SECURITIES AND EXCHANGE BOARD OF INDIA
PRIMARY MARKET DEPARTMENT
Mittal Court, A Wing, Gr. Floor,
224, Nariman Point, Mumbai 400 021
TEL NO. : 2850451- 56/ 2880962-70 FAX NO. :204 5633
RMB (Compendium) Series Circular No. 1 (1999-2000)
January 19, 2000
To:
All Registered Category I Merchant Bankers
Dear Sirs,
Sub: Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000
A Compendium of Guidelines, circulars, instructions to merchant bankers relating to issue of capital, issued from time to time by the Primary Market Department, has been placed on the SEBI web site today.
The Compendium shall replace the following with effect from January 27, 2000:
1. Original DIP Guidelines issued in June 1992
2. Clarifications I to XXVI to the DIP Guidelines
3. Issue related RMB General Instruction (GI) Series Circulars
4. Other guidelines issued from time to time (preferential issue guidelines, guidelines on advertisements, guidelines on book building etc.)
Clarification XXVII dated November 26, 1999 and RMB (GI) Series Circular No. 2 dated December 1, 1999 have not been consolidated into the above compendium and shall continue to be in force. The exercise to consolidate these circulars has already been initiated and the merchant bankers would be informed suitably as and when the consolidation takes place.
GI Series circulars relating to amendments in merchant banking regulations would also continue to be in force.
Certain changes have also been made in the guidelines relating to entry norms, lock-in and promoter’s contribution as a part of consolidation exercise. A list of salient changes in respect of same is enclosed as Annexure -A.
Yours faithfully,
O P Gahrotra
Senior Executive Director
ANNEXURE A
| EXISTING GUIDELINE | CHANGE |
| 1. No separate Chapter on definitions given. | Chapter on definitions incorporated for various terms. Additional definitions incorporated. |
| 2. The Entry barrier norms stipulate appraisal and funding by Financial Institutions/Scheduled commercial banks. However, the time period for bringing in of funds by the Appraising agency has not been stipulated. | The appraising agency to bring in the required contribution at least one day before the opening of the issue. |
| 3. No specific mention regarding applicability of entry norm in case of offers for sale. | Applicability of Entry norms in case of offer for sale specified. |
| 4. A listed company to meet the entry norm only if the post-issue equity capital becomes five times the pre-issue equity. | The word “equity ” has been replaced by the word “networth” |
| 5. No explicit provision requiring the companies to make their partly paid-up shares fully paid up or forfeit the same before making a public/rights issue. | Explicit provision made. |
| 6. Promoters Contribution for public issues by unlisted as well as listed companies specified as 25% for issue size upto Rs.100 crores and 20% for issue size above Rs.100 crores. | The promoters contribution made uniform at 20% irrespective of the issue size. |
| 7. In case of offers for sale of securities of unlisted companies, promoters’ shareholding subject to lock-in shall not be less than 25% . | The same has been reduced to 20%. |
| 8. Shares issued during the 12 months preceding the filing of offer document at a price lower than the issue price are not eligible for promoters contribution. Similarly, the bonus shares issued out of revaluation reserves and shares issued for consideration other than cash wherein revaluation of assets or capitalisation of intangible assets is involved ,during the preceding 3 years, are also not eligible for promoters contribution. No mention regarding eligibility for promoters’ contribution for such shares acquired pursuant to merger/ amalgamation approved by a High Court. | Such shares shall be eligible for the purpose of promoters’ contribution. |
| 9. Promoters are free to offer the shares allotted to relatives, friends etc. as promoters contribution. | Only such securities can be offered for promoters contribution for which a specific written consent has been obtained from the shareholders for lock-in. |
| 10. In case of issues of convertible securities, promoters have the option to bring in their contribution either by way of the same security as offered to the public or by way of equity. | In case the conversion price of the convertible security is not pre-determined and/or a formula for conversion price is indicated , the promoters do not have this option and shall have to partake in the same security as offered to the public. |
| 11. No stipulation regarding applicability of pricing provisions of SEBI’s Preferential Offer Guidelines to promoters contribution in case of companies which have been listed for a period of 3 years and have a track record of three years dividend payment. | In such companies, subscription by promoters in excess of minimum specified promoters contribution shall attract pricing provision of SEBI preferential offer guidelines. |
| 12. Lock-in period is reduced for those shares which have been allotted in the past and are being considered for promoters contribution in the present issue by the period for which those shares have already been held. However, these shares have to be locked-in for a minimum period of two years from the date of allotment in the public issue. | The provision for said reduction in lock-in period has been done away with |
| 13. The following categories of securities issued to the promoters, not forming part of promoters contribution, are required to be locked in for a period of 3 years from the date of allotment :
1. Securities issued against revalued assets / capitalisation of intangible assets within a period of 3 preceding accounting years. 2. Securities issued by way of bonus out of revaluation reserves within a period of 3 preceding accounting years. . 3. Securities issued at a price lower than the price at which equity is being offered to the public within a period of 1 preceding year. |
All such securities would be locked in for a period of 3 years whether issued to the promoters or persons other than promot |
