SEBI (Issue of Capital And Disclosure Requirements) (Second Amendment) Regulations 2020

SEBI Issue of Capital & Disclosure Requirements) 2nd Amendment Regulations 2020. Pricing in preferential issue of shares of companies having stressed assets

SECURITIES AND EXCHANGE BOARD OF INDIA

NOTIFICATION

Mumbai, the 22nd June,2020

Securities And Exchange Board of India (Issue of Capital And Disclosure Requirements) (Second Amendment) Regulations, 2020

No.SEBI/LAD-NRO/GN/2020/18.—In exercise of the powers conferred under section 30 of the Securities and  Exchange  Board  of  India  Act,  1992  (15  of  1992),  the  Board  hereby  makes  the  following  Regulations  to  further amend the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, namely:-

1. These regulations may be called the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Second Amendment) Regulations, 2020.

2. They shall come into force on the date of their publication in the Official Gazette. 3.In the  Securities and Exchange  Board of India  (Issue  of Capital and Disclosure  Requirements) Regulations, 2018,-

I.After regulation 164 the following new regulation shall be inserted, namely, –

“Pricing in preferential issue of shares of companies having stressed assets

164A.  (1)  In  case  of  frequently  traded  shares,  the  price  of  the  equity  shares  to  be  allotted  pursuant  to  the preferential  issue  shall  not  be  less  than    the  average  of  the  weekly  high  and  low  of  the  volume  weighted average  price  of  the  related  equity  shares  quoted  on a  recognised  stock  exchange  during  the  two  weeks preceding the relevant date.

(2)  No  allotment  of  equity  shares  shall  be  made  unless  the issuer company  meets  any  two  of  the  following criteria:

a) the issuer has disclosed all the  defaults relating to the  payment of interest/ repayment of principal amount  on  loans  from  banks  /  financial  institutions/  Systemically  Important  Non-Deposit  taking Non-banking financial companies/ Deposit taking Non-banking financial companies and /or listed or unlisted  debt  securities  in  terms  of  SEBI  Circular  dated  November  21,  2019  and  such  payment default is continuing for a period of at least 90 calendar days after the occurrence of such default;

b) there is an Inter-creditor agreement in terms of Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions 2019 dated June 07, 2019;

c) the credit rating of the financial instruments (listed or unlisted), credit instruments /  borrowings (listed or unlisted) of the listed company has been downgraded to “D”.

(3) The issuer company making the preferential issue shall ensure compliance with the following conditions:

a) The preference issue shall be made to a person not part of the promoter or promoter group as on the date of the board meeting to consider the preferential issue. The preference issue shall not be made to the following entities:

(i) undischarged insolvent in terms of the Insolvency and Bankruptcy Code, 2016;

(ii) ”wilful defaulter‟ as per the  guidelines of  the  Reserve Bank of India issued  under the Banking Regulation Act, 1949;

(iii) a person disqualified to act as a director under the Companies Act, 2013;

(iv) a  person  debarred  from  trading  in  securities  or  accessing  the  securities  market  by  the Board;

Explanation:  The restriction under (iv) shall not apply to the persons or entities mentioned therein who were debarred  in  the  past  by  the  Board  and  the  period  of  debarment  is already over as on the date of the board meeting considering the preferential issue.

(v) a person declared as a fugitive economic offender;

(vi) a person who has been convicted for any offence punishable with imprisonment-

A. For two years or more under any Act specified under the Twelfth Schedule of the Insolvency and Bankruptcy Code, 2016

B. For seven years or more under any law for the time being in force:

Provided that such restriction shall not be applicable to a person after the expiry of a period two years from the date of his release from imprisonment.

(vii) A  person  who  has  executed  a  guarantee in favour of  a  lender  of  the  issuer  and  such guarantee has been invoked by the lender and remains unpaid in full or part.

(4) The resolution for the preferential issue and exemption from open offer shall provide for the following:

(a) The votes cast by the shareholders in the “public‟ category in favour of the proposal shall be more than the number of votes  cast  against  it.  The  proposed  allottee(s)  in  the  preferential  issue  that already hold specified securities shall not be included in the category of „public‟ for this purpose:

Provided that  where  the  company  does  not  have  an  identifiable  promoter;  the  resolution  shall  be deemed to have  been passed if the  votes cast in favour are  not less than three times the  number of the votes, if any, cast against it.

(5)  The  proceeds  of  such  preferential  issue  shall  not  be  used  for  any repayment  of  loans  taken  from promoters/  promoter  group/  group  companies.  The  proposed  use  of  proceeds  shall  be  disclosed  in  the explanatory statement sent for the purpose of the shareholder resolution.

(6)  (a)  The  issuer  shall  make  arrangements  for  monitoring  the  use  of  proceeds  of  the  issue  by  a  public financial institution or by a scheduled commercial bank, which is not a related party to the issuer:

(i)  The monitoring agency shall submit its report to the issuer in the format specified in terms of Schedule XI (with fields as applicable) on a quarterly basis  until at least ninety five percent  of  the proceeds of the issue have been utilized.

(ii)  The board of directors and the management of the issuer shall provide their comments on the findings of the monitoring agency as specified in Schedule XI.

(iii)  The issuer shall, within forty five days from the end of each quarter, publicly disseminate the report of the monitoring agency by uploading the same on its website as well as submit the same to the stock exchange(s) on which the equity shares of the issuer are listed.

(b)The proceeds of the issue shall also be monitored by the Audit Committee till utilization of the proceeds.

(7) The allotment made shall be locked-in for a period of three years from the last date of trading approval.

(8) The statutory auditor and the audit committee shall certify that all conditions under sub-regulations (1), (2), (3), (4) and (5) of regulation 164A are met at the time of dispatch of notice for general meeting proposed for passing the special resolution and at the time of allotment.”

AJAY TYAGI, Chairman
[ADVT.-III/4/Exty./79/2020-21]

Footnotes:

1. The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 was published in the Gazette of India on September 11, 2018, vide notification No. SEBI/LAD-NRO/GN/2018/31.

2. The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 was subsequently amended on –

(a) December 31, 2018 by the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2018, vide notification No.SEBI/LAD-NRO/GN/2018/57.

(b) March 29, 2019 by the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2019, vide notification No.SEBI/LAD-NRO/GN/2019/05.

(c) April 5, 2019 by the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Second Amendment) Regulations, 2019,vide notification No. SEBI/LAD NRO/GN/2019/08.

(d) July 29, 2019 by the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2019, vide notification No. SEBI/LAD-NRO/GN/2019/29.

(e) September 23, 2019 by the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Fourth Amendment) Regulations, 2019, vide notification No. SEBI/LAD-NRO/GN/2019/35.

(f) December 06, 2019 by the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Fifth Amendment) Regulations, 2019, vide notification No. SEBI/LAD-NRO/GN/2019/42.

(g) December 26, 2019 by the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Sixth Amendment) Regulations, 2019, vide notification No. SEBI/LAD-NRO/GN/2019/47.

(h) January 01, 2020 by the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Seventh Amendment) Regulations, 2019, vide notification No. SEBI/LAD-NRO/GN/2020/01.

(i) May 08, 2020 by the Securities and Exchange Board of India (Payment of Fees) (Amendment) Regulations, 2020, vide notification No. SEBI/LAD-NRO/GN/2020/11.

(j) April 17, 2020 by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2020 vide notification No. SEBI/LAD-NRO/GN/2020/10.

(k) June 16, 2020 by the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2020, vide notification No. SEBI/LAD-NRO/GN/2020/17.

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