Shareholder Resolution Closing Stock Purchase Agreement by ujh44521


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									    What is preferential issue?

  Preferential issue means issuance of equity
   shares to the promoters, promoter group or
   selected group of persons or any investor(s) on
   private placement basis.
 Thus if offer is made to-
1. Persons ,who are not members of Company
2. Selected members of Company
3. members in disproportionate manner(not pro
Such an offer shall be called Preferential issue.
          Who can be Investors?
   Institutional Investor
   Private equity investors
   High net worth individuals or Companies
            Regulatory Framework
      For making a preferential issue, listed companies shall
       be governed by the provisions contained in Chapter
       XIII and Chapter XIII-A of the SEBI (Discloser and
       Investor Protection ) Guidelines,2000.
     certain provisions of:-
1.     Securities Contracts(regulation) Act, 1956
2.     Listing Agreement
3.     Indian Stamp Act 1899
4.     Companies Issue of Share Certificate) Rules 1960
5.     SEBI(Substantial Acquisition of shares and Takeover)
       Regulations 1997
    In-Principle approval from Stock
 Clause 24(a) of the listing agreement says
 prior to the preferential issue of shares, the
  Company shall obtain an ‘In-Principle’ approval
  from BSE
 for grant of ‘in principal’ approval, Stock
  Exchange insist upon production of specific
  identity of the proposed allottees
      Authorization in the Articles &
         Resolution requirement
   A company shall be authorized by its Article to
    issue shares on preferential basis.
   A Company can offer further shares to any
    person, whether they are shareholder or not, if a
    special resolution to that effect has been
    passed in the general meeting.
   If company fails in getting Special Resolution
    but get Ordinery resolution then C.G approval
    shall also be required.
   Allotment by the Board pursuant to any
    resolution passed at a meeting of shareholder of a
    Company granting consent for preferential issues
    of any financial instrument, shall be completed
    within a period of fifteen days from the date of
    passing of the resolution.
   Where the allotment on preferential basis is
    pending for want of any approval for such
    allotment by CG, the allotment shall be
    completed within 15 days from such approval
     Restriction on number of offerees
   Offer or invitation of preferential issue can’t be made
    to 50 persons or more. Section 67 of the Act
    prescribes that private placement made by companies ,
    other than non- banking financial companies and
    public financial institutions, to 50 persons or more will
    be deemed to the public issue.
   However ,Shares issued to certain category of person
    under Employee Stock option Scheme or
    Employee Stock Purchase Scheme or Sweat Equity
    Shares shall not be reckoned for calculating this
            Pricing of the issue
     at a price higher of the following
   Avg weekly high / low closing prices of shares
    quoted in STX during 6 months preceding the
    relevant date
   Avg weekly high / low closing prices of shares
    quoted in STX during 2 weeks preceding the
    relevant date
   "relevant date" means the date 30 days prior to
    the date on which the meeting of general body
    of shareholders is held, in terms of Section
    81(1A) to consider the proposed issue.
   A listed company shall not make any preferential
    issue unless it has obtained the PAN of the
    proposed allottees.
                  Example of Pricing
      Date of meeting : 31st Oct2009
      Relevant date :1st Oct 2009

    Average of weekly high & low of closing price

          During preceding 6     During preceding   Price (Rs.)
          month of relevant date 2 weeks of
                                 relevant date
Case 1          15                      19           19
Case 2          26                       24           26
    Lock-in period for promoter/s
   The instruments allotted on a preferential basis to the promoter
    / promoter group, shall be subject to lock-in of 3 years from the
    date of their allotment
   In any case, not more than 20% of the total capital of the
    company, including capital brought in by way of preferential
    issue, shall be subject to lock-in of three years from the date of
   In addition to the requirements for lock in of instruments
    allotted on preferential basis to promoters/ promoter group the
    instruments allotted on preferential basis to any person including
    promoters/promoters group shall be locked-in for a period of 1
    year from the date of their allotment
          Auditor’s Certification
   In case of every issue of shares or other financial
    instruments having conversion option, the
    statutory auditors of the issuer company shall
    certify that the issue of said instruments is being
    made in accordance with the requirements
    contained in these guidelines
   Copies of the auditors certificate shall also be
    laid before the meeting of the shareholders
    convened to consider the proposed issue
If shares are issued for consideration
           other than cash
   valuation of the assets in consideration for which
    the shares are proposed to be issued shall be done
    by an independent qualified valuer and
   the valuation report shall be submitted to the BSE
   ‘Valuer” means C.A or merchant banker
    appointed to determine the value of intellectual
    property rights or other value addition.
             Proceed from issue
   The details of all monies utilised out of
    preferential issue proceeds shall be disclosed
    under appropriate heads in B/S indicating the
    purpose for which such monies have been
   The details of un utilised monies shall also be
    disclosed under a separate head in the B/S
    indicating the form in which such unutilised
    monies have been invested.
   Details can be given in the notes to accounts
Clause 43(a)of listing agreement
   Every Company shall furnish on a quarterly
    basis statement to the Exchange indicating the
    variation between projected utilisation of funds
    and/or projected profitability statement made by
    it in its object/s stated in the explanatory
    statement to the notice for the general meeting
    for considering preferential issue of shares and
    the actual utilisation of funds and/ or actual
Clause 43(b) of listing agreement
   The statement referred to above shall be given
    for each of the years for which projections are
    provided in its object/s stated in explanatory
    statement to the notice for considering
    preferential issue of shares and shall published
    in newspapers with the unaudited /audited
    financial result as required under clause 41 .
    Clause 43 (C ) of listing agreement
   If there are material variation between the
    projections and the actual utilisation/profitability
    ,the Company shall furnish an explanation therefor
    in the advertisement and shall also provide the
    same in the Director’s Report.
    49(IV) (D) of the listing agreement
   Every company shall disclose to the Audit
    committee, the uses applications of fund by
    major category ,quarterly
   Further on annual basis ,the Company shall
    prepare a statement of funds utilised for the
    purposes other than those stated in the notice
    and place it before audit committee shall make
    appropriate recommendation to the board to
    take up steps in this matter. This statement shall
    be certified by the Statutory auditors of the
     SEBI (substantial Acquisition of
     shares and takeover regulation)
   Any new acquirer who is allotted shares having
    voting rights on a Preferential basis shall make a
    Public Announcement under reg.11 in case
    shares allotted to him to exercise 15% or more
    but less than 55% of total voting right either
    himself or together with person acting in
    concert, or in case of beyond 55% of paid up
    post preferential equity
If preferential issue is made to QIBs
  Equity share shall be:
1. Of the same class and listed on stock exchange

2.  In compliance with the prescribed minimum
   public shareholding requirement of the listing
Shares issued under QIP are not subjected to lock-
                       QIBs means
   Public financial Institution as defined in 4A of the Act
   Scheduled Commercial bank
   Mutual fund
   Foreign Institutional Investor registered With SEBI
   Multilateral and bilateral development financial Institution
   Venture Capital fund with SEBI
   Foreign Venture Capital registered with SEBI
   State industrial development corportions
   Insurance companies registered with IRDA
   Providend funds with minimum corpus Rs 25 crore
   Pension Fund with minimum corpus of Rs. 25 crore
    Public financial Institution u/s 4A
   IFCI
   IDBI
   LIC
   UTI
   IDFC
             Placement Document
   is mandatory to be provide to select investors through
    serially numbered copies. The placement document
    shall contain all material information
   It should also be posted on website of BSE and of
    company with disclaimer to
    the effect that it is in connection with an issue to QIBs
    and that no offer is being made to public or to any
    other category of Investors.
   A copy of placement document shall be filed with SEBI
    with in 30 days of the allotment
              Resolution & Allotment
                                         Allotment shall be completed
 A company can make a
                                          in within 12 months from
  preferential issue to QIBs if a
                                          the date of passing of the
  special resolution to that effect
  has been passed.
                                         Allotment to mutual Funds
 The placement made pursuant
  to authority of same                    Mutual fund shall be alloted a
  shareholder's resolution shall          minimum of 10 % of
  be separated                            specified securities. If no
                                          mutual fund is agreeable to
 by at least six months between
                                          take up the minimum portion
  each placement.
                                          or any part then such
                                          minimum portion may be
                                          allotted to other QIBs
         Restriction on allotment
  No allotment shall be made ,either directly or indirectly,
   to any QIB being a promoter or any person related to
  QIBs who has all over or any of the following rights shall
   be deemed to be related
1. Rights under a shareholder’s agreement or voting
   agreement entered in to with promoters
2. Veto right
3. Right to appoint any nominee director
Note :- A QIB who does not hold any shares in the issuer
   and who has acquired the aforesaid rights in the capacity
   of a lender shall not be deemed to be a person related to
            Number of allottees
   2 where the issue size is less than o equal to
    Rs.250 crore,
   5, where the issue size is greater than 250 crore.
   No single allottee shall be allotted 50 % of the
    issue size.
   QIBs under the samegroup shall be single
   Investors shall not allowed to withdraw their
    bids after the closure of issue.
Obligations of Merchant Banker
   Any issue and allotment to QIBs shall be
    managed by Merchant Banker(s) registered with
   The M.B shall give due diligence certificate to
   M.B shall also furnish any document
    ,undertaking etc required for the purpose of
    seeking In principal approval and final
    permission from BSE
    Restrictions on amount raised
   The aggregate of the proposed placement and all
    previous placement made in the same financial
    year to QIBs shall not exceed five times the
    networth of issuer as per audited balance sheet
    of previous financial year.

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