SLCM Marathon Notes.pdf

SECURITIES CONTRACT REGULATION ACT 1956
INTRODUCTION
SCRA 1956
Applicable to all
over India.
It came into force
from 20th Feb 1957.
It prescribes the procedure of
recognition of stock exchange (SE)
by CG, procedure of listing of
securities and operation of brokers
relating to buying & selling of
securities on behalf of investors.

POWERS GIVEN TO CG BY SCRA ACT 1956
To make rules
relating to
contract of
securities.
To prescribe Rules
for listing of
securities on RSE.
To regulate the SE
by process of recognition
& continued supervision.

SCOPE/OBJECTIVE OF SCRA
Delisting of
securities.
Penalty and
procedures
Right to appeal
to SAT against
delisting or
refusal of listing.

SCOPE/OBJECTIVE OF SCRA
Recognition &
Derecognition
of SE.
Corporatisations
&
Demutualization
of SE.
Prescribe
power of
CG, SEBI,SE.

CORPORATISATION
Means
succession.
Of SE which was
incorporated as Body of
individual or as a society
under Societies
Registration Act 1860.
By a SE incorporated
as company form of
organisation.

DEMUTUALIZATION
Mean segregation of
ownership &
management rights.
From the
trading
rights of
members
of SE.
As per the
scheme
approved
by SEBI.
And making sure that
at least 51 % of equity
share are held by those
shareholders who are
not the trading
members.

DELISTING & APPEAL
1. Who can delist the securities
RSE may delist the securities of listed company.
2. Grounds
IF the listed company has not followed listing agreement.
3. Conditions
i. Reason for delisting must be informed in writing by RSE
ii. Opportunity of being heard must be given to company.

4. Appeal by whom
Within 15 days of delisting's order. But SAT on sufficient cause being
shown condone the delay & allow max 1 month extension.
a) Listed company.
b) Investor.
5. To whom
SAT
6. Time limit of Appeal

7. Procedure & Order of SAT:-
a) SAT shall hear the parties to appeal.
b)SAT shall try to dispose the case within 6 months.
c) SAT shall hear the matters on both Question of law
& Question of fact.
d)SAT may confirm or vary or set aside the order of
RSE.
e)Copies of order of SAT shall be given to all the
parties.

8. Appeal to SC:-
a) Any party aggrieved by SAT’S order may
appeal to SC.
b) Within 60 days of SAT’S order.
c) SC may condone the delay by further 60
days on sufficient cause being shown.
d) SC will hear the matter only on Question of
Law.

REFUSAL/REJECTION OF LISTING APPLICATION BY RSE
1. Who refuses listing application
RSE may refuse to list the securities of a co which applied for listing.
2. GROUNDS
Listing agreement/conditions not satisfied.

3.Appeal by Company
4.Appeal to SAT
5. Time Limit Within 15 days of
rejection/refusal of listing
communicated by RSE.
expiry of 10 weeks from
closure of subscription list.
or

6.Condonation of delay
SAT may condone
the delay by 1
month on sufficient
cause being shown.
7.Procedure & Order of SAT Same.
8.Appeal to SC Same.

IMPORTANT DEFINITIONS (Sec 2)
Securities include
Share, scrips,
bond,
debenture or
like kind of
securities
issued by a
company.
Derivatives
Units issued
by Collective
Investment
Scheme.
Unit issued by
Mutual Fund
Scheme.
Security
Receipt.

Securities include
Govt securities.
Any other security as
CG may prescribe
Rights or interest
in securities.

CONTRACT MEAN A contract relating to purchase
or sale of securities.
SPOT DELIVERY CONTRACT MEANS
taking actual delivery of
securities.
by making payment either
on same day or the very
next day of contract.

STOCK EXCHANGE MEANS
Body of Individuals
before
corporatization &
demutualization.
Any body incorporate
incorporated under
Companies Act 2013.
or
For the purpose of assisting, regulating or
controlling the business of buying , selling or
dealing in securities.

GOVT SECURITIES MEAN
Securities issued by CG or SG.
Derivative (Refer Part B)

Non Applicability of SCRA
Govt, RBI, local
authority or
corporatization
established under
special law.
Convertible securities
or warrants if they are
going to be converted
at future date but at a
predetermined price.
Such contract as CG
may exempt for
interest of trade,
public & economic
development.
Non Applicability of SCRA

Application by SE for recognition to CG (Sec 3)
Any SE desirous of getting
recognized shall make an
application to CG.
Application shall be
accompanied by the
following details

Application shall be accompanied by the following details
i. Details of governing body,
constitution, rules & byelaws, manner
in which business will be conducted.
ii. Power of office- bearers
iii. Procedure, eligibility criteria for
admission, removal, suspension of
members.
iv. Procedure for registration of
partnership as member.

Grant of recognition to SE by CG (Sec 4)
CG shall grant
recognition to SE if
CG may impose
conditions relating
to following
matters

CG shall grant recognition to SE if
i. Rules & Bye laws of SE are not inconsistent with investor interest.
ii. SE is willing to comply conditions to be imposed by CG.
iii. To recognize SE is in its interest of investors and traders.
CG may impose conditions relating to following matters
i. Admissions & Removal of members.
ii. Manner in which contracts relating to securities will be entered.
iii. CG’s nominees/ representative on SE not exceeding 3.
iv. Manner of maintenance of accounts.
CG shall publish the recognition in Official Gazette

Withdrawal of Recognition by CG (Sec 5)
CG may in investor’s or
trade interest withdraw
recognition of SE after
informing in writing the
reason to Governing Body
& giving them an
opportunity of being
heard.
CG shall
withdraw
recognition if SE
fails corporatise
& demutalise.
Withdrawal of
Recognition shall be
published in OG.
It will not impact
the contracts
entered before the
withdrawal of rec.

Power of CG Same as SEBI Act.
Power to make Rules
& Issue Directions
Same as SEBI Act.
Power to Grant
Immunity
Same as SEBI Act.

Actions that CG may take on RSE
Withdrawal of recognition Supersede the
Governing Body of SE
Suspend the operations of
SE
Covered in Sec 5
Same as SEBI Act.

Suspend the operations of SE
i. CG on the grounds of emergency
ii. May suspend the operation of SE for
maximum 7 days.
iii. By notification in OG.
iv. After informing reason in writing to
governing body.
v. & after giving an opportunity of being
heard.

POWER OF RSE
To make regulations to
restrict voting rights of
members (Brokers)
To make Bye
laws

To make regulations to restrict voting rights of members (Brokers)
i. It can prescribes the matters on which members
can vote.
ii. It can restrict the member’s vote to be counted
only as 1 vote irrespective of no. of share held.
iii. It can restrict members from appointing proxy.
iv. It can provide for restriction on incidentals
matters.

To make Bye laws
i. Opening & closing of market hours
i.e. hours of trade.
ii. Periodical settlement of contracts.
iii. Terms & Conditions of contract.
iv. Margin requirement.
v. Brokerage Scales.
vi. Levy of fees,fines,penalties.
vii. Settlement of claims & Disputes.
viii. Limitations of volume of trade by a
particular member.
ix. Conditions of listing of securities.
x. Procedure of admission & removal of
members.

Punishment for contravention
If any member of RSE contravenes the bye laws of RSE then he shall be liable for
any of the following action
Fine Expulsion Suspension Penalty

CLEARING CORPORATION
It’s a company
incorporated by
RSE to which RSE
delegates the
duties & function
of a clearing
house.
Prior approval
of SEBI is
required.
Clearing
corporation
performs the
following
functions.
Clearing corporation
will have to make its
own byelaws & submit
to SEBI for approval.
SEBI will approve if its
in interest of trade &
public interest.

Clearing corporation performs the following functions:-
Settlement of
trades executed on
RSE.
Payment of money
& delivery of
securities.
Other incidental
matter related to it.

Advantages/Importance
1) Reduce the burden of RSE of clearing &
settlement.
2) Enhances investor’s confidence.
3) Promotes consistency & transparency.
E.G:- NSE ltd.'s clearing corporation is
National securities clearing corporation ltd.

Powers of SEBI under SCRA
Power to
issue
directions.
Power to Make,
Amend the bye
laws of RSE.
Power to
adjudicate.
Power to
make
regulations.
E.g.
a) Issue of Capital &
Disclosure Requirement
Regulations 2018
b) Listing, Obligation &
Disclosure Requirement
Reg 2015

NOTE:- Power of SEBI do not extend on interesternational Financial Service
Centre setup under Special Economic zone Act 2005
Additional Trading Floor
It is an additional
trading ring/
platform provided by
RSE to its investors
for smooth trading in
Securities.
It is
incorporated as
a subsidiary
comp of RSE.
Prior
approval of
SEBI is
required.
It will also have to
make bye laws and
get approved from
SEBI.
NOTE: Power of SEBI do not extend on international Financial Service Centre
setup under Special Economic Zone Act 2005

Public Issue & Listing of Securities Sec 17A of SCRA
Any company which is making a public issue or intends to list
its securities on RSE shall fulfill all the following conditions
Shall comply with all the
regulations of SEBI.
Shall make an
application for
listing on RSE.
If listing is refused/rejected
then refund the money
collected within 8 days
failing which interest @
15% will be attracted from
the expiry of 8th day.

Contracts in Derivatives (Sec 18A)
Shall be valid & legal if all 3 conditions are satisfied
1.Should be traded on
RSE.
2.Settled on clearing
house of RSE.
3.Should be between the
parties allowed by CG by
notification in OG.
Few pages in SCRA:- Already covered in SEBI Act .

MISCELLANEOUS PROVISIONS
Entitlement of the Investor to claim Dividend on shares
The security holder whose name
appears in the books of
company which issued such
securities shall be entitled to
receive the dividend declared by
the company not withstanding
the fact that he may have
transferred his securities for
consideration.
The said period of 15
days shall be
extended.
However, the transferee
shall have a right to claim
dividend from the
transferor if transferee
submit necessary
documents related to
securities transfer with the
company within 15 days of
the date when dividend
became due.

The said period of 15 days shall be extended
i. If transferee dies:- by the time period taken by LR to
transmit shares in his name.
ii. If the transfer deed lost:- by the time period taken for its
duplicate/replacement.
iii. In case of delay due to post:- by the time period taken in
post.
Note: Right to receive Income by an Investor from Collective
Investment Scheme or Mutual Fund
Exactly same as above (Instead of Security Holder use the term
Unit holder.)

Securities Contract Regulation Rules 1957
SCRR 1957 have been made on
Procedure for
recognition of
SE.
Submission of
periodical returns
& Annual Reports
by RSE.
Inquiry into affairs of
RSE & its members.
Procedure for
listing of
securities on
RSE.

Requirements for Listing of securities with RSE
Copy of
MOA &
AOA.
Copies of offer
for sale or
advertisement
inviting public
to subscribe
Securities in
last 5 years.
Copies of
Balance sheet
& audited
accounts in 5
last years or
company’s
period of
existence we.
is lower.
Statement
showing
dividend & cash
bonus given in
last 10
years or period
of existence we.
is lower.
Copies of
all
prospectus
issued so
far.
Rules 19(1) Co. shall submit application for listing to RSE with the following detail

Certified copies of
contracts with
i. Promoters
ii. Broker
iii. Underwriters.
Courts
Order.
Details of
shares
forfeited.
Brief
History of
company.
Certified copies of
contracts with
i. Managing
Director.
ii. Other Managers
iii. Agents.
Rules 19(1) Co. shall submit application for listing to RSE with the following detail

Rules 19 (2) (a)
Articles of Co. should provide following terms
There shall be
a common
share transfer
form.
Fully paid shares
shall be free from
lien.
If SH has paid calls in
advance then only
interest will be given
& no dividend on
such calls in advance.
Co. cannot forfeit
the unclaimed
dividend unless it
becomes time
barred by laws.

Rules 19 (2) (b)
Minimum offer to public Issue size
1. 25% of issue size If post issue capital ≤ 1600 cr
2. Rs 400 cr If post issue capital > 1600 cr
≤ 4000 cr
3. 10% of issue size If post issue capital > 4000 cr ≤ 1
lac cr

Conditions precedent applicating for listing of securities Rule 19(3)
To transfer the
securities if
proper
documents
related to such
transfer received
by company
To notify RSE
about the
material change
in the character
or nature of
Co.’s business.
A company while applying for listing to RSE shall undertake the following matters:-
Not to charge
any fees
on
consolidation/
sub division of
share
Co. will
dispatch
letter of
allotment
immediately
Co. will
dispatch
rights letter
immediately

Conditions precedent applicating for listing of securities Rule 19(3)
To notify
RSE about
outcomes of
General
Meetings.
To submit
Annual return
to RSE.
To submit audited
accounts
to RSE.
To inform RSE
if forfeited
shares are
reissued.
To notify RSE
about
Changes in
Directors or
Managers or
Auditor.
A Co. while applying for listing to RSE shall undertake the following matters

Rules 19 (4) For every new public issue of
securities, fresh listing
application has to be to RSE.
Rules 19 (5) RSE may suspend or withdraw the
listing of securities if Co. violates the
listing agreement.

Minimum Public Shareholding as per Rule 19 A
Shall be at least 25% of class
of securities listed on RSE.
If it falls below 25% then it
should be restored back to
minimum 25% within 12
months.

Introduction
However, it got statutory
powers on 30th Jan 1992
when SEBI Act was
passed.
It was established on
12th April, 1988.
SEBI Act 1992

Objectives of SEBI Act
To protect investors
interest.
To promote growth of
securities market. To promote fair dealing.

Objectives of SEBI Act
To establish code of
conduct of intermediaries
like brokers, merchant
bakers etc.
To monitor the
activities of stock
exchanges.
To regulate securities
market.

Establishment of SEBI
Established by CG
notification in the official
gazette.
It’s a body corporate have
separate entity perpetual
succession, common seal,
power to sale, hold acquire
and dispose property both
movable, immovable , power
to sue and be sued in its own
name.
Its headquarter is in
Mumbai.

Constitution & Management of SEBI is managed by
1 Chairperson
2 members from
ministry of CG,
i.e., 1 from MCA
& 1 from MOF
1 member from
RBI
5 other members
out of which
atleast 3 shall be
whole time

Note 1 :- All of them are appointed by CG
Note 2 :- They shall be persons of integrity,
ability and standing and having knowledge of
law or accounts or economics or finance or
administration

Powers/ Functions of SEBI
To prescribe the
listing
regulations
To prescribe
matters to be
included in
prospectus/ offer
Document
To make
regulations
relating to issue
of capital
For this SEBI has
issued Issue of
Capital & Disclosure
Requirement, i.e.,
ICDR Regulations
2018
For this SEBI has issued
Listing Obligation &
Disclosure Requirement,
i.e., LODR Regulations
2015
So that investors
are not misled by
companies

Investigation by SEBI u/s 11C
1. Grounds of Investigation
SEBI has reasonable cause
to believe that listed company
or intermediary have violated
the provisions of SEBI Act or
SEBI regulations.
Or they have conducted
operations against interest
of investors or securities
market.

2. Duty of Director, Officers & employees of Listed Company/
Intermediary
To preserve and produce
such books and returns
as asked by Investigating
Authority.
To furnish necessary
information and
explanation to
Investigating Authority.

4. Examination on Oath by Investigation Authority
To retain Books and
Papers for 6 months.
To examine an oath.
3. Powers of Investigating Authority
Use it as evidences in
legal proceedings
Investigating Authority may
examine Directors, Officers &
employees of Listed Co /
Intermediary on oath
Make notes and read to them
and get signed by them.

5. Seizure of Books and Papers
On the
grounds that
they may
destroyed or
secreted.
Allowed
after
approval of
Magistrate
of 1st class.
After
investigation
it must be
returned.
Seizure is
allowed till
completion
of
investigation

Cease and Desist Proceedings u/s 11D
Investigating Authority submits report to SEBI and finds
Listed company/ Intermediary guilty then SEBI shall pass
cease and desist order, i.e., stop the operations of that
Listed company/ Intermediary and debar from accessing
the securities market. Also a Adjucating Officer is
appointed to impose penalty.

Penalties under SEBI Act 1992
Section No. Nature of Contravention or
Reason of Penalty
Amount of Penalty
15A Failure to furnish information,
Books of Accounts, etc., to SEBI
Minimum 1 lac but in case of
continuing offence 1 lac per day
but maximum 1 crore
15B Failure of intermediary to enter
agreement with client.
Do
15C Failure by listed company or
intermediary to redress investor’s
grievances.
Do

Reason of Penalty
Amount of Penalty
15D Failure by Mutual Fund or
Collective Investment scheme to
comply with SEBI Regulations.
Do
15E Failure by AMC to comply with
SEBI regulations
Do
15EA Failure by Alternative Investment
Fund, Real Estate Investment
Trust and Infrastructure
Investment Trust to comply with
SEBI Regulations
Minimum penalty 1 lac. But in
case of continuing offence, 1 lac
per day subject to maximum 1
crore or 3 times X profit
whichever is higher

Reason of Penalty
Amount of Penalty
15EB Failure by Investment Advisors
and Research Analysts to comply
with SEBI Regulations
Same as 15A
15F (a) Broker fails to issue proper
contract notes.
Minimum penalty 1 lac
Maximum penalty 1 crore
(b) Broker fails to deliver the
securities or pay amount due to
investor.
Same as 15A
(c) Broker charges excess
brokerage
1 lac or 5 times of excess
brokerage whichever is higher

Reason of Penalty
Amount of Penalty
15G Insider Trading, i.e., dealing in
securities on basis of unpublished
price sensitive information.
Maximum penalty 25 crore or 3
times X profit earned whichever
is higher.
15H Violation of T/O code Do
15HA Fraudulent and unfair trade
practices.
Same as 15G but minimum
penalty 5 lac
15HAA Destruction of accounts/ records Minimum penalty 1 lac
Maximum penalty 10 crore or 3
times X profit whichever is
higher.
15HB Offence for which no specific
penalty is provided.
Maximum penalty 1 crore

Sec 15I SEBI’s power to Adjucate
SEBI shall
appoint an
Adjudicating
Officer to
impose
penalty
AO shall not
be below the
Rank of
Divisional
Chief
AO shall
have the
power to
summon and
enforce
attendance.
AO shall allow
the party to
present his case
and after giving
opportunity of
being heard
impose penalty.

Factors considered by AO while imposing penalty
Amount of
disproportionate
gain earned due
to default.
Loss caused
to investors.
Repetitive
nature of
default.

Appeal to Securities Appellate Tribunal
(Sec 15T & 15U)
Any person aggrieved by order passed by SEBI or AO or
Insurance Regulatory Development Authority or Pension
Fund Regulatory Development Authority may file an appeal
to SAT
Within 45 days of receipt of copy of order passed by SEBI/
AO/ IRDA/ PFRDA

SAT shall after giving reasonable opportunity of being
heard to the parties pass an order to
However SAT may allow such appeal even after 45 days
on grounds of sufficient cause.
Confirm
or
Set aside
or
Modify the
order of SEBI/
AO/ IRDA/
PFRDA

SAT shall follow the principles of natural justice and
is not bound by Code of Civil Procedure 1908.
SAT shall try to dispose the case within 6 months.

SAT shall have the following powers
Summon
and
enforce
attendance
Discovery &
production of
documents
Receiving
evidences
Reviewing
Decisions
Examinatio
n of
Witness

The Appellant may be present either in person or
through a CA or CS or CMA or a legal practioner.
No Civil Court shall have the jurisdiction in the
matters related to SEBI/ AO’s order.
The Presiding Officer, other officers and employees
of SAT are deemed to be public servants.

Appeal against SAT’s order can be made by
aggrieved party to Supreme Court on question
of Law within 60 days of communication of
SAT’s order. SC may allow further 60 days also
on grounds of sufficient cause of delay.

Composition of SAT (Sec 15L)
Such no. of
judicial and
technical
members as CG
may decide.
1 Presiding
Officer
Jurisdiction of SAT
shall be determined by
the Benches to be set by
Presiding Officer
consisting of at least 1
judicial and 1 technical
member.

Qualification (Sec 15M)
Judicial
Member
Presiding
Officer
Technical
Member
SC judge
or
Chief justice of HC
or
HC judge for at least 7
years
HC judge for at
least 5 years
Secretary/ Additional
Secretary in Ministry or Dept
of CG/ SG or Having at least
15 years experience in fields
of finance, securities market,
pension funds or insurance &
is a person of integrity &
ability.

Presiding Officer and judicial members are
appointed by CG.
Technical members are also appointed by CG but
after recommendation of Search cum Selection
Committee which comprises of :-

Chairperson of Committee will be the Presiding
Officer of SAT
Secretary, Dept of Economic Affairs as Member
Secretary, Dept of Financial Services as Member
Secretary, Legislative Department as Member

No Appointment shall be invalid merely because of
any defect in Selection Committee.
No member of SEBI or IRDA or PFRDA can be
appointed in SAT during their tenure and 2 years
after their tenure has expired.

Tenure of Presiding Officer, Judicial &
Technical Members of SAT
1 term of 5
years
Can be
reappointed
for 1 more
term of 5
years
Cannot
hold office
beyond 70
years of age

Salaries and Allowances
Will be fixed by CG
Can be increased
but not reduced.
Filling up Vacancies
CG shall fill vacancy if any

Resignation
They can submit written resignation to CG
and hold office till
a) 3 months from resignation
b) New successor joins
c) Tenure ends whichever is earlier

Removal
CG may remove them only after inquiry done by SC
judge.
Power of CG in SEBI Act 1992
• Power to issue directions u/s 16
• Power to supersede u/s 17

Power to issue directions to SEBI u/s 16
CG has power to issue directions in writing to SEBI
Before issuing any direction SEBI would be given a reasonable
opportunity of expressing its view point to SEBI
Generally such direction is related to policy matters
CG’s direction shall be binding on SEBI and final

Power to Supersede SEBI u/s 17
CG has the power to supersede (take over) SEBI for
such period as notified in Official Gazette but
maximum 6 months on any of 3 grounds :-
If CG thinks on the grounds of public interest its unnecessary SEBI
On account of grave emergency, SEBI is unable to discharge its duties & functions
SEBI has persistently violated CG’s directions

Following should be the effects of superseding SEBI
All members of SEBI shall immediately vacate the office
CG’s representatives shall discharge duties & functions of SEBI
All properties of SEBI shall vest with CG until SEBI is reconstituted
CG’s representatives shall appoint new members to reconstitute SEBI
CG shall give entire report to both houses of Parliament as soon as possible

Power to Grant Immunity Sec 24B
CG has the power to grant immunity, i.e., protection from prosecution & penalties
CG may grant such immunity to any person on recommendation of SEBI if such
person discloses to SEBI all facts related to alleged violation of SEBI Act or Rules
or Regulations.
No immunity can be granted if prosecution has already started.

If the person to whom immunity was granted fails to fulfill
the conditions related to immunity or later on it was found
that he made incomplete/ false disclosure then CG shall
withdraw immunity.
Once CG withdraws immunity SEBI can start
its prosecutions and impose penalties.

To decide
term of
appointment
of
Chairperson
& members of
SEBI
To prescribe
procedure of
investigation
To
prescribe
additional
functions
of SEBI
To
prescribe
salaries &
allowances
of members
of SEBI
To
prescribe
the manner
in which
SEBI shall
maintain
its account
Power of CG to make Rules on following matters
under SEBI Act u/s 29

Returns & Reports
CG may
call for any
return &
report from
SEBI
SEBI shall within
90 days from end of
every FY submit a
report to CG
containing
activities, policy &
programme of
SEBI in last FY
Such report
shall also be
laid down in
both the
houses of
Parliament

Delegation of Power
SEBI may delegate its powers in
writing to its officers, members and
employees.

Offences
If a person fails to pay penalty imposed by
AO then he shall be liable to imprisonment
minimum 1 month maximum 10 years OR
Fine upto 25 crores OR Both

Recovery of Amount
SEBI may appoint a recovery officer to recover the
penalty amount. Recovery Officer can :-
Attach and sell movable property
Attach bank account
Attach and sell immovable property
Imprisonment of that person

Sec 15V of SEBI Act 1992 authorizes CA/ CS/ CMA in
practice or lawyer to represent before SAT
Role of CS
Note:- SEBI has no jurisdiction/ control over IFSC
(International Financial Service Centre)

Depositories
Meaning of Depository :-
As per Sec 2(e) of the Depositories Act 1996,
Depository means a company formed and registered
under the Companies Act and has been granted a
certificate of registration under Sec 12(IA) of the SEBI
Act 1992

2 Depositories licensed by SEBI are
NSDL
(National Securities
Depositories Ltd)
CDSL
(Central Depository
Services Ltd)

Concept of Depository is same as Banks
Depositories (NSDL, CDSL) Central Bank (RBI)
Depository Participants (eg., ICICI
Direct, Motilal Oswal, etc.)
Banks
Demat Account of Investors Bank Account
Shares are held in electronic form Money in electric form

Benefits/ Advantages/ Importance of Depository
1. Elimination of Bad Delivery
Securities getting late delivered or damaged in
transit got eliminated because of electronic delivery
directly in demat account.

2. Elimination of all risks associated with physical
certificates
Risk of theft, securities getting misplaced or damaged
got eliminated
3. Immediate transfer & registration of securities
In no time the securities are transferred electronically.

4. Faster disbursement of non cash corporate
benefits
Right shares & Bonus shares are credited in demat
directly
5. Less Paper Work
Paper work got reduced.

6. Less Brokerage & Cost
Brokerage cost became less
7. Less Fraud and Error
Frauds and errors got controlled.

Investor opens a
demat account
with depository
participant (DP)
Investor fills up
Dematerialisation
Request Form
(DRF)
Investor
submits DRF &
physical share
certificates to
DP
Process of Dematerialisation

DP
intimates
Depository
DP intimates
Issuer Co/
Registrar to
issue
DP sends
physical sh
cert to Issuer/
Registrar
If sh cert are ok then
Issuer/ Registrar
confirms Depository &
demat a/c of investor
gets credited with
electronic shares

Investor fills up
Rematerialisation
Request Form
(RRF)
He
submits
it to DP
DP
intimates
Depository
Process of Rematerialisation

DP intimates
Issuer Co/
Registrar to
issue
DP send RRF
to Issuer/
Registrar
If RRF is ok then
Issuer/ Registrar
prints sh cert &
sends to Investor &
informs Depository
Demat A/c
of investor
is debited

Account Opening
Dematerialisation
Rematerialisation
Settlement
IPO Application
Pledging
Functions of Depository

Acts as agent of depository
Acts as an interface, i.e., connecting link between Depository & Customer
Account Opening
Facilitates in Dematerialisation & Rematerialisation
Settlement
IPO Application
Pledging
Functions of Depository Participant

2 Models of Depository
IMMOBILISATION DEMATERIALISATION
Physical shares are kept by depository in
vaults/ locker in safe custody on behalf of
investors
No physical shares exist
Investor can withdraw those physical
shares
Shares are held in electronic form in
demat account of investor opened with
depository
Jumbo Certificate is issued to investor
which is a proof that his physical shares
are with depository
This method is simple, cost effective and
adopted in India

The Depositories Act, 1996
The SEBI Act, 1992
The Companies Act, 2013
Indian Stamp Act, 1899
Regulatory Framework governing Depositories

By Laws of Depository
Income Tax Act, 1961
Securities Contract Regulation Act, 1956
Bankers Book Evidence Act, 1891

To provide the facility for dematerialization of securities
To provide legality to Depository System in India
To make securities fungible
To make securities freely transferrable
To provide exemption from stamp duty on the transfers made through depository
Objectives of the Depositories Act 1996

Certificate of Commencement of Business &
Eligibility Conditions for Depository Services
As per Sec 3 of the Depositories Act 1996, an entity
who wants to render depository services shall take
registration certificate from SEBI and must satisfy
following eligibility criteria :-

Its Net Worth should be at least 100 crores
It should be registered as a company under the Companies Act 2013
It should be registered with SEBI
Its by laws must be approved by SEBI
It should have adequate number of participants
It should have adequate infrastructure and system
It should comply Depositories Act 1996

There must be an agency agreement between Depository and its
DP
DP shall render services to investors as per by laws of Depository
There must be an agreement between DP & Investor
(Beneficiary) to avail the services of depository
There must be an agreement between Depository & Issuer Co. to
hold securities of its investors in demat form
Obligations of Depository, DP, Issuer, Beneficiary (Investor)

Equity shares
Preference shares
Partly paid shares
Bonds
What kind of securities can be held in demat form?

Debentures
Commercial Papers
Certificate of Deposits
Government Securities

Restriction on Transfer of
securities of Listed Co.
Listed company’s securities cannot be
transferred unless held in demat form.

Promoter’s Shareholding in
Listed Co.
Listed company shall ensure that 100%
shareholding of promoters must be held in
demat form.

It is governed by Sec 9 of the Depositories Act 1996
It means securities in demat form are interchangeable
Investor looses the right to withdraw exact sh certificate that he
surrendered at the time of dematerialisation
It is same like money in the bank account
Just like depositors can’t claim exact currency note that he deposited, in the
same manner demat A/c works
Fungibility

Rights of Depository and Investor
Depository shall be the
registered owner of the
securities
Investor shall be the
beneficial owner enjoying
all the rights and benefits
over securities

Can Investor pledge securities
held in demat?
Yes after prior approval of depository.

Powers of SEBI to control Depositories
SEBI can ask
information and
explanation
from
Depositories
Give
directions
to follow
Make
regulations
for
Depositories

If Depositories don’t follow the above then SEBI can
impose penalty minimum 1 lac + 1 lac/day for
continuing offence but maximum 1 crore.
Also if Depositories fail to conduct business fairly
then minimum penalty 5 cr & maximum penalty 25
cr or 3 times of profit earned whichever is higher.

Offences
If any person fails to
follow the Depositories
Act or Regulations then
imprisonment upto 10 yrs
or fine upto 25 cr or both
If any person fails to pay
penalty imposed on him
then he shall be liable to
imprisonment minimum
1 month maximum 10 yrs
or fine upto 25 cr or both

In case of offences by companies, then
Officers in Charge at the time when
default was committed will be liable.

Audit under SEBI (Depositories & Participants) Regulations
2018/ Internal Audit of Depository Participants
NSDL has mandated
internal audit of its DPs
on quarterly basis (before
amendment it was half
yearly basis) by
CA/CS/CMA in practice
CDSL has also mandated
its DPs to undergo
internal audits by
CA/CS/CMA in practice

Such Audit Report will be
submitted to Depository.

Account opening
Dematerialisation
Rematerialisation
Pledging
Internal Audit shall check the following

Transfer
Reporting to BOs
Settlement
Record keeping

Concurrent Audit
It’s a continuous
audit of the
following aspects
of DP:-
a) Demat
opening
b) Control &
verification
of Delivery
Instruction
Slips (DIS)
Conducted
by CA/CS
in practice
Auditor shall
verify KYC
documents of
client
received by
DP or not
Regarding DIS
auditor shall
check:-
a) DIS was
under proper
custody or
not
b) DIS dated or
not
c) DIS stamped
or not

BSDA
It stands
for Basic
Service
Demat A/c
Charges
are nil or
very low
Investor
can hold
securities
upto MV 2
lacs in it
Only 1 BSDA
is allowed per
investor. SEBI
introduced
BSDA to
motivate retail
investors to
open Demat
A/c

Role of CS in Depositories
To represent in
front of various
Regulatory
Authorities &
Tribunals like
SAT
Internal
Audit of
DP
Concurrent
Audit of
DP

SEBI ISSUE OF CAPITAL & DISCLOSURE REQUIREMENTS
REGULATIONS 2018
INTRODUCTION/BACKGROUND
SEBI constituted
ICDR committee
under the
chairmanship of
Prithvi Haldea.
ICDR Reg 2018
repealed ICDR
Reg 2009 due to
following
reason,
ICDR Regulations 2018 were
notified by SEBI in Official
Gazette on 11th sept 2018 &
was made applicable after
60 days from its notification
in Official Gazette.
ICDR committee
recommended ICDR Reg
2018 which was also
supported by SEBI’S
PMAC (Primary Market
Advisory Committee).

ICDR Reg 2018 repealed ICDR Reg 2009 due to
following reason:-
i. To make regulation more simple & remove
complexity.
ii. To make Reg which match with current market
practices.
iii. To shorten the language & make it more
understandable.

Eligibility Conditions for Initial Public Offer
Rules 6(1) & 6(2)
An issuer must satisfy all the following conditions
1. Net Tangible Assets must be at least 3 crores in each of immediately
preceding 3 full years (of 12 months each) out of which not more than 50%
should be monetary Asset.
However if issuer is having more than 50% monetary assets then it should
make firm commitment to deploy excess monetary assets in upcoming
projects.
This 50% limit of monetary asset is not applicable in case OFS(offer for sale).
2. Average Operating Profit of immediately preceding 3 full years should
be at least 15 cr with profit in each of those years.

3. Net worth of immediately
preceding 3 full years should be at
least 1 crore.
4. If Co. has changed the name in last 1
year then at least 50% of revenue
should be out of the activity suggested
by new name.

However, if the issuer fails to satisfy any of the above 4
conditions then it can still come out with IPO if both of the
following conditions are satisfied
Entire issue should be made
through book building.
At least 75% of net offer
must be allotted to Qualified
Institutional Buyers.

Entities who are not allowed to bring IPO
Reg 5(1) & 5(2)
Issuer having a
promoter or
director who is
also a promoter
or director in any
other co. which is
debarred by SEBI.
Issuer or its
promoter or
director are
wilful
defaulters.
Issuer or its
promoter or
director are
fugitive
economic
offender.
Issuer is having
some
Outstanding
Convertible
Securities.
Issuer or its
promoters are
debarred from
accessing the
securities market
by SEBI.

General Conditions of IPO
(Regulation 7)
Issuer must
have applied to
1 or more RSE
for listing of its
securities & if
applied to more
than 1 RSE then
issuer must
state its
designated
stock exchange.
Make
arrangements
with
Depository
for opening of
demat
account of its
investor’s.
All its
existing
partly paid
up shares
must either
be made
fully paid up
or forfeited.
Promoter’s
entire
shareholdin
g must be in
demat
form.
Make firm
commitment to raise
through verifiable
means of finance at
least 75% of the
stated means of
finance for the
project for which IPO
is being made.
Amt used from
issue proceeds
of IPO cannot
be used for the
general
corporate
purposes more
than 25% x
issue proceeds.

Eligibility Criteria for FPO (Further Public Offer OR Follow on Public
Offer) Regulation 103
Only 1 condition has to be satisfied:- If Co. has changed the name in last 1
year then at least 50% of its revenue should be out of the activity suggested
by new name.
If it fails to satisfy the above condition then also it can bring FPO by satisfying
both the following conditions:-
Entire should
be made
through book
building.
At least 75%
of net offer
alloted to QIB
&

Entities Not eligible to bring FPO
(Reg 102)
General conditions for FPO
(Reg 104)
Exactly same as IPO but don’t write 5th point.
Exactly same as IPO .

Issue of Warrants in IPO/FPO
1. 1 or more
warrants may be
attached with the
securities.
2. The tenure of
warrant cannot
exceed 18
months.
3. Co. will take at
least 25% of
exercise price of
warrant upfront
at the time of
issue.
4. If warrant is
not exercise then
Co. shall forfeit
upfront amt
received.

Promoter’s contribution
IPO FPO
Min. 20% x Post Issue Capital
However in case of shortfall in case of
minimum promoter’s contribution,
maximum 10% can be held by
Alternative Investment Funds,
Venture Capitalists, PFI, Scheduled
Commercial Banks, Insurance
Securities.
Either Min. 20% x Post Issue Capital or
Min. 20% x Proposed Public Issue
However, in case of Composite Issue
i.e. FPO + Right Issue, Minimum
promoter’s contribution of 20% x Post
Issue Capital or 20% x Proposed Public
Issue shall be calculated after
excluding the Right issues Component.

Non Applicability/Exemption from Promoter’s Contributions
IPO FPO
No Identifiable Promoter’s exist.
1) No Identifiable Promoter’s exist.
Or
1) A Co. whose securities are frequently
traded on RSE & has complied LODR
Regulations for immediately
preceding 3 Fys & has redressed at
least 95% of complaints of Investors
received till the end of the preceding
quarter.

Timing of Promoter’s Contribution
Promoter must bring his min.
contribution at least 1 day prior
to the opening of the Public Issue.
However in case issue of partly paid
up shares & if Promoter’s
contribution > 100 crores then RS
100 Cr shall be brought at least 1 day
prior to the opening of public issue &
rest amount shall be brought by
promoters on pro rata basis as &
when Co. makes the remaining calls.

Shares acquired by
promoters in
immediately preceeding
3 FYs for consideration
other than cash.
Bonus shares recvd
by Promoters in
immediately
preceeding 3 FYs.
Shares Pledged by the
Promoters.
Securities Ineligible for counting Min. Promoter’s Contribution

Lock in Requirements
Promoters
Retail Investors & employees who
got shares under ESOP.
Others
e.g. QIB 1 yr from
date of allotment
No lock in under ICDR Regulations.

Promoters
Minimum
Contribution
Excess over
Minimum
Contribution
Holding AIF, VC, PFI,
Banks, Ins Co. etc to
meet shortfall in
minimum Promoter’s
Contribution.
Holding of SR
equity shares
(Special rights)

Minimum Contribution 3 years from allotment or
start of Commercial Production (CP) w.e. is later
Excess over Minimum Contribution 1 yr from
allotment or CP w.e. is later.
Holding AIF, VC, PFI, Banks, Ins Co. etc to meet shortfall in
minimum Promoter’s Contribution:- 3 yr from allotment or CP
w.e. is later.
Holding of SR equity shares (Special right) Conversion Date
into Ordinary shares or 3 Yrs from allotment or CP w.e. is
later.

Determination of Lot Size
As per SEBI ICDR Regulations Lot Size will be between RS 10,000 to RS 15,000.
Now suppose Issue price/Sh = RS 500 then
Min Lot Size:-
RS 10,000
RS 500 = 20 Shares
in 1 lot.
Maximum Lot Size:-
RS 15,000
RS 500 = 30 Shares
in 1 lot.
Hence Co can decide lot size of 20 to 30
shares/lot.

Compute maximum No. of Shares that a retail investor may
apply for in following cases
No. of
Shares/
Lot
Value/Lot Maximum No of
Lots
Maximum No. of
Shares.
20 10,000
(20sh x 500)
20
(Rs 2 lac/ Rs
10,000)
400sh
(20 lots x 20)
23 11,500
(23sh x 500)
17 lots
(Rs 2 lac/ Rs
11,500)
391sh.
(17 lot x 23)
25 12,500 16 400sh
27 13,500 14 378sh
30 15,000 13 390sh

Allotment Procedure & Basis
of Allotment.
There should be at
least 1000
Prospective allotees.
In case of over
subscription
allotment to
persons other than
Retail Individual
Investors shall be
made or
proportionate basis.
Issuer shall not allot
in excess of the no.
of securities
mentioned in the
offer document.
of Allotment

In case of over subscription,
allotment to retail investors
shall be made at least 1 lot
subject to availability of
shares & remaining shares if
any will be alloted on
proportionate basis.
Lead Manager should ensure
that basis of allotment is fair.
of Allotment

E.g.
i. Total no. of Specified Securities = 1 crore @ Rs 600/share
ii. Shares offered to retail investors 35 lac sh.
iii. Issue was over all subscribed 2.5 times & retail category 4 times.
iv. Lot/Bid size = 20 shares.
v. Total 1 lac retail investors have applied between 1-16 lots.
vi. Compute shares alloted to following retail investors who have applied
for:-
A 320 SH
B 220 SH
C 120 SH
D 60 SH
E 20 SH

Ans
Total Applications received from Retail Investors (RI)
= 35 lac × 4 times
= 140 lac sh.
However, Co. can allot only 35 lac sh to RI.
First Co. should allot at least 1 lot of 20 shares to all the 1 lac RI which means 1 lac × 20 sh = 20 lac
sh will be alloted to ensure that each RI receives at least 1 lot of 20 shares.
Now remaining shares shall be alloted on Pro rata factor:-

Remaining sh that co. can allot
Remaining no. of applied sh

35 lac sh – 20 lac sh
140 lac sh – 20 lac sh

15 lac sh
120 lac sh
= .125

Name of RI No. of Shares applied No. of shares alloted
A 320 20 sh + 300× .125 = 58 sh
B 220 20 sh + 200×.125 = 45 sh
C 120 20 sh + 100×.125 = 33 sh
D 60 20 sh + 40×.125 = 25 sh
E 20 20 shares

e.g.
i. Total no. of specified securities @ Rs 600/sh is 1 crore shares.
ii. Shares reserved for Retail Investors = 35 lac sh.
iii. Issue was overall subscribed by 7 times & retail investors
category by 9.37 times.
iv. Lot Size = 20 sh/ lot
v. 2 lac retail investors applied in range of 1 lot to 16 lots.
Compute column E from following details:-

A
No of lots Applied
B
No. of shares
C
No. of Investors
D
Total share applied.
E
No. of Investors
who shall receive
minimum Bid Lot
i.e. 1 lot ( to be
selected by lottery)
[Column C× .875]
1 20 10,000 2,00,000 8,750
2 40 10,000 4,00,000 8,750
3 60 10,000 6,00,000 8,750
4 80 10,000 8,00,000 8,750
5 100 20,000 20,00,000 17,500

A
No of lots Applied
B
No. of shares
C
No. of Investors
D
E
No. of Investors
who shall receive
minimum Bid Lot
i.e. 1 lot ( to be
[Column C× .875]
6 120 20,000 24,00,000 17,500
7 140 15,000 21,00,000 13,125
8 160 20,000 32,00,000 17,500
9 180 10,000 18,00,000 8,750

A
No of lots Applied
B
No. of shares
C
No. of Investors
D
E
No. of Investors
who shall receive
minimum Bid Lot
i.e. 1 lot ( to be
[Column C× .875]
10 200 15,000 30,00,000 13,125
11 220 10,000 22,00,000 8,750
12 240 10,000 24,00,000 8,750

A
No of lots Applied
B
No. of shares
C
No. of Investors
D
E
No. of Investors
who shall receive
minimum Bid Lot
i.e. 1 lot ( to be
[Column C× .875]
13 260 10,000 26,00,000 8,750
14 280 5,000 14,00,000 4,375
15 300 15,000 45,00,000 13,125
16 320 10,000 32,00,000 8,750
Total 2 lac investors 328 lac sh

Ans:
Shares reserved for retail investors :- 35 lac sh
As per SEBI ICDR Regulation at least 1 lot must be alloted to each
Retail Investor subject to availability of shares.
2 lac retail investors have applied & if 1 lot of 20 shares are alloted
then we require 2 lac investors × 1 lot × 20 sh = 40 sh.
But we have only 35 lac sh
Therefore Proportionate Retail Investors who will be alloted 1 lot =
35 lac
40 lac
= .875

E.g.
Using the data from above sum compute shares to
be alloted to Investor (other than retail investor)
who applied for 1 lac shares.
Ans:
Shares reserved for Non Retail Investors = 1 Cr – 35
lac sh = 65 lac sh
Shares applied by them =>
Total sh applied by all 1 Cr × 7 times = 700 lac sh

Total sh applied by all 1 Cr × 7 times = 700 lac sh
Sh applied by RI 328
lac sh
Non RI :- 700 – 328 = 372
lac Sh
Therefore, Pro-rata factor for Non RI =
65 lac sh
372 lac sh
= .1747
Therefore, Investor in Non RI category who applied for 1 lac sh shall be
alloted = 1 lac sh × .1747 = 17,470 shares.

Allotment, Refund & Payment of interest
1. The lead manager shall
ensure that either
allotment has been made
or refund has been done.
2. Lead manager shall
ensure that in case of
allotment shares have
been credited
electronically or in
case of refund money
has been transferred
electronically.
3. Any delay in refund will
attract 15 % interest P.a.
on issuer.

Post Issue Advertisement.
It shall be the
responsibility of lead
manager to advertise the
following details:-
i. No. of Subscriptions
ii.Basis of allotment
iii.No. value & % of
successful allotees.
iv.Date of dispatch of
refund order.
Post issue adv
shall be done
within 10 days of
completion of
various activities.
It shall be published in 3 news
papers
i. English Language in
National Eng NP
ii. Hindi Language in
National Hindi NP
iii. Vernacular Language in
vernacular NP circulated
in district where Co’s RO
is situated.
It shall also be
uploaded on
website of
RSE.

Post Issue Responsibilities of Lead Manager
Lead manager’s
responsibility
continues until
the completion
of issue process.
Lead manager shall
monitor regularly
that investor’s
grievances related
to the issue are
being redressed by
issuer or not.
Lead manager
shall co-ordinate
with other
intermediaries
like Registrar to
Issuer &
Underwriters.
Lead manager
shall report to
SEBI about non
compliance if
any of
intermediaries.

Release of Subscription Money
In case of rejecting
listing application by RSE,
Co. shall refund entire
application money within
8 days.
Any delay will attract
interest@ 15% p.a. on
company.

Transactions in Securities by Promoter
Done between the date of
filing of offer document and
closure of issue.
Shall be reported by Co. to
RSE within 24 hrs.

Post Issue Report/Due Diligence Certificate
Given by lead
manager
Within 7 days
of allotment
or refund as
the case may
be
Mentioning
whether issuer
complied with
ICDR Regulation
or not

Fast Track Issue (Regulation 155)
It means Further Public Offer done by
issuer co without filing the draft offer
document to SEBI & waiting for its
observations. Issuer Co must satisfy all
12 conditions if it wants to come out
with Fast Track Issue/ Fast Track FPO

It means Further Public Offer done by issuer co without filing the draft offer
document to SEBI & waiting for its observations. Issuer Co must satisfy all 12
conditions if it wants to come out with Fast Track Issue/ Fast Track FPO
Listing. LODR
Regulations.
Disciplinary
action.
Demat
Holding.
Investors
Complaints.

Marketing
Capitalisation.
Annualised
Trading
Turnover.
Delivery
Based
Turnover.
No show
cause notice.
No alleged
violations.

Conflict of interest. Audit Qualification.

Listing: Co’s equity shares are listed on RSE for last 3 years
immediately preceeding the reference date.
LODR Regulations: It is in compliance with LODR Reg for last 3
years imm pr the reference date.
Disciplinary action: Its trading of eq sh were not suspended in
last 3 years imm pr. the reference date.
Demat Holding: Promoter’s entire shareholding is in demat
form.
Investors Complaint: It has redressed at least 95% ×
Investment complaints recd till the pvs quarter.

Marketing Capitalisation: Its non public shareholding Mkt Cap is at
least 1000 crores.
Annualised Trading Turnover: Its annualised trading turnover of
equity shares in immediately preceeding 6 months is at least 2 % of
total weighted no. of eq sh.
Delivery Based Turnover: Is at least 10% of total trading T/O in imm
pr 6 months.
No show cause notice: It has not recd any show cause notice from
SEBI.
No alleged violations: It is not involved in settlement of any alleged
violation in securities law.

Conflict of interest: No conflict of interest
between issuer & its Lead Merchant
Banker.
Audit Qualifications: If auditor has issued
Qualified report, the impact on financials
does not exceed 5% × Net profit/loss.

Exit offer to the dissenting shareholder
Promoters or persons
having majority control
need to provide exit
opportunity
To the dissenting
shareholders i.e. those
who voted against the
resolution to change the
object mentioned in
offer document.
Exit offer is made if both
conditions are satisfied:
a. The amount to be
used in the object
mentioned in the offer
document < 75% of
issue proceeds
AND
a.Atleast 10% dissenting
shareholders are
there.
Exit Offer Price shall be
highest of the following
Exit offer to the dissenting shareholder
Promoters or persons
having majority control
need to provide exit
opportunity

Exit Offer Price shall be highest of the following:-
i.Volume weighted avg price of shares acquired by
Promoter/Persons having control in last 52 weeks imm
pr the relevant date.
ii.Highest price paid/sh by promoter/person having
control in last 26 weeks imm pr the relevant date.
iii.Volume weighted Avg Mkt price in last 60 trading days
imm pr the relevant date.
iv.If shares are infrequently traded then valuation/share
on the basis of parameters like book value, Net worth
etc.

Manner of Providing exit offer to Dissenting Shareholder
Notice Proposing
the passing of
Special Resolution
to change the
object of offer
document shall
also mention about
exit offer.
Results of Voting
shall be submitted
by co to RSE.
An explanatory
statement shall
be annexed with
notice explaining
about exit offer.
List of dissenting
SH shall also be
submitted by co
to RSE.

Co. shall inform
details of exit
offer & its price to
RSE.
Co. shall appoint
Merchant Banker
to fix exit offer
price.
RSE Shall inform
Public within 1
working day about
exit offer.
Promoter/Persons
having control
shall deposit
money in escrow
A/c.

Exit offer should
start within 7
days of passing of
SR & remain open
for 10 days.
Once the
consideration is
paid, it should be
informed to RSE
within 2 days.

Imp Note: If issuer does not have identifiable Promoters or Persons having majority
control, then no exit offer shall be made.
Right Issue
Its an offer to existing
ESHs to subscribe further
issue of eq sh. Being
made by the Company.
Its also called Pre
emptive rights
SHs.
ICDR Regulations shall be
followed if right issue is
of Rs 10 Crore or more.

Entities not Eligible to Make Right Issue (Regulation 61)
Issuer or its
promoter or
director debarred
from accessing
the Capital
Market by SEBI
Issuer having
common
promoter or
director of
another issuer
who has been
debarred.
Promoter or
Director is a
fugitive
economic
offender.
OR OR

General Conditions of Right Issue (Regulation 62)
1. Make an
application
for listing of
shares to 1 or
more RSE.
2. Partly paid
up shares
must be
made fully
paid up or
forfeited.
3. Maximum
amt of issue
proceeds that
can be used
for general
corporate
purpose
cannot exceed
25% × issue
proceeds.
4. It has
made firm
arrangement
s of finance
of at least
75% × other
means of
finance for
the project.
5.If promoter
has SR eq
shares then
he will get
right issue
also of SR eq
sh & will be
subject to
lock in.

Preferential Issue
It means issue of equity
shares to a select group of
persons on a private
placement basis.

Who are not eligible for preferential issue (Regulation 159)
Any person belonging to
the promoter group who
has sold any of its equity
shares in last 6 months
immediately preceeding
the relevant date.
Any person belonging to
the Promoter group who
failed to exercise its
warrants & a period of 1
yr has not yet elapsed.
Any person who is a
fugitive economic
offender.
Who are not eligible for preferential issue (Regulation 159)

General Conditions of Preferential Issue
(Regulation 160)
Special
Resolution in
General
Meeting is
required to be
passed.
Partly paid up
eq sh shall be
converted into
fully paid up
orforfeited.
Entire
shareholding
of the
proposed
allotees are in
dematform.
Obtain PAN of
Proposed
allotees.
Co. should be
in compliance
of LODR
Regulation.

Qualified Institutional Placement
It means offer of specified securities to
Qualified institutional buyers only.
Example of QIB :- Mutual fund Co, Banks,
Insurance Co ,PFI , Venture Capitalists etc.

Conditions for QIP (Regulation 172)
SR in GM is required.
Provided that if QIP is
an offer for sale of
existing shares of
promoters, then SR in
GM is not required.
Validity of SR shall be 1
year.
Partly paid up shares
must be fully paid up or
forfeited.

Conditions for QIP (Regulation 172)
Promoter/Director is
not a fugitive economic
offender.
New QIP can be made
only after 2 weeks of
last QIP.
The Co.’s shares have
been listed on RSE for
minimum 1 year.

IPO of Indian Depository Receipt
These are the specified securities
issued by a foreign company India.

Conditions for issue of IDR (Regulation 183)
Conditions of Issue:-
i. Issue size must be of at least Rs 50 Crores.
ii.It should be denoted only in INR.
iii.Shares issued in India shall rank pari passu
with shares listed in its home country.
Eligibility Criteria:-
i. Issuer should be listed in its home
country for preceeding 3 years.
ii. It is not prohibited by regulator to issue
securities.
iii. It has a track a record of compliance of
securities market regulations.
iv. Its promoter/director is not a fugitive
economic offender.

Right Issue of IDR
Conditions are same as right issue of shares
Other General Conditions of IDR
Same as earlier done in Reg 7
Right Issue of IDR
Other General Conditions of IDR
Same as earlier done in Reg 7

Entities not Eligible to make right issue of IDR.
1. If it has not complied with SEBI LODR
Regulations.
OR
2. If its promoter/director is a fugitive economic
offender.

IPO by Small & Medium Enterprises (SME)
Entities not Eligible:-
Exactly same as
Normal IPO first 4 pts.

Eligibility Requirement for IPO by SME (Reg 229)
If post issue paid
up capital≤ 10 Cr
then it can b e
listed only on
Small & Medium
Enterprise
Exchange Board.
If post issue paid
up capital > 10 ≤
25 Cr then it has
an option to get
listed on SME
Board or Main
Board.
SEBI does not
issue any
observation on
offer document.
Due Diligence
certificate
submitted by
lead manager to
SEBI

Eligibility Requirement for IPO by SME (Reg 229)
100% issue must
be Underwritten
in which at least
15% by lead
manager.
Compulsory
market making for
3 years from
listing.
Minimum
Application size Rs
1 lac.
May migrate to
main Board by
passing SR
through Postal
Ballot.

Same as Normal IPO
Other General Conditions

It is a trading platform for listing &
trading of specified Securities issued by
those start ups which has extensive use of
technology, intellectual property right,
biotech etc.
Innovators Growth Platform

Conditions :
1. At least 25% × pre issue capital should be held by QIBs or
Innovator Growth Platform Investors last 1 year.
2. Listing of securities possible both with or without IPO.
3. Min issue size of IPO should be Rs 10 Crores.
4. Min application value in IPO should be Rs 2 lac.
5. Trading Lot should be Min Rs 2 lac & its multiples.
6. Min allotees should be 50.

Condition for Issue of Bonus Shares
Regulation 293
1) Bonus issue must be authorised by articles.
2) If articles are silent then alter the articles by passing SR in GM.
3) Co. should not have defaulted fixed deposit or debt securities.
4) Co. should not have defaulted in pyt of statutory dues of ees
like bonus, PF, Gratuity.
5) Partly paid up eq Sh must be converted into fully paid up.
6) Promoter/ Director not a fugitive economic offender.

Regulation 294
7) If promoter/ founder has any SR eq sh then Bonus
shares issued on them shall also carry same rights.
8)Bonus share can be given out of :-
a. Free Reserves
b. Securities Premium
c. Capital Redemption Reserve
9) Bonus shares cannot be issued in lieu of dividend.

Regulation 295
10) Bonus issue must be completed within 15
days/2months from the date of BM in which bonus
issue was decided if SH’s approval not read/ read.
11) Bonus issue once announced cannot be
withdrawn.

Steps involved in Issue of shares to public
1. Compliances
with SEBI
Regulations:
Issuermustensure
compliancewith
ICDRReg2018
2. Holding of GM:
SRinGMrequired
forissuingsharesto
public
3. Appointment
of merchant
Bankers:
Issuermustappoint
merchantbankerto
managetomanage
theissuer
4.Appointmentof
other
intermediaries:-
like Registrarto
issue,bankerto
issue,underwriter,
Brokers,printersetc

5.Draftingof
Prospectus:
Prospectusisdrafted
6.InformRSE:
MOA&AOAis
submittedtoRSE
7. Approvalof
prospectusby
experts:
Expertssignatureis
takenonprospectus
8.Approvalof
prospectusbyBOD:
BOD approves
prospectus

9. ListingApplication
istomadetooneor
more
10.Prospectusis
printerested&
distributed.
11. Promoter’s
Contributions&Lock
inmustbesatisfied
12. Pricingisdone
9. ListingApplication
istomadetooneor
more
10.Prospectusis
printed&distributed.
12. Pricingisdone

14.Mandatory
CollectionCentreis
openedinKolkata,
Delhi,Mumbai,
Chennai,tocollect
applicationsforms
15. Promoter’s
Contributionsis
certifiedbyanexpert
16. Application
Moneyis receivedby
Bankers
13. Underwritingis
done

18. Allotmentisdone 19. Refundismadeincaseof
failedinallotment
17. MinimumSubscription
mustbeachieved

1. To guide the
management
regarding
regularity
requirements
of public issue
&listing.
2. To ensure
complaince of
ICDR
Regulations.
3. To ensure
complaince of
CompaniesAct.
Role CS in Public Issue
4. To Co-
ordinate with
interestermedia
ries.
5.Toensure
complainceof
otherRules&
Regulations.
1.Toguidethe
management
regarding
regularity
requirements
ofpublicissue
&listing.
2.Toensure
complainceof
ICDR
Regulations.
3.Toensure
complainceof
CompaniesAct.
Role CS in Public Issue
4.To
Co-ordinate
with
intermediaries.

Disclosure in Drafting Offer Document & Offer Document.
It shall contain all the
material information so
that applicants can take
an informed investment
decision.
Lead manager shall certify
it as correct.
Information should not be
more than 6 months old.

Filling of Offer Document
Before IPO/FPO
issuer shall file 3
copies of draft
offer documents
to SEBI.
Due Diligence
certificate given
by lead manager
shall also be
attached to it.
SEBI may issue
its observations
within 30 days
otherwise it
shall be deemed
that SEBI has no
objections.
Copy of draft
offer document
shall also be
submitted to
RSE.

Offer Document Available to Public:-
The draft offer document shall be made available to
public for at least 21 days on website of SEBI & RSE so
that even public can submit its observations or objections
if any to SEBI

Face Value/share
Shall be disclosed in draft offer document, offer
document, all the advertisements & application
forms
Pricing & Price Band
The issue price is fixed by the
issuer along with the lead
manager or as per Book Building
Process

Book Building Process
Its an investor driven
pricing technique in which
company/issuer fixes a
price band containing floor
price & cap price in which
cap price cannot exceed
20% × floor price.
Bid price are invited
from prospective
investors.
The price at which
maximum no. of shares will
get sold becomes the final
share price.

E.g. Suppose company has 100 shares to offer & it fixes price band of
Rs 100-120/share.
Compute final share price from following info:-
Bid Price No. of shares
100 40
105 30
110 35
115 20
116 30
118 35
120 15

Ans
Bid price No. of shares Cumulative shares
120 15 15
118 35 50
116 30 80
115 20 100
100 35 135
105 30 165
100 40 205
Hence Rs 115 should be the final share price because at this price all our 100
shares will be sold.

Steps in Book Building Process
1. Company appoints a lead book runner who shall be none other
than the lead merchant banker.
2. Submit draft offer document to SEBI for its observations.
3. Submit Red herring prospectus containing price band to SEBI,
RSE,ROC.
4. Make pre issue advertisements.
5. Appoint underwriters & other intermediaries.
6. Bids are electronically invited from prospective investors.
7. Final share price is fixed
8. Prospectus is issued.
9. Issue is subscribed by Public.
10. Allotment is made.

When Book Building was optional for
issuer:-
Minimum 35% × issue size = Retail
Individual Investors.
Minimum 15% × issue size = Other
Non Institutional Investors.
Maximum 50% × issue size = QIBs out
of which 5% reserved for Mutual
Funds
Mandatory:-
Maximum 10% × issue size = Retail
Individual Investors.
Maximum 15% × issue size = Other
Non Institutional Investors.
Minimum 75% × issue size = QIBs out
of which 5% reserved for Mutual
Funds
Allocations in case of Book Building

Differential Pricing
It means fixing
different Issue prices
for different categories
of applicant.
Its allowed but lower
price has to be charged
from Retail Individual
Investors & employees.
However, it cannot be
lower than 10% × issue
price fixed for other
categories of
applicants.

Reservation on Competitive Basis
It means Proportionate
allotment of specified
securities to applicants
of reserved category.
Issuer may reserve the
specified securities for
its employees &
shareholders.
The reserved no. of
securities cannot
exceed 5% of post
issue capital for
employees & 10% of
post issue capital for
shareholders.

Incentives: No incentive can be paid by issuer to
anyone to subscribe the securities.
Security Deposit: 1% × issue size has to be
deposited by issuer with RSE.
IPO Grading: Is mandatory for the issuer to obtain
from the credit rating agency.

Underwriting
At least minimum
subscription should
be underwritten.
It should be done by
underwriters & Lead
Manager.
Shares offered to
QIBs are not
underwritten.

Monitory Agency
PFI or
scheduled
bank is
appointed as
a monitoring
agency if
issue
proceeds >
100 crores
Its role is to
check
whether issue
proceeds are
being used for
purposes
which was
mentioned in
offer
document
Not
applicable if
issuer is Bank
or PFI or
Insurance
Company
Monitoring
agency
submits
quarterly
report on use
of issue
proceeds till
95% × issue
proceeds are
not utilised
Issuer
publishes it
on website
within 45
days of each
quarter.

Pre Issue Advertisement
Made in 3 Newspapers
(same as post issue
advertisement)
Contain information
about fixed price or price
band
Details of issue size, Lead
Manager
IPO/FPO must be brought within 12 months from the date
of SEBI’s observation on Offer Documents
Min subscription :- 90% × issue size other wise refund.
Subscription to be kept open for minimum 3 working
days & maximum 10 working days

An Overview of SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015

APPLICABILITY
These regulations shall apply to a listed entity which has
listed any of the following designated securities on
recognised stock exchange(s):

Applicability
Specified
securities listed
on main board or
SME exchange or
Innovators
Growth
Platform.
NCDs,
NCRPs,
Perpetual
Debt
Instrument
Indian
depository
receipts
Securitised
debt
instruments
Security
receipts
units issued
by mutual
funds
Any other
securities
as may be
specified
by SEBI

OBLIGATIONS OF LISTED ENTITIES
(ACRONYM : CC DD FF SS G)
Common obligations
(Applicable for all listed
entities)
Obligations of Listed entity
which has listed its Specified
Securities
Obligations of Listed entity which
has listed its Non- Convertible Debt
Securities or Non- Convertible
Redeemable Preference Shares or
both

which has listed its
Specified Securities and
either Non-Convertible Debt
Securities or Non-
Convertible Redeemable
Preference Shares or both
which has listed its Indian
depository receipts
which has listed its securitized
debt instruments

Obligations of Listed
entity which has listed its
Security Receipts.
which has listed its units
issued by mutual funds.

COMMON OBLIGATIONS OF LISTED
ENTITIES
General obligations applicable to all listed companies
(Acronym : CC DD FF SS G)
 Compliance officer and his/her obligations: A listed company shall appoint a
qualified Company Secretary as the Compliance officer who shall be responsible
for:
 Ensuring conformity with the regulatory provisions applicable to the listed entity
in letter and spirit
 Co-ordination and reporting to board, recognised stock exchange(s) and
depositories
 Ensuring correct procedures are followed and reports are filed
 Monitoring email address of grievance redressal division

Share-transfer agent: The listed entity shall appoint a share transfer
agent or mange the share transfer facility in house
Co-operation with intermediaries registered with the SEBI:
Wherever applicable the listed entity shall co-operate with and submit
correct and adequate information to the intermediaries registered with
the SEBI such as credit rating agencies, registrar to an issue and share
transfer agent etc.
Preservation of documents: The listed entity shall have a policy for
preservation of documents, approved by its board of directors, classifying
them in at least two categories as follows-
Documents whose preservation shall be permanent in nature

 Documents with preservation period of not less than eight years after
completion of the relevant transactions.
However, the listed entity may keep documents in electronic mode.
Filing of information: The listed entity shall file the reports, statements,
documents, filings and any other information with the recognised stock
exchange(s).
Scheme of Arrangement: The listed entity shall ensure that any scheme of
arrangement /amalgamation/ merger /reconstruction /reduction of capital etc.
to be presented to any Court or Tribunal does not in any way violate, override
or limit the provisions of securities laws or requirements of the stock
exchange(s).
Payment of dividend or interest or redemption or repayment: The listed
entity shall use any of the electronic mode of payment facility approved by the
Reserve Bank of India.

Grievance Redressal Mechanism: The listed entity shall ensure that
adequate steps are taken for expeditious redressal of investor
complaints. The listed entity shall ensure that it is registered on the
SCORES platform.
Fees and other charges to be paid to the recognized stock
exchange(s): The listed entity shall pay all such fees or charges, as
applicable, to the recognised stock exchange(s).

COMPLIANCES UNDER SEBI (LODR)
REGULATIONS
The Listed entity shall comply with the following compliances under the SEBI
(LODR) Regulations:-
 One Time Compliances
 Quarterly Compliances
 Half yearly Compliances
 Yearly Compliances
 Event based Compliances

One-time Compliances
Regulation Particulars
6(1) A listed entity shall appoint a Company Secretary as the Compliance
Officer.
7(1) The listed entity shall appoint a share transfer agent or manage the
share transfer facility in house.
However, in the case of in-house share transfer facility, as and when
the total number of holders of securities of the listed entity exceeds
one lakh, the listed entity shall either register with the SEBI as a
Category II share transfer agent or appoint Registrar to an issue and
share transfer agent registered with the SEBI.

One-time Compliances
Regulation Particulars
7(1) However, in the case of in-house share transfer facility, as and when
the total number of holders of securities of the listed entity exceeds
one lakh, the listed entity shall either register with the SEBI as a
Category II share transfer agent or appoint Registrar to an issue and
share transfer agent registered with the SEBI.
9 The listed entity shall have a policy for preservation of documents,
approved by its Board of Directors.

Quarterly Compliances
Regulation Title Particulars Time Limit
13(3) Investor complaints
statement
The listed entity shall file
with the recognised stock
exchange, a statement giving
the number of investor
complaints pending at the
beginning of the quarter,
those received during the
quarter, disposed of during
the quarter and those
remaining unresolved at the
end of the quarter.
Within 21 days
from end of
quarter.

27(2) Quarterly
Compliance report
The listed entity shall submit a
quarterly compliance report on
corporate governance in the format
as specified by SEBI from time to
time to the recognized stock
exchange(s).
Within 21 days from the
end of each quarter.
31(1)(b) Shareholding
pattern
The listed entity shall submit to the
stock exchange(s) a statement
showing holding of securities and
shareholding pattern separately for
each class of securities, in the format
specified by SEBI from time to time.
within 21 days from the
end of each quarter.

32(1) Statement of
deviation(s)
or
Variation(s)
The listed entity shall submit to the
stock exchange a statement of
deviation or variation (for public
issue, rights issue, preferential issue
etc.)
Quarterly Basis till such time
the issue proceeds have been
fully utilized or the purpose
for which these proceeds
were raised has been
achieved.
32(6) Monitoring
Agency
Report
Where the listed entity has appointed
a monitoring agency to monitor
utilisation of proceeds of a public or
rights issue, the listed entity shall
submit to the stock exchange(s) any
comments or report received from
the monitoring agency.
within 45 days from the end
of each quarter.

33(3) Financial results The listed entity shall submit quarterly
and year-to-date standalone financial
results to the stock exchange.
In case the listed entity has subsidiaries,
the listed entity shall also submit
quarterly/ year- to date consolidated
financial results.
Within 45 days of end of
each quarter, other than
the last quarter.
47 Advertisements
in Newspapers
Financial results, along-with the
modified opinion(s) or reservation(s), if
any, expressed by the auditor.
Within 48 hours of
conclusion of the meeting
of board of directors at
which the financial
results were approved.

Half Yearly Compliances
23(9) Related Party
disclosures
The listed entity shall submit to
the stock exchange, disclosures of
related party on consolidated
basis.
within 30 days from the date of
publication of its standalone
and consolidated financial
results for the half year.
33(3) Statement of
Assets and
Liabilities/
Cashflow
The listed entity shall also submit
as part of its standalone or
consolidated financial results for
the half year a statement of assets
and liabilities and a statement of
cash flows by way of a note.
half-yearly basis

Yearly Compliances
7(3) Compliance
Certificate
The listed entity shall submit a compliance
certificate to the exchange, duly signed by both
the compliance officer of the listed entity and
the authorised representative of the share
transfer agent certifying that all activities in
relation to share transfer facility are
maintained either in house or by Registrar to
an issue and share transfer agent registered
with the SEBI.
Within 30 from the end
of the financial year.
14 Annual Listing
Fees
The listed entity shall pay all such fees or
charges, as applicable, to the recognised stock
exchange(s), in the manner specified by SEBI or
the recognised Stock Exchange (s)
within 30 days of the
end of financial year

Yearly Compliances
33(3) Annual Financial
results
The listed entity shall submit
annual audited standalone
financial results with audit
report.
Within 60 days from the end
of the financial year
34 Annual Report The listed entity shall submit the
annual report along with the
Notice of the Annual General
Meeting to the stock exchange.
Not later than the day of
commencement of dispatch
to its shareholders.

Yearly Compliances
34(1)(b) Changes to annual
report
In case any changes to the
annual report, the revised copy
along with the details of and
explanation for the changes
shall be sent.
within 48 hours after the
annual general meeting
36 Annual reports to
securities holders
The listed entity shall send
annual report to the holders of
securities.
Not less than 21 days
before the annual general
meeting.

Yearly Compliances
40(9) Certificate The listed entity shall ensure that the
share transfer agent and/or the in-
house share transfer facility, as the
case may be, produces a certificate
from a practicing company secretary
certifying that all certificates have
been issued within thirty days of the
date of lodgment for transfer,
subdivision, consolidation, renewal,
exchange or endorsement of calls/
allotment monies.
within 30 days from
the end of the
financial year.

Event Based Compliances
7(5) Share-transfer
agent
The listed entity shall
intimate the appointment
of Share Transfer Agent,
to the stock exchange(s).
Within 7 days of
Agreement with
RTA.
28(1) In-principle
approval
The listed entity shall
obtain In-principle
approval from recognised
stock exchange
Prior to issuance
of Security.

29(1)(a) read
along with
proviso to 29
(2)
Intimations The listed entity shall give prior
intimations of Board Meeting for
financial result viz. quarterly, half
yearly or annual, to the stock
exchange(s).
At least 5 days in advance
(excluding the date of the
intimation and the date of
the meeting)
29(1) (b), (c),
(d), (e) & (f)
read along
with 29 (2)
Intimations The listed entity shall give prior
intimations of Board Meeting for
Buyback, Voluntary delisting, Fund
raising by way of FPO, Rights Issue,
ADR, GDR, QIP, FCCB, Preferential
issue, debt issue, declaration/
recommendation of dividend,
declaration of Bonus securities etc.,
At least 2 working days in
advance (excluding the
date of the intimation and
date of the meeting)

29(3) Intimations Board Meeting for alteration in
nature of Securities, alteration in
the date on which interest on
debentures/ bonds/redemption
amount, etc.
At least 11 working
days in advance.
30(6) Disclosure of
events
The listed entity shall disclose all
events, as specified in Part A of
Schedule III of SEBI (LODR)
Regulations, to the stock
exchange(s).
Not later than 24
hours from the
occurrence of the
event or
information.

31(1)(a) Holding of
Specified
securities
The listed entity shall submit to
the stock exchange(s) a
statement showing holding of
securities and shareholding
pattern separately for each
class of securities prior to
listing of securities.
One day prior to listing of
securities.
31(1)(c) Shareholding
pattern
a statement showing holding
of securities and shareholding
pattern.
Within 10 days of any
capital restructuring
exceeding 2% of the total
paid-up share capital.

31A (8) Disclosure of material
events in case for
reclassification of any
person as
promoter/public
The listed entity shall disclose
to the stock exchange the
deemed material events i.e.,
receipt of request for re-
classification by the listed entity
from the promoter(s) seeking
re-classification, Minutes of the
board meeting considering such
request which would include
the views of the board on the
request, etc
within 24 hours
from the occurrence
of the event.

37(1) Scheme of
arrangement
The listed entity shall file draft
Scheme of Arrangement to the
stock exchange(s)
Prior approval before
filing with Court or
Tribunal.
39(2) Issue of
Certificate
The listed entity shall issue
certificates or subdivision, split,
consolidation.
within 30 days from
the date of such
lodgment.

39(3) Information relating
loss of securities
The listed entity shall submit
information with respect to
loss of share certificates and
issue of the duplicate
certificates to the stock
exchange.
Within 2 days of
getting in-formation.
40(3) Registering the
transfer of securities
The listed entity shall register
transfers of its securities in
the name of the transferee(s).
within 15 days from
the date of such
receipt of request
for transfer.

Transmission request The listed entity shall
proceed the transmission
request.
In case securities held in
dematerialised mode, within
7 days after receipt of the
documents
In case of physical mode,
within 21 days after receipt of
the documents.

42(2) Record Date /
Book Closure
The listed entity shall intimate the record date
or date of closure of transfer books to all the
stock exchange(s) specifying the purpose of
the record date. The listed entity shall intimate
the following events:
(a) declaration of dividend
(b) issue of right or bonus shares
(c) issue of shares for conversion of
debentures or any other convertible security.
In case of Right Issue,
at least 3 working
days in advance.
Other than Right
Issue, at least 7
working days in
advance (excluding
the date of intimation
and record date).

43A Dividend distribution
policy
Dividend Distribution Policy
by the top 1000 listed entities
based on market
capitalization.
shall be disclosed on
the website of the
listed entity and a
web-link shall also
be provided in their
annual reports.
44(3) Voting results The listed entity shall submit
to the stock exchange details
regarding voting results.
Within 2 working
days of conclusion of
its General Meeting.

46 Maintenance of
website
The listed entity shall maintain a
functional website containing the
basic information about the listed
entity and update any change in
the content of its website.
Within 2 working
days from the date
of change in
content.

CORPORATE GOVERNANCE UNDER SEBI (LODR)
REGULATIONS, 2015
Corporate governance provisions which are specified in Regulations 17
to 27 and clause (b) to (i) and t of regulation 46(2).

Exceptions for Listed Entity which has listed
its Specified Securities
As per Regulation 15(2) of the SEBI (LODR) Regulations, 2015 the
compliance with the corporate governance provisions as specified in
Regulations 17 to 27 and clauses (b) to (i) and t of Regulation 46(2) and
para C, D and E of Schedule V shall not apply, in respect of following –
1. A listed entity having:-
paid up equity share capital not exceeding rupees 10 crore and
net worth not exceeding rupees 25 crore, as on the last day of the previous
financial year.

Provided that-
Where the provisions of regulations 17 to 27, clauses (b) to (i) and (t)
of sub-regulation (2) of regulation 46 become applicable to a listed
entity at a later date, it shall ensure compliance with the same within
six months from such date.
Further, once the above regulations become applicable to a listed
entity, they shall continue to remain applicable till for a period of three
consecutive financial years.

Question:
A Company ABC Limited, which has its Equity Shares listed on stock
exchanges, has a paid up capital of Rs. 9 Crore and net worth of Rs. 26
Crore.
Answer:
In such a case, the exemption will not be available to ABC Limited as it
is required to comply with both conditions as stated in para 1 above.

2. A listed entity which has listed its specified securities on the SME
Exchange.
3. The provisions as specified in regulation 17 shall not be applicable
during the insolvency resolution process period.
4. Regulations 18, 19, 20 and 21 shall not be applicable during the
insolvency resolution process period .

KEY PROVISIONS PERTAINING TO CORPORATE GOVERNANCE
Composition of Board of Directors (Regulation 17)
Board of Directors shall have optimum combination of executive and
non-executive directors with at least one-woman director and not less
than fifty per cent. of the board of directors shall comprise of non-
executive directors.
The Board of directors of the top 1000 listed entities shall have at least
one independent woman director

Question:
ABC Limited is a listed entity and having on Board one-woman
Director as Executive Director. The Company is within the top 1000
listed entities. Whether the Company still requires to appoint
another woman Director?
Answer:
In the given case, the Company will be required to appoint one
Independent woman Director as the Company is having Executive
woman Director and not independent.

The Composition of board of directors of the listed entity
shall be as follows:
Chairman Composition
In case chairperson is a non-executive
director and not related to promoter
group.
At least one-third of the board of
directors shall comprise of
independent directors.
In case listed entity does not have a
regular non-executive chairperson.
at least half of the board of
directors shall comprise of
independent directors.

Question:
Mr. A is non-executive director of ABC Limited. X, Y and Z are
promoters of ABC Limited. Mr. A is a chairperson of the Company and
he is also related to X. Suggest the requirement of Independent
directors for ABC Limited.
Answer:
In the given case, since Mr. A is non-executive chairperson and is
related to promoter, then ABC Limited will be required to appoint
atleast half of the directors as independent director.

Maximum age of non-executive directors
No listed entity shall appoint a person or continue the directorship
of any person as a non- executive director who has attained the age
of 75 years unless a special resolution is passed.

Minimum Directors Requirement
The top 2000 listed entities (with effect from April 1, 2020) shall
comprise of not less than six directors.
Quorum of board meeting
The quorum for every top 2000 listed entities shall be one-third of its
total strength or three directors, whichever is higher, including at least
one independent director.
In case of listed entity, one independent director should be present at
the Meeting to form a quorum.

Key Compliance Requirements for Board
Periodically review compliance
reports pertaining to all laws
applicable to the listed entity.
Satisfy itself that plans are in
place for orderly succession
for appointment to the board
of directors
Performance evaluation of
independent directors
Lay down a code of conduct
for all members of board of
directors and senior
management
Recommend all fees or
compensation, if any, paid
to non-executive directors,
including independent
directors.

Maximum Number of Directorships /
Committee Membership & Chairpersonship
A person shall not be a director in
more than seven listed entities.
However a person shall not serve
as an independent director in
more than seven listed entities.
Any person who is serving as a
whole time director / managing
director in any listed entity shall
serve as an independent director in
not more than three listed entities.
A director shall not be a member
in more than ten committees or
act as chairperson of more than
five committees across all listed
entities.

(a) The limit of the committees
on which a director may serve in
all public limited companies,
whether listed or not, shall be
included and all other companies
including private limited
companies, foreign companies
and companies under section 8 of
the companies act, 2013 shall be
excluded;
(b) For the purpose of
determination of limit,
chairpersonship and membership
of the audit committee and the
stakeholders’ relationship
committee alone shall be
considered.
A director shall not be a member in more than ten committees or act as
chairperson of more than five committees across all listed entities

Question:
Mr. A is a Director of ABC Listed company. He holds following membership /
chairmanship in following companies –
1. Chairman of Audit Committee of ABC Listed company
2. Chairman of Nomination & Remuneration Committee of ABC Listed
company
3. Chairman of Stakeholders’ Relationship Committee of ABC Listed company
4. Chairman of Audit Committee of XYZ Limited company
5. Chairman of Nomination & Remuneration Committee of XYZ Limited
company
6. Chairman of Stakeholders’ Relationship Committee of XYZ Limited
company
Please advise the limit of membership / chairpersonship.

Answer:
Mr. A, in the given case, is chairman of above mentioned committees.
Only Audit Committee and Stakeholders Relationship Committee will
be counted for the purpose and both ABC Listed company and XYZ
Limited, being public limited company will be considered.
In view of the above, his total chairperson is 4 which is within the limit
of 5 committee chairpersonship as permitted.

Board Committees
Committees
Audit Committee
(Regulation 18)
Nomination and
Remuneration
Committee
(Regulation 19)
Stakeholders
Relationship
Committee
(Regulation 20)
Risk
Management
Committee
(Regulation 21)

BASIS AUDIT COMMITTEE
(REG 18)
NOMINATION &
REMUNERATION
COMMITTEE (REG
19)
STAKEHOLDERS
RELATIONSHIP
COMMITTEE
(REG 20)
RISK MANAGEMENT
COMMITTEE (REG 21)
COMPOSITION •The committee
shall comprise of
at least three
directors.
•Two-thirds of the
members of audit
committee shall be
independent
directors.
• The committee
shall comprise
of at least three
directors.
• All directors of
the committee
shall be non-
executive
directors.
•The committee
shall comprise
of at least three
directors.
•The committee
shall have at
least one
independent
director.
• Minimum three
members with
majority of them
being members of the
board of directors,
including at least one
independent director.

BASIS AUDIT
COMMITTEE
(REG 18)
NOMINATION &
REMUNERATION
COMMITTEE (REG 19)
STAKEHOLDERS
RELATIONSHIP
COMMITTEE (REG 20)
RISK
MANAGEMENT
COMMITTEE
(REG 21)
COMPOSITION •In case of a
listed entity
having
outstanding SR
equity shares,
the audit
committee
shall only
comprise of
independent
directors.
•At least fifty percent
of the directors shall
be independent
directors.
•In case of a listed
entity having
outstanding SR equity
shares, two thirds of
the nomination and
remuneration
committee shall
comprise of
independent
directors.
•In case of a listed
entity having
outstanding SR equity
shares, at least two
thirds of the
Stakeholders
Relationship
Committee shall
comprise of
independent
directors.
•In case of a
listed entity
having
outstanding SR
equity shares, at
least two thirds
of the Risk
Management
Committee shall
comprise
independent
directors.

(REG 18)
NOMINATION &
REMUNERATION
COMMITTEE (REG
19)
STAKEHOLDERS
RELATIONSHIP
COMMITTEE (REG 20)
RISK
MANAGEMENT
COMMITTEE
(REG 21)
CHAIRPERSON The chairperson
shall be an
independent
director who shall
be present at
Annual general
meeting to answer
shareholder
queries.
The chairperson
shall be an
independent
director who may
be present at
the annual general
meeting, to
answer
the shareholders’
queries.
The chairperson shall be
an executive director
who shall be
present at the annual
general meetings to
answer queries of the
security holders.
The Chairperson
of the Risk
management
committee shall
be a member of
the board of
directors and
senior
executives of
the listed entity
may be
members of the
committee.

BASIS AUDIT
COMMITTEE
(REG 18)
NOMINATION &
REMUNERATIO
N COMMITTEE
(REG 19)
STAKEHOLDERS
RELATIONSHIP
COMMITTEE (REG 20)
RISK
MANAGEMENT
COMMITTEE
(REG 21)
MEETINGS The committee
shall meet at
least four times
in a year and not
more than one
hundred and
twenty days shall
elapse between
two meetings.
The committee
shall
meet at least
once in a year.
The committee shall
meet at least once in a
year.
The committee
shall meet at
least twice in a
year.

(REG 18)
NOMINATION &
REMUNERATION
COMMITTEE (REG 19)
STAKEHOLDERS
RELATIONSHIP
COMMITTEE
(REG 20)
RISK MANAGEMENT
COMMITTEE (REG 21)
QUORUM Two members or one
third of the members
of the audit
committee,
whichever is greater,
with at least two
Independent
directors.
Two members or one
third of the members
of the committee,
whichever is greater,
Independent director
in attendance.
The quorum for a
meeting of the Risk
Management
Committee shall be
either two members
or one third of the
members of the
Committee,
whichever is higher,
member of the board
of directors in
attendance.

BASIS AUDIT
COMMITTEE
(REG 18)
NOMINATION &
REMUNERATION
COMMITTEE (REG 19)
STAKEHOLDERS
RELATIONSHIP
COMMITTEE
(REG 20)
RISK MANAGEMENT
COMMITTEE (REG 21)
QUORUM The meetings of the risk
management committee
shall be conducted in
such a manner that on a
continuous basis not
more than one hundred
and eighty days shall
elapse between any two
consecutive meetings.

(REG 18)
NOMINATION &
REMUNERATION
COMMITTEE (REG 19)
STAKEHOLDERS
RELATIONSHIP
COMMITTEE (REG 20)
RISK
MANAGEMENT
COMMITTEE
(REG 21)
ROLE OF
COMMITTEE
•Recommend name
and remuneration
of auditors.
•Review financial
statements.
•Review Audit
Report.
•Check that
independent audit
was done.
•Approve related
party transactions.
• Recommend
remuneration of
executive directors
and senior
management.
• Recommend
parameters to
evaluate
performance of
executive director
and senior
management.
• To solve grievances
of stakeholders.
• Monitoring
and reviewing
of the risk.
• Cyber security.

ABC Limited is a listed company having all committees constituted in
compliance with listing regulations. Its Audit committee having 5
directors, out of which 4 directors are independent. At a meeting of
the Audit Committee, 2 directors were present (one non-executive
and one independent). Is the meeting valid?

In terms of the listing regulations, two independent directors
should be present at the meeting of the Audit Committee to
constitute a valid quorum. Therefore, the aforesaid Meeting is
invalid as only one Independent Director was present.

Note:
• The Company Secretary shall act as the secretary to the audit
committee.
• The provisions of Risk Management Committee shall be
applicable to top 1000 listed entities.

VIGIL MECHANISM
The listed entity shall formulate
a vigil mechanism / whistle
blower policy for directors and
employees to report genuine
concerns.
The vigil mechanism shall
provide for adequate
safeguards against victimization
of director(s) or employee(s) or
any other person who avail the
mechanism.

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