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1. This chapter of SEBI regulations on preferential issues does not apply in certain cases such as conversion of loans or options attached to convertible debt, schemes approved by courts for mergers/acquisitions, or qualified institutional placements.
2. It also does not fully apply to issues under rehabilitation schemes for sick companies or resolution plans under bankruptcy law, or issues to specified financial institutions.
3. Some pricing and disclosure provisions do not apply to preferential issues for debt restructuring under RBI guidelines subject to certain conditions like independent valuation and share lock-ins.
1. This chapter of SEBI regulations on preferential issues does not apply in certain cases such as conversion of loans or options attached to convertible debt, schemes approved by courts for mergers/acquisitions, or qualified institutional placements.
2. It also does not fully apply to issues under rehabilitation schemes for sick companies or resolution plans under bankruptcy law, or issues to specified financial institutions.
3. Some pricing and disclosure provisions do not apply to preferential issues for debt restructuring under RBI guidelines subject to certain conditions like independent valuation and share lock-ins.
1. This chapter of SEBI regulations on preferential issues does not apply in certain cases such as conversion of loans or options attached to convertible debt, schemes approved by courts for mergers/acquisitions, or qualified institutional placements.
2. It also does not fully apply to issues under rehabilitation schemes for sick companies or resolution plans under bankruptcy law, or issues to specified financial institutions.
3. Some pricing and disclosure provisions do not apply to preferential issues for debt restructuring under RBI guidelines subject to certain conditions like independent valuation and share lock-ins.
Brief Note - Chapter V of SEBI Regulations on Issue and Capital Disclosure Requirements
(ICDR), 2018 – Preferential issue
Provisions of this chapter not to apply in certain cases which include -
1. This provision shall not be applicable to companies where preferential issue of shares is made pursuant to: a. Conversion of loan or an option attached to convertible debt instruments in terms of Section 62 of the Companies Act, 2013 i.e. Further issue of share capital b. A scheme approved by High Court under Section 230 to 234 of the Companies Act, 2013 i.e. provisions on ‘Compromises, Arrangements and Amalgamations’ c. A QIP in accordance with Chapter VI of the ICDR 2. This provision shall not be applicable to companies that issues of shares on preferential basis, except for lock-in provisions, in terms of rehabilitation scheme approved under Sick Industrial Companies Act, 1985 or resolution plan approved under Section 31 of the Insolvency & Bankruptcy Code, 2016 whichever is applicable. 3. The pricing and lock-in of shares shall not be applicable to equity shares allotted to any financial institutions which include securitization companies or any such other institution as the Central Government may, having regard to its business activity and the area of its operation in India, by notification, specify; 4. The provision of Regulation 163 i.e. Disclosure of preferential issue to shareholders and sub-regulation (1), (2), (3) and (4) of Regulation 164 i.e. Pricing of frequently traded shares Sub-regulation (1); In case of DHFL, If equity shares of issuer have been listed on recognized stock exchange for a period of 26 weeks or more from the relevant date, the price of equity shares to be allotted on preferential basis shall not be less than higher of: a. Average VWAP of 26 weeks b. Average VWAP of 2 weeks shall not apply to the preferential issue of shares or compulsorily convertible debt, fully or partly, where the board has granted relaxation in terms of Regulation 11 of SEBI (Substantial Acquisition of Shares and Takeovers [SAST], 2011), if adequate disclosures about the plan and process proposed for identifying allottees are given in notice for shareholder meeting 5. The provisions of sub-regulation (1) of Regulation 159 i.e. Preferential issue of specified securities shall not be made to any person who has sold or transferred any equity shares of the issuer during the six months preceding the relevant date and sub-regulation (6) of Regulation 167 i.e. The entire pre-preferential allotment shareholding of the allottees, if any, shall be locked-in from the relevant date up to a period of six months from the date of trading approval shall not apply to preferential issue of shares where proposed allottee is Mutual Fund registered with Board or Insurance Company with IRDA or Scheduled Commercial Bank or Public Financial Institution. 6. The provisions shall not apply where the preferential issue of equity shares is made to Lenders pursuant to conversion of their debt, as a part of a debt restructuring scheme implemented in accordance with RBI subject to: a. Guidelines for determining conversion price have been specified by RBI and will be determined and in accordance with Companies Act, 2013 b. Conversion price to be certified by 2 independent Valuers c. Equity shares so allotted shall be locked-in for a period of one year from the date of allotment. (for the purpose of transferring the control, Lenders may transfer the shares before the lock-in period subject to continuation of the lock-in for remaining period, with transferee) d. The lock-in of equity shares allotted pursuant to conversion of convertible securities issued on preferential basis shall be reduced to the extent of convertible securities already locked-in e. Applicable provisions of Companies Act, 2013 are complied with, including special resolution 7. The provisions shall not apply where the preferential issue of shares is a made to person(s) at the time Lenders selling their holding or enforcing change in ownership in favour of the person(s) pursuant to debt restructuring scheme implemented in accordance with RBI subject to: a. Guidelines for determining conversion price have been specified by RBI and will be determined and in accordance with Companies Act, 2013 b. Conversion price to be certified by 2 independent Valuers c. Equity shares so allotted shall be locked-in for a period of at least three years from the date of allotment d. The lock-in of equity shares allotted pursuant to conversion of convertible securities issued on preferential basis shall be reduced to the extent of convertible securities already locked-in e. Special resolution has been passed by shareholders before preferential issue f. Disclose additional information of allottees like: i. Identity of company / person ii. Business model iii. Statement on growth of business over a period of time iv. Summary of audited financials of previous 3 financial years v. Track record vi. Proposed roadmap for effecting turnaround of the issuer vii. Applicable provisions of the Companies Act, 2013 are complied with