Our ref:SE/4726
June 18, 1992


The Presidents/Executive Director
of all recognised Stock Exchanges

Dear Sir,

Guidelines for public issues

As you are aware, the Capital Issues (Control) Act, 1947, which controlled issue of capital by companies has been repealed by an ordinance promulgated by the President of India on May 29, 1992 and issue of capital and pricing of issues by the companies have since been released from the requirements of prior approval from the Controller of Capital Issues. Thereafter, with a view to ensure proper disclosure by companies and protect the interest of investors, SEBI has issued on June 11, 1992 certain guidelines which are to be observed by companies issuing capital. These guidelines and the clarifications issued thereof (Press Release dated June 17, 1992) are enclosed for your information and necessary action.

These guidelines will apply to all issues of capital made by companies hereafter. However, those companies holding consents from the controller of Capital Issues granted prior to the promulgation of the Ordinance may proceed with the issues on the terms and conditions contained therein, subject to the requirement that the guidelines now issued by SEBI would also apply to such issues to the extent they are not inconsistent with the terms of the CCI consents.

You are advised to ensure that the companies issuing capital and seeking enlistment of their securities at your Stock Exchange scrupulously adhere to the guidelines. For this purpose, amendments to the extent required should be made at the earliest in the bye-laws and regulations relating to the conditions of listing of securities at your Exchange. In this context, among others, your attention is invited especially to the following provisions of the Guidelines:

a. Not less than 20 percent of the equity should be offered to the public in case of new issues made either by the new company or by the existing closely held/private companies going to public

b. In case of public issues by the listed companies there should be disclosure of highs and lows of prices of their shares for the last 2 years.

c. (i) The promoters contribution shall not be considered for a lock in period of 5 years from the date of commencement of the production or date of allotment whichever is later Promoters must bring in their full subscription to issues in advance before public issue.

(ii) All firm allotments, preferential allotments to collaborators, shareholders of promoters, companies whether corporate or individual shall not be transferable for three years from the date of commencement of production or date of allotment wherever is later.

iii) The Share certificate issued for firm allotments etc. described in (ii) above and to promoters, friends, relatives and associates etc. should carry the inscription, “not transferable.” For a period of 3 or 5 years as may be applicable from the date of commencement of production or date of allotment whichever is later.

In case of need for any clarification, you may please write to SEBI.

Please acknowledge receipt of this letter.

Yours faithfully,
Head (Secondary) Market Department – I

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