Preferential
Issue by Listed Entity
Meaning of Preferential Issue:
As per Regulation 2(1)(nn) of
SEBI (ICDR) Regulation 2018- “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 in accordance with Chapter V of these regulations and
does not include an offer of specified securities made through employee stock
option scheme, employee stock purchase scheme or an issue of sweat equity
shares or depository receipts issued in a country outside India or foreign
securities;
References made in this article
A part from above regulation, the Listed entity shall ensure provisions of SEBI (PIT) Regulations 2015 regarding closure of Trading Window.
Coverage of the Article- This article specifically deals regarding Issue of Equity shares (and not other convertible securities) by way of Preferential Allotment by Listed Entity.
Before we dive out to analyse the provisions regarding issuance of Preferential Issue, the pre-requisite is to clear who are ineligible to make such preferential issue.
ISSUERS INELIGIBLE TO MAKE A PREFERENTIAL ISSUE
As per Regulation 159 of SEBI (ICDR) 2018
1. Any person who has sold or
transferred any equity shares of the issuer during the six months (6 months) preceding the(relevant date)*1:
However the SEBI may grant relaxation from the
requirements of this sub-regulation.
Where any person
belonging to promoter(s) or the promoter group has sold/ transferred their
equity shares in the issuer during the six months preceding the relevant date,
the promoter(s) and promoter group shall be ineligible for allotment of
specified securities on preferential basis.
The above restriction shall not
apply to following:
2. Where any person belonging to promoter(s)
or the promoter group has previously subscribed to warrants of an issuer but
has failed to exercise the warrants, the promoter(s) and promoter group shall
be ineligible for issue of specified securities of such issuer on preferential
basis for a period of one year from:
a) the date of
expiry of the tenure of the warrants due to non-exercise of the option to
convert; or
b) the date of
cancellation of the warrants, as the case may be.
3. An issuer shall not be
eligible to make a preferential issue if any of its promoters or directors is a
fugitive economic offender.
*1 Relevant Date - As per Regulation 161 of SEBI (ICDR) 2018, For the purpose of this Chapter,
"relevant date" means:
Pre-requisite for Preferential Issue:
After ensuring the above pre-requisite its to take ride of step wise procedure that is to be followed by listed entities while making Preferential Issue of Equity Shares.
Reader
should note that, listed entity before issuing securities shall obtain an “in principle”
approval from Recognised Stock Exchanges – [Regulation 28 of SEBI
(LODR) 2015]
Step 1
|
Pre Board Meeting Requirement-
1.
Intimation to Stock Exchange about the Board meeting where proposal for
preferential issue is to be considered. [Regulation 29 of SEBI (LODR) 2015
and intimation for closure of trading window [SEBI (PIT) Regulation 2015]
2.Closure
of Trading Window [SEBI (PIT) Regulation 2015]
|
Step 2
|
Conduct Board Meeting: The Listed shall call Board
Meeting for the following:
1. To
approve issue of equity share on preferential basis and approve the offer
letter and to identify the group of person to whom such offer is to be given.
2. To
consider and fix the date, time and venue of Extra Ordinary General Meeting for
passing special resolution and simultaneously approve notice of Extra
Ordinary General Meeting. [Section 62(1)(c)]
|
Step 3
|
Post Board Meeting:
1.
Intimate Stock exchange regarding outcome of the Board Meeting within 30
minutes of the closure of meeting. [Regulation 30 of SEBI (LODR) 2015]
2.
Above intimation made shall also be published on Website of the Company
[Regulation 46(3) of the SEBI (LODR) 2015]
3. File
MGT-14 with ROC with Copy of Board Resolution passed. [ Section 117 read with
179(3) and Companies (Prospectus and Allotment of Securities Rules) 2014]
|
Step 4
|
Pre General Meeting
Requirement:
1.
Certificate from Statutory Auditors certifying that issue is in accordance
with the relevant provisions as required for the time being in force.
[Regulation 163 of SEBI (ICDR) 2018].
2.
Valuation of Equity Shares as per Regulation 161 of SEBI (ICDR) 2018
|
Step 5
|
Conduct General Meeting: The Listed Entity shall call
General Meeting for according approval of Shareholders for issuance of Equity
shares by preferential issue by means of Special Resolution.
|
Step 6
|
Post General Meeting:
1.
Intimation to Stock Exchange about proceedings of the General Meeting within
24 hours of the conclusion. [Regulation 30 of SEBI (LODR) 2015] and details
regarding voting results within 48 hours of the conclusion of general meeting
[Regulation 44 of SEBI (LODR) 2015]
2. Publish
the above on the website of the Company [ Regulation 46(3) of SEBI (LODR)
2015]
3. File
MGT-14 with ROC
4.
Opening of Bank Account for receiving application money [ Section 42]
5. Private
placement offer cum application letter shall be in the form of an application
in [Form PAS-4] serially numbered and addressed specifically to the person to whom the
offer is made and shall be sent to him, either in writing or in
electronic mode, within thirty days
of recording the name of such person pursuant to sub-section (3) of section
42
However no person other than
the person so addressed, the private placement offer cum application letter
shall be allowed to apply through such application form and any application
not conforming to this condition shall be treated as invalid
5. Received the amount of subscription: [Section
42 read with Rule 14 of Companies (Prospectus and Allotment of Securities)
Rules 2014]
Identified person shall apply in the private
placement and application issued to such person along with subscription money
paid either by cheque or demand draft or other banking channel and not by cash:
The company shall not utilise monies raised
through private placement unless allotment is made and the return of
allotment is filed with the Registrar i.e. [PAS 3]
The payment to be made for subscription to bank
account of the person subscribing to such keep the record of the bank account
from where been received, However monies payable on subscription to
securities to be held by joint holders shall be paid from the bank account of
the person whose name appears first in the application:
6. The company shall maintain a complete record
of private placement offers in Form PAS-5
|
Step 7
|
Conduct Second Board Meeting*
To consider
the allotment of Equity Shares.
* Allotment can also be made
through Resolution by Circulation as “Issue of Securities” are prohibited by
this mode.
Allotment
pursuant to the special resolution shall be completed within a period of
fifteen days from the date of passing of such resolution: [Regulation 170 of
SEBI (ICDR) 2018
|
Step 8
|
Post Board Meeting:
1.
Intimate Stock exchange regarding outcome of the Board Meeting within 30
minutes of the closure of meeting. [Regulation 30 of SEBI (LODR) 2015]
2.
Above intimation made shall also be published on Website of the Company
[Regulation 46(3) of the SEBI (LODR) 2015]
3. File
Return of Allotment within 15 days from the date of allotment form PAS-3 [Section
42(8]
|
RBI Reporting: If the allotment was made to
any Non-Resident, FORM FC-GPR is required to be file within 30 days of
allotment at firms portal of RBI.
Requirement for FC-GPR
1. FIRC and KYC of Investor
2. Valuation Report
3. Certificate from Company Secretary
4. Certified true copy of Board Resolution
|
|
Other Important Point to be ensure.
- Allotment will be made only in DEMAT MODE.
- Exemption given under Regulation 158 should be considered for availing any exemptions.
- Provision of Lock-in period for promoter and promoter group shall also require to be ensured.
- Apply to Stock Exchange for In-principle approval
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AAKARSHIT JAI (Company Secretary)
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