Tag Archives: rights issue

securities market relaxations – covid

SEBI circular dated 22nd April, 2021 giving certain relaxations in compliances due to ongoing covid pandemic. Read on.

  1. SEBI vide Circular no. SEBI/HO/CFD/DIL2/CIR/P/2020/78 dated May 6, 2020, granted one time relaxations from strict enforcement of certain regulations of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, pertaining to Rights Issue opening upto July 31, 2020.
  2. Based on the representations received from the market participants, the validity of these relaxations was further extended for Rights Issues opening up to December 31, 2020, vide SEBI Circular No. SEBI/ HO/ CFD/ DIL1/ CIR/ P/ 2020/136 dated July 24, 2020.
  3. The relaxation mentioned in point (iv) of the SEBI Circular No. SEBI/HO/CFD/DIL2/CIR/P/2020/78 dated May 6, 2020, was further extended for Rights Issues opening up to March 31, 2021, vide SEBI Circular No. SEBI/ HO/ CFD/ DIL1/ CIR/ P/2021/13 dated January 19, 2021.
  4. To ease and facilitate investors, the relaxation mentioned in point (iv) of the SEBI Circular No. SEBI/ HO/ CFD/ DIL2/ CIR/ P/2020/78 dated May 6, 2020, is further extended and shall be applicable for Rights Issues opening up to September 30, 2021, provided that the issuer along with the Lead Manager(s) shall continue to comply with point (v) of the SEBI Circular No. SEBI/HO/CFD/DIL2/CIR/P/2020/78 dated May 06, 2020.
  5. In respect to mechanism and compliance requirements at point (iv) and (v) of the SEBI Circular No. SEBI/ HO/ CFD/ DIL2/ CIR/P/2020/78 dated May 6, 2020, the issuer along with Lead Manager(s), Registrar, and other recognized intermediaries (as incorporated in the mechanism) shall also ensure the following:
    a. Refund for un-allotted / partial allotted application shall be completed on or before T+1 day (T: Basis of allotment day).
    b. Registrar to the issue, shall ensure that all data with respect to refund instructions is error free to avoid any technical rejections. Further, in case of any technical rejection of refund instruction, same shall be addressed promptly.

https://www.sebi.gov.in/legal/circulars/apr-2021/relaxations-relating-to-procedural-matters-issues-and-listing_49900.html

Leave a comment

Filed under securities laws

rights issue

MCA has issued a notification dated 11th February, 2021 wherein they have amended the Companies (Share Capital and Debenture) rules, 2014 by adding a new clause 12A after clause 12.

Basically what the new clause 12A says is that it stipulates that the rights issue offer has to be made for acceptance by the shareholders within 7 days from the date of offer.

Earlier this stipulation was never there in the act or rules. The exact wording of the rule 12A is as follows

12A. Period for notice under sub-clause (i) of clause (a) of sub-section (1) of section 62.- For the purposes of sub-clause (i) of clause (a) of sub-section (1) of section 62, the time period within which the offer shall be made for acceptance shall be not less than seven days from the date of offer.”.

Copy of this notification can be found at the MCA site .i.e. http://www.mca.gov.in

Leave a comment

Filed under company law

rights issue by unlisted InvITs

SEBI circular dated 4th November, 2020 laying down guidelines for issue of rights units by unlisted infrastructure investment trust (InvIT).

Chapter VIA of the of SEBI (Infrastructure Investment Trusts) Regulations, 2014 (InvIT Regulations) provides the framework for private placement of units by InvITs which are not eligible to be listed. In order to enable unlisted InvITs to raise further funds, it has been decided to provide a mechanism for raising of funds by unlisted InvITs through rights
issue of units. For the purpose of this circular “rights issue” shall mean an offer of units by an unlisted InvIT to the unit holders of the InvIT as on the record date fixed for the said purpose. The guidelines in respect of a rights issue of units by an unlisted InvIT are given below.

  1. Conditions for issuance
    1.1.No InvIT shall make a rights issue of units unless the following conditions are satisfied:
    1.1.1. A resolution of the board of directors of the investment manager approving the rights issue of units and determining the record date has been passed.
    1.1.2. Units of the same class, which are proposed to be allotted are already issued by the InvIT.
    1.1.3. None of the respective promoters or partners or directors of the sponsor(s) or investment manager or trustee of the InvIT is a fugitive economic offender declared under section 12 of the Fugitive Economic Offenders Act, 2018 (17 of 2018).
    1.1.4. None of the respective promoters or partners or directors of the sponsor(s) or investment manager or trustee of the InvIT
    (a) is debarred from accessing the securities market by the Board;
    (b) is a promoter, director or person in control of any other company or a
    sponsor, investment manager or trustee of any other InvIT which is
    debarred from accessing the capital market under any order or
    directions made by the Board;
  2. Underwriting
    2.1. If the InvIT desires to have the issue underwritten, it may appoint underwriters in accordance with the Securities and Exchange Board of India (Underwriters) Regulations, 1993.
  3. Letter of Offer
    3.1. The investment manager, on behalf of the InvIT shall file a letter of offer with the Board at least 5 days prior to opening of the issue
    3.2. The investment manager, on behalf of the InvIT, shall carry out the obligations relating to the issue.
    3.3. The investment manager shall ensure that disclosures made in the letter of offer contains material, true, correct and adequate disclosures and are in accordance with the InvIT Regulations and guidelines or circulars issued thereunder.
    3.4. The letter of offer shall contain disclosures as specified in Annexure I of this Circular.
    3.5. The letter of offer shall also be furnished to the Board in soft copy.
  4. Application
    4.1.The application form for the issue shall be prepared by the investment manager and the investment manager shall make arrangements for distribution of the application form along with letter of offer to all unit holders as on the record date at least five days prior to the opening of the issue.
  5. Pricing of Units
    5.1.The investment manager on behalf of the InvIT shall decide the issue price before determining the record date.
    5.2.The issue price shall be disclosed in the letter of offer.
  6. Timelines
    6.1. The rights issue shall open within three months from the record date.
    6.2.The rights issue shall be kept open for at least three working days but not more than fifteen working days.
  7. Manner of issuance of units
    7.1.The units shall be allotted in the dematerialized form only.
    7.2.The rights entitlements shall be credited to the demat account of the unitholders before the date of opening of the issue. The rights entitlements shall include a right exercisable by the person concerned to renounce the units offered to him/her or any of them in favour of any other person and letter of offer and the notice sent to the unitholders shall contain a statement to this effect.
  8. Allotment
    8.1.The minimum allotment to any investor shall be INR 1 crore.
    8.2.Allotment shall be made in the following manner:
    8.2.1. full allotment to those eligible unitholders who have applied for their rights entitlement either in full or in part and also to the renouncee(s), who has/have applied for the units renounced in their favour, in full or in part, as adjusted for fractional entitlement.
    8.2.2. allotment to eligible unitholders who having applied for the units in full to the extent of their rights entitlement and have also applied for additional units shall be made as far as possible on an equitable basis, having due regard to the number of units held by them on the record date, provided there is an undersubscribed portion after making allotment in (a) above.
    8.2.3. allotment to the renouncees, who having applied for the units renounced in their favour and also applied for additional units, provided there is an undersubscribed portion after making full allotment specified in (a) and (b) above. The allotment of such additional units may be made on a proportionate basis.
    8.2.4. Allotment to the underwriter appointed for the issue, if any, at the discretion of the board of directors of the investment manager, subject to disclosure in the letter of offer as applicable.
  9. Restriction on further capital issues
    9.1.The InvIT shall not make any further issue of units in any manner during the period between the date of filing the letter of offer with the Board and the allotment of the units offered through the letter of offer.
    9.2.The InvIT shall file an allotment report with the Board providing details of the allottees and allotment made within 15 days of the issue closing date.

https://www.sebi.gov.in/legal/circulars/nov-2020/guidelines-for-rights-issue-of-units-by-an-unlisted-infrastructure-investment-trust-invit-_48082.html

For disclosures in the letter of offer, please visit the above link.

Leave a comment

Filed under securities laws

Notice for rights issue

MCA has issued a circular dated 11th May, 2020 wherein it has exempted listed companies from sending notices for rights issues by post/ courier where the rights issues are upto 31st July, 2020. This is in view of the Covid situation wherein all businesses have been under lockdown for more than 50 days now. So non despatch of notices to shareholders will not be construed as a violation under the Act. But listed companies have to comply with SEBI circular dated 6th May, 2020 on the subject. This circular of SEBI basically says that intimations should be sent by e-mail with reminders by SMS and advertisement by the company in all digital channels – internet, television, including crawlers, etc.  The notice should be posted on the website of the company, lead manager, registrar & stock exchanges. The rights issue during this period shall be only in ASBA method.

https://www.sebi.gov.in/legal/circulars/may-2020/relaxations-relating-to-procedural-matters-issues-and-listing_46652.html

Click to access Circular21_11052020.pdf

Leave a comment

Filed under Uncategorized

Rights issues

SEBI has issued a circular dated 22nd January, 2020 streamlining the process of issue and allotment of rights shares by listed companies.

https://www.sebi.gov.in/legal/circulars/jan-2020/streamlining-the-process-of-rights-issue_45753.html

Salient features of the amendments are as follows:

1.1 The period for advance notice to stock exchange(s) under Regulation 42(2) of LODR Regulations has been reduced from at least 7 working days to at least 3 working days (excluding the date of intimation and the record date), for the purpose of rights issue.

1.2 Issuance of newspaper advertisement disclosing date of completion of dispatch and intimation of same to the stock exchanges for dissemination on their websites, as per Regulation 84 (1) of ICDR Regulations, shall be completed by the issuer at least 2 days before the date of opening of the issue.

1.3 Introduction of dematerialized Rights Entitlements (REs) –

1.3.1. In the letter of offer and the abridged letter of offer, the issuer shall disclose the process of credit of REs in the demat account and renunciation thereof.

1.3.2. REs shall be credited to the demat account of eligible shareholders in dematerialized form. 1.3.3. In REs process, the REs with a separate ISIN shall be credited to the demat account of the shareholders before the date of opening of the issue, against the shares held by them as on the record date.

1.3.4. Physical shareholders shall be required to provide their demat account details to Issuer / Registrar to the Issue for credit of REs not later than two working days prior to the issue closing date, such that credit of REs in their demat account takes place at least one day before the issue closing date.

1.4 Trading of dematerialized REs on stock exchange platform –

1.4.1. REs shall be traded on secondary market platform of Stock exchanges, with T+2 rolling settlement, similar to the equity shares. Trading in REs on the secondary market platform of stock exchanges shall commence along with the opening of the issue and shall be closed at least four days prior to the closure of the rights issue.

1.4.2. Investors holding REs in dematerialized mode shall be able to renounce their entitlements by trading on stock exchange platform or off-market transfer. Such trades will be settled by transferring dematerialized REs through depository mechanism, in the same manner as done for all other types of securities.

1.5. Payment mode – Application for a rights issue shall be made only through ASBA facility.

1.6. No withdrawal of application shall be permitted by any shareholder after the issue closing date.

Leave a comment

Filed under Uncategorized

Private placement/ preferential allotment to foreign shareholders

In respect of private placement/ preferential allotment of shares under section 42 of CA 2013, the allotment has to be done within 60 days of the receipt of application money, whereas FEMA gives 180 days time for allotment of shares in case of receipt of inward remittance from foreign shareholders. This is apparently a dichotomy because normally in case of foreign inward remittances companies normally wait for one or more tranches and then allot the shares within 180 days of the first remittance received. Also how do we treat that companies act 2013 gives one time limit for allotment and FEMA regulations gives another time limit for allotment. 

Moreover where one remittance has been received before April 2013 and the second one after April, 2013, which law should be applied, the 1956 Act or the 2013 Act, because for private placement under section 42 requires previous approval of the shareholders by way of special resolution for each of the private offers. So in case do we have to treat each remittance as a separate offer then take separate special resolutions for each offer. 

Moreover, rights issue, ESOP issue and preferential allotment appears in Chapter IV relating to share capital and debentures whereas private placement under section 42 appears in Chapter III relating to Prospectus and Allotment. 

Moreover what is the form to be used for filing allotment under section 62 in respect of rights issue or preferential allotment. Form PAS 3 refers to allotment made under sections 39 and 42 only.

Leave a comment

Filed under Uncategorized