to 10,000 fully paid-up equity shares of the face value of Re.1/- each for cash at par of HSEL.
5.2 HSE shall allot the equity shares to the entitled Members or their nominees, as the case may be, as referred to in clause 5.1 by the Due Date:
Provided that the allotment of shares to a Member suspended by HSEL shall be kept in abeyance till the suspension continues;
Provided further that the allotment of shares in respect of deceased and defaulter members shall be made on fulfilment of all requisite formalities.
5.3 The invitation to subscribe to, and the offer, issue and allotment of equity shares of HSEL pursuant to this clause shall not be considered as being an invitation, offer, issue or allotment to the public.
6. Listing of Shares
HSEL may at any time list its securities on any recognised stock exchange.
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 Memorandum and Articles of Association, Rules, Bye-laws and Regulations of HSEL.
8.4 HSEL 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 of HSEL in the manner specified in the Memorandum and Articles of Association, Rules, Bye-laws and Regulations of HSEL.
8.6 Irrespective of the date or mode of acquisition of trading right, the Trading Members shall have uniform rights and privileges.
Provided that HSEL may, with the prior approval of SEBI, grant additional privileges to those Trading Members who were Members on the day preceding the re-registration.
8.7 Trading Members 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 trading on HSEL before the Due Date.
8.8 Trading Members shall be bound by all obligations and liabilities towards their clients and constituents, SEBI, HSEL and other authorities or other persons arising out of or under any act, omission or contract or law, notification, order, direction, etc. while trading on HSEL before the Due Date.
9. Shareholding Rights
9.1 On and from Due Date, no Shareholder, who is a Trading Member, 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 HSEL.
9.2 HSEL shall ensure that atleast 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 SCRA.
9.3 On and from the Appointed Date, HSEL shall ensure that public other than shareholders having trading rights continuously hold at least 51% of equity shares.
10. Memorandum and Articles of Association, etc
10.1 Memorandum and Articles of Association, Rules, Bye-Laws and Regulations of HSEL on the day preceding the Due Date shall, unless contrary to or inconsistent with or excluded by this Scheme, apply to it on and from the Due Date.
10.2 HSEL 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.
10.3 Memorandum and Articles of Association, Rules, Bye-laws and Regulations of HSEL may be amended after the Due Date in accordance with the applicable laws, provided that no such amendment is inconsistent with any provisions of this Scheme.
11. Transfer of Clearing and Settlement Functions
11.1 HSEL shall, within two years from 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.
11.2 Until the duties and functions of the clearing house are transferred as provided in clause 11.1, the clearing and settlement functions in relation to trading on HSEL shall be carried out by the clearing and settlement mechanism as used by HSEL at present, or in such other manner as the Governing Board may determine.
12. Utilisation of Assets and Reserves
12.1 HSEL shall not do anything contrary to the provisions of section 4B (3) of the SCRA.
12.2 Without prejudice to the generality of the provisions in clause 12.1, HSEL shall not use its assets and reserves as on the date of publication 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 on the date of publication of this Scheme or for the business operations of stock exchange.
13. Compliance with this Scheme
13.1 HSEL shall ensure compliance with the provisions of this Scheme at all times and shall not do anything contrary to the provisions of this Scheme.
13.2 Without prejudice to the generality of the provisions in clause 13.1, HSEL shall continuously comply with the provisions in clauses 4.2, 7, 8.3, 8.4, 8.5, 8.6, 9.1, 9.3, 10.3 and 12 of this Scheme.
13.3 HSEL shall report compliance with the provisions of this Scheme in such manner as may be required by SEBI from time to time.
14. Removal of Difficulties
If any difficulty arises in giving effect to the provisions of this Scheme, SEBI may, at the written request of HSEL, relax any of the provisions of this Scheme.
**************