Annexure – A

THE INTER-CONNECTED STOCK EXCHANGE OF INDIA LIMITED (CORPORATISATION AND DEMUTUALISATION) SCHEME, 2005

1.         Title and Commencement

1.1               This Scheme shall be called the Inter-connected Stock Exchange of India Limited (Corporatisation & 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 (herein after referred to as the “SCRA”).

1.3               Inter-connected Stock Exchange of India Limited (herein after referred to as the “ISE”) 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 (herein after referred to as the “SEBI”) in respect of ISE 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 these 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 the SCRA.

2.2               “Governing Board” means the Board of Directors of ISE.

2.3               “Inter-connected Stock Exchange of India Limited (ISE)” means the company limited by guarantee incorporated under section 12 of the Companies Act, 1956, having its principal place of business at International Infotech Park, Tower 7, 5^th  Floor, Vashi, Navi Mumbai – 400 703 and recognised as a Stock Exchange under the SCRA, and which shall be re-registered as a company limited by shares, in pursuance of clause 3 of this Scheme.

2.4               “Shareholder” means a person who holds any equity share(s) of ISE.

2.5               “Trading Member” means a stock broker of any segment of ISE and registered with SEBI as such under the SEBI (Stock Brokers & Sub-brokers) Regulations, 1992.

2.6               Words and expressions used and not defined in the 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 under these Acts, memorandum and articles of association, the rules, bye-laws and regulations of ISE shall have the same meanings respectively assigned to them in the above mentioned Acts, memorandum and articles of association, rules, bye-laws and regulations.

 

3.         Re-registration

3.1               ISE shall re-register itself, prior to Due Date, as a company limited by shares under section 12 of the Companies Act, 1956, in the name and style of “Inter-connected Stock Exchange of India Limited”, in accordance with section 32 of the Companies Act, 1956.

3.2               The following participating stock exchanges, shall each subscribe to and pay for fully paid-up equity shares of ISE of the face value of Re.1/- each for cash at par, for the purpose of its re-registration, in the manner specified as under:

 

Participating Stock Exchange	No. of shares	Amount
Bangalore Stock Exchange Ltd.	70,000	Rs.70,000/-
Cochin Stock Exchange Ltd.	70,000	Rs.70,000/-
Coimbatore Stock Exchange Ltd.	70,000	Rs.70,000/-
Gauhati Stock Exchange Ltd.	70,000	Rs.70,000/-
Jaipur Stock Exchange Ltd.	40,000	Rs.40,000/-
Madras Stock Exchange Ltd.	30,000	Rs.30,000/-
Magadh Stock Exchange Association	70,000	Rs.70,000/-
Mangalore Stock Exchange	70,000	Rs.70,000/-
Saurashtra Kutch Stock Exchange Ltd.	70,000	Rs.70,000/-
Uttar Pradesh Stock Exchange Association Ltd.	70,000	Rs.70,000/-
Total	6,30,000	Rs.6,30,000/-

 

4.         Allotment of Shares

4.1               Every participating stock exchange (other than those mentioned in clause 3.2), shall be entitled to 70,000 fully paid-up equity shares of the face value of Re.1/- each for cash at par of ISE.

4.2               ISE shall allot the equity shares to the entitled participating stock exchanges, as referred to in clause 4.1, by the Due Date.

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

 

5.         Governing Board

5.1               The first Governing Board on re-registration shall comprise of Directors as are named as first directors in the Articles of Association of ISE, subject to the condition that the representatives of a trader or dealer does not exceed one-fourth of the total strength of the Governing Board.

5.2               The Governing Board, on and from the Due Date, shall be constituted in accordance with the provisions of the articles of association of ISE in force from time to time:

Provided that –

(i)                   the representation of stock brokers, trading members or clearing members of any stock exchange or clearing corporation 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.

5.3               Notwithstanding anything contained in clause 5.2, SEBI may nominate directors on the Governing Board as and when deemed fit.

 

6.         Listing of Shares

ISE 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 Trader or Dealer, who is registered as a stock broker on the day preceding the Due Date, shall become a Trading Member of the Cash Segment of ISE on the Due Date.

8.2               A Trader or Dealer, who is not registered as a stock broker on the day preceding the Due Date, shall become a Trading Member of the Cash Segment of ISE on and from the date he is registered as a stock broker under the SEBI (Stock Brokers and Sub-brokers) Regulations, 1992:

Provided that his application for registration is submitted to SEBI within one month of the Due Date.

8.3               After the Due Date, a person desirous of becoming a Trading Member shall be admitted, if he complies with the requirements and pays the fees and deposits as specified in the rules, bye-laws and regulations of ISE.

8.4               ISE 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 the mode of acquisition of the trading right by that person:

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

Provided further that different standards may be followed for admission of Trading Members in different segments.

8.5               A Trading Member may surrender his trading membership of any segment to ISE in the manner specified in the rules, bye-laws and regulations of ISE.

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

Provided that ISE may, with the prior approval of SEBI, grant additional privileges to those persons who were Traders or Dealers on the day preceding the Due Date.

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 Trading Members arising out of or under any act, omission or contract or law, notification, order, direction, etc., as had accrued to them while being Traders or Dealers on or before the Due Date.

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

 

9.         Shareholding Rights

9.1               ISE shall ensure that atleast 51% of the equity shares are held by public, other than shareholders having trading rights and the Participating Stock Exchanges, 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, ISE shall ensure that public, other than shareholders having trading rights and the Participating Stock Exchanges, continuously hold atleast 51% of the equity shares.

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

 

10.        Memorandum and Articles of Association, etc.

10.1            The memorandum and articles of association, rules, bye-laws and regulations of ISE 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            ISE 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            The memorandum and articles of association, rules, bye-laws and regulations 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.

 

11.        Utilisation of Assets and Reserves

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

11.2            Without prejudice to the generality of the provisions in clause 11.1, ISE 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 as on the date of publication of this Scheme or the business operations of stock exchange.

11.3            The Settlement Guarantee Fund, the Investor Protection Fund and the Investor Services Fund of ISE shall, after corporatisation and demutualisation, continue to exist in the same form and be utilised by it only for the purpose they have been set up for.

 

12.        Transfer of Clearing and Settlement Functions

12.1            ISE shall, within two years of the Due Date, subject to prior approval of SEBI, transfer the duties and functions of the clearing house of ISE 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 ISE shall be carried out by the clearing and settlement mechanism as used by ISE at present or in such other manner as the Governing Board may determine.

 

13.        Compliance with this Scheme

13.1            ISE 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 of clause 13.1, ISE shall continuously comply with the provisions in clauses 5.2, 7, 8.3, 8.4, 8.5, 8.6, 9.2, 9.3, 10.3 and 11 of this Scheme.

13.3            ISE 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 ISE, relax any of the provisions of this Scheme.

 

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