Order under Section 4B (6) read with section 4B (7) of the Securities Contracts (Regulation) Act, 1956 in the matter of the BSE (Corporatisation and Demutualisation) Scheme, 2005. - S.O. No.684(E) - SEBI/MRD/40967/2005 - SEBI

SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 20th May, 2005 S. O. 684(E). 1.0 BSE (also known as The Stock Exchange, Mumbai ) is an Association of Persons and a recognised stock exchange having its principal place of business at Phiroze Jeejeebhoy Towers, Dalal Street, Fort, Mumbai 400 001. It is required to be corporatised and demutualised under the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as the SC(R)A ). 1.1 BSE, vide its letter dated 9th March, 2005, submitted a Scheme for its corporatisation and demutualisation for approval to the Securities and Exchange Board of India (hereinafter referred to as SEBI ) in terms of sub-section (1) of section 4B of the SC(R)A. SEBI made enquiries and obtained further information from BSE through meetings with the officials of BSE and the BSE Broker s Forum. Vide letter dated 23rd March 2005, SEBI communicated its observations on the said Scheme to BSE and advised it to resubmit the Scheme after considering the said observations. 1.2 SEBI made further enquiries from BSE and explained its observations to BSE through meetings with its officials on 24th March and 27th March 2005. BSE, vide its letter dated 30th March 2005, submitted a revised Scheme. It was noted that while this Scheme, inter alia, provided for the succession of BSE being an Association of Persons by a company to be incorporated under the Companies Act, 1956 under the name and style of the Bombay Stock Exchange Limited for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities as recognized stock exchange and segregation of ownership and management from the trading rights of the members, it did not provide for certain matters required for the purpose of and in connection with the corporatisation and demutualisation of BSE as observed by SEBI vide its letter dated 23rd March, 2005. The observations made by SEBI included the following: a. Voting Rights: The voting rights of a shareholder, who is also a trading member along with that of persons acting in concert with him, may be restricted to 5%. b. Trading Members: Only those members, who are registered with SEBI under the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 may be trading members of the demutualised stock exchange. c. Board Composition : The Governing Board, on or after due date, may be constituted in accordance with the provisions of the Articles of Association of Bombay Stock Exchange Limited in force from time to time, provided that - i. the representation of trading members does not exceed 1/4th of the total strength and the remaining directors are appointed in the manner as may be specified by SEBI from time to time, ii. the Chief Executive, by whatever name called, is an ex-officio director, and iii. SEBI shall have the right to nominate as many directors on the Governing Board, as and when deemed fit, irrespective of the size of the Governing Board. d. Utilisation of Assets and Reserves: Bombay Stock Exchange Limited may not do anything contrary to the provisions of section 4B (3) of the SC(R)A. It may not use the assets (other than current assets) of BSE transferred to it or the proceeds from disposal of such assets or the proceeds from disposal of successive species of assets acquired from the proceeds of disposal of such assets for any purpose other than the business operations of the stock exchange. e. Uniform Standards: Uniform standards may be followed for admitting any person as a trading member of the exchange or accepting his surrender. All trading members may have similar rights and privileges. 1.3 Therefore, vide letter dated 15th April 2005, SEBI advised BSE to submit the Scheme in conformity with the observations made by SEBI. SEBI made further enquiries and explained the observations to BSE through the meetings on 26th, 27th and 28th April 2005. BSE finally submitted a revised Scheme (hereinafter referred to as the Scheme ) vide its letter dated 2nd May 2005. 2.0 Submissions of BSE on the Observations of SEBI 2.1 Voting Rights: Vide letter No. BSE/ED/084/05 dated 4th May, 2005, BSE has submitted that the restriction on voting rights should not be applicable to Public Financial Institutions as defined under section 4A of the Companies Act, or otherwise they would not be able to participate in the disinvestment as they generally have subsidiaries which are brokers. This is necessary to avoid any problems pertaining to interpretation of the term persons acting in concert at a later date and to facilitate the leading Public Financial Institutions to acquire a strategic stake in the equity of the exchange. 2. 2 Trading Members: A few Members are not registered with SEBI under the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992, but will nevertheless become trading members on corporatisation and demutualisation. However, in accordance with Rule 3 of the SEBI (Stock Brokers and Sub-Brokers) Rules, 1992, such Members would not be able to buy, sell or otherwise deal in securities until they are registered with SEBI. Therefore, the trading members should be a stock broker or a trading member or clearing member of any segment of the exchange. 2.3 Board Composition: BSE Scheme did not include the provisions: (i) the remaining directors are appointed in the manner as may be specified by SEBI from time to time, and (ii) SEBI shall have the right to nominate as many directors on the Governing Board, as and when deemed fit, irrespective of the size of the Governing Board. In this regard BSE has submitted that the manner of appointment of remaining directors will be provided in the Articles. The rules of BSE and other Exchanges provide for the number of SEBI nominees on Governing Board. 2.4 Utilisation of Assets and Reserves: BSE has submitted that the purport of this observation is not clear and it appears to impose restrictions on the exchange which are not required under the SC(R)A nor is otherwise justified. The Scheme does not provide for any of the matters prohibited in section 4B (3) of the SC(R)A. 2.5 Uniform Standards : BSE has accepted the observation of SEBI. However, it has suggested modified clause which appears to give perpetual preferential treatment to the existing members, as they used to have so far. 3.0 Consideration of the Scheme and the Submissions of BSE The Scheme of BSE, the information submitted by it and the other submissions of BSE have been considered. It is noted that the Scheme provides for most of the matters required for and in connection with its corporatisation and demutualisation. The findings in respect of the submissions of BSE are as follows 3.1 Voting Rights: Section 4B (6) of the SC(R)A provides that SEBI may, inter alia, restrict the voting rights of the shareholders who are also stock brokers of the recognized stock exchange. SC(R)A does not provide for differential treatment amongst the shareholders who are stock brokers with respect to voting rights. 3.2 Trading Members: The members of BSE, who do not have certificate of registration from SEBI, may include the persons who are not fit and proper to be registered under the SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 read with SEBI (Criteria for Fit and Proper Person) Regulations, 2004 or whose certificate of registration has been cancelled by SEBI or those who are not interested to trade on the demutualised stock exchange. It is not desirable to have such unregistered persons as trading members in an exchange and by virtue of the same, as representatives of trading members on the Governing Board of Bombay Stock Exchange Limited. If such persons wish to be trading members, they should have SEBI registration. However, taking into consideration the submission of BSE, such members may, within 3 months from the due date, obtain SEBI registration. Therefore, a suitable provision has been made in the Scheme. 3.3 Board Composition: The corporatised and demutualised stock exchange will be functioning in a dual capacity i.e. as a Self Regulatory Organization and a profit-making company. In such a case, the conflict of interest, which corporatisation and demutualisation as enshrined in the SC(R)A intends to avoid, may creep in. Therefore, demutualised stock exchange needs to be effectively regulated. Further, a Stock Exchange is a State under Article 12 of the Constitution and hence amenable to writ jurisdiction. Therefore, it is necessary for SEBI to ensure the highest standards of governance in stock exchanges. The Scheme should contain a specific reference to regulatory powers of SEBI and SEBI should, in the interest of trade and public interest, have express powers in-built in the Scheme to make or amend the rules of the Bombay Stock Exchange Limited including that of the constitution and powers of the Governing Board. Hence, the clause relating to Board composition is required to be modified to retain the powers of SEBI to appoint or nominate directors as and when deemed fit. A suitable provision has been made in the Scheme accordingly. 3.4 Utilisation of Assets and Reserves: It is the spirit of section 4B (3) of SC(R)A that the assets and reserves of the exchange should not be used for the benefit or enrichment of the trading members at any point of time and should be used only for exchange operations. This is to ensure that the assets and reserves built from the support of the public system are used only for public purpose and that the Exchange continues to operate as an exchange. Such assets and reserves should also not be used for the benefit or enrichment of any particular section, for example the shareholders / stock brokers of the exchange. It is, therefore, imperative to ensure that the existing assets and reserves transferred from the erstwhile exchange are utilised only for the operations of the exchange. The shareholders / trading members should not have option to take away the assets and reserves inherited by the demutualised exchange. The requirement of use of assets and reserves only for exchange operations would give the necessary comfort to the new investors during the process of disinvestment / initial public offer. This would bring discipline in the management. Further, such provision would ensure the functioning of the stock exchange in performing its duty as a self-regulatory organization as well as a for-profit company. Hence, it is felt that it is in the interest of trade and in the public interest that the assets and reserves (other than current assets) of BSE are used by the demutualised exchange only for exchange operations. Therefore, a suitable provision has been made in the Scheme. 3.5 Uniform Standards: Demutualisation means segregation of membership into ownership right and trading right. The members would become shareholders of the demutualised exchange and may also become trading members. The trading rights of these shareholders who are also trading members should rank pari passu with the trading rights of any other trading member. After Corporatisation and Demutualisation, there will be only one class of trading members with similar rights and privileges. Any additional privileges given to existing members who become trading members would create value to the trading rights of such members. Therefore, uniform standards should be followed in terms of capital adequacy, deposits, fees, etc while admitting any person as a trading member or accepting his surrender. Though all members must have similar rights and privileges, keeping in view the submissions of BSE and for limited purpose of facilitating the smooth transition, the Scheme is modified to allow additional privileges to the existing members with the prior approval of SEBI. 3.6 BSE has provided that upon transfer of the duties and functions of the clearing house of BSE to the clearing corporation, all the members of BSE should be admitted as clearing members of the clearing corporation, so as to enable the members to clear the trades in the same manner as is presently being done by them. It is felt that by virtue of such provision the existing trading members shall automatically become members of the clearing corporation without requiring them to qualify or comply with the prescribed requirements of the clearing corporation. The clearing corporation will have its own rules which will be approved by SEBI at the time of their recognition. The clearing members will have to separately qualify and comply with the rules of clearing corporation. Therefore, the provision has been suitably modified. 4.0 In view of the above, SEBI is satisfied that it would be in the interest of trade and also in the public interest to approve the Scheme with certain modifications as mentioned above in consonance with the object of the SC(R)A. Accordingly, the Scheme is hereby approved with the following conditions in terms of section 4 B (6) of the SC(R)A: a. Voting Rights: On and from Due Date, no Shareholder, who is a trading member, shall have voting rights (taken together with voting rights held by him and by persons acting in concert with him) exceeding 5% of the voting rights in Bombay Stock Exchange Limited. b. Board Composition: The Governing Board, on or after Due Date, shall be constituted in accordance with the provisions of the Articles of Association of Bombay Stock Exchange Limited in force from time to time, provided that - (i) the representation of Trading Members does not exceed one-fourth of the total strength of the Governing Board, and the remaining directors are appointed in the manner as may be specified by SEBI from time to time, and (ii) the Chief Executive, by whatever name called, is an ex-officio director. Nothing contained in this condition shall preclude SEBI from nominating directors on the Governing Board as and when deemed fit. 4.1 The approved Scheme is enclosed as Annexure A. 5.0 Compliance and Monitoring BSE and Bombay Stock Exchange Limited, as the case may be, shall ensure compliance with the Scheme within the time as specified in the Scheme and shall not do anything contrary to the provisions of Scheme and submit compliance report to SEBI in the manner as may be specified by SEBI. 6.0 SEBI reserves its rights to amend, alter or modify the Scheme in the interests of trade and public interest and in furtherance of the objectives of the corporatisation and demutualisation of the stock exchange. 7.0 The Scheme shall come into effect on the day of its publication in the Official Gazette. [F. No. SEBI/MRD/40967/2005] M. DAMODARAN, Chairman Encl: Annexure A THE BSE (Corporatisation and Demutualisation) Scheme, 2005 1. Title and Commencement 1.1 This Scheme shall be called The BSE (Corporatisation and Demutualisation) Scheme, 2005 (hereinafter referred to as this Scheme ). 1.2 This Scheme shall have effect on its publication under sub-section (4) of Section 4B of the Securities Contracts (Regulation) Act, 1956. 1.3 BSE shall be corporatised and demutualised in accordance with this Scheme on and from the appointed date as may be notified by the Securities and Exchange Board of India (SEBI) in respect of BSE under Section 4A of the Securities Contracts (Regulation) Act, 1956. Provided that the activities specified in the respective clauses of this Scheme shall be implemented as per the time schedule specified in those clauses. 2. Definitions In this Scheme, unless the context otherwise requires, - 2.1 Bombay Stock Exchange Limited means the company incorporated in pursuance of clause 3 of this Scheme for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities as a recognized stock exchange and to succeed BSE. 2.2 BSE means the stock exchange also known as The Stock Exchange, Mumbai , an unincorporated association of persons having its principal place of business at Phiroze Jeejeebhoy Towers, Dalal Street, Fort, Mumbai, which has been recognized by the Central Government under the Securities Contracts (Regulation) Act, 1956 by and under notification No. 17/2/56-SE/EAD dated August 31, 1957, and whose name has been changed to BSE pursuant to the approval granted by SEBI by its letter No.SMD/SEAID-I/BSE/592/02, dated 10th January, 2002. 2.3 Due Date means the date, as may be determined by the Governing Board of BSE, which shall not be later than 3 months from the date of publication of the order under sub-section (7) of section 4B of the Securities Contracts (Regulation) Act, 1956. 2.4 First Shareholders means the fifty Members, selected by the Governing Board of BSE, who will subscribe to the Memorandum of Association and Articles of Association of Bombay Stock Exchange Limited for the purpose of its incorporation. 2.5 Governing Board means the Board of Directors of Bombay Stock Exchange Limited. 2.6 Member means a person who is a member of BSE as per the register of members maintained by BSE under Rule 64 of the Rules, Bye-Laws and Regulations, 1957 and does not include a Limited Trading Member of BSE. 2.7 Record Date means the date, prior to the Due Date, fixed by the Governing Board of BSE for determining the Members who will be entitled to shares of Bombay Stock Exchange Limited pursuant to clause 5 of this Scheme. 2.8 Rules, Bye-Laws and Regulations, 1957 means the Rules, Bye-laws and Regulations, 1957 of BSE on the day preceding the Due Date. 2.9 Rules, Bye-Laws and Regulations of the Derivatives Segment means the Rules, Bye-laws and Regulations, 2000 of the Derivatives Segment of BSE on the day preceding the Due Date. 2.10 Rules, Bye-Laws and Regulations of Bombay Stock Exchange Limited means the Memorandum of Association, the Articles of Association and the Rules, Bye-laws and Regulations of Bombay Stock Exchange Limited including the Rules, Bye-laws and Regulations of any segment of Bombay Stock Exchange Limited. 2.11 Shareholder means a person who holds any equity share(s) of Bombay Stock Exchange Limited. 2.12 Trading Member means a stock broker or trading member or clearing member of any segment of Bombay Stock Exchange Limited and registered with SEBI as such under the SEBI (Stock Brokers and Sub-Brokers) Regulations 1992: Provided that Bombay Stock Exchange Limited shall not have clearing members after the clearing function is transferred to a recognized clearing corporation under clause 13.1 of this Scheme. 2.13 Words and expressions used and not defined in this Scheme but defined in the Securities and Exchange Board of India Act, 1992, the Depositories Act, 1996, the Securities Contracts (Regulation) Act, 1956, the Companies Act, 1956, the rules and regulations made under these Acts, the Rules, Bye-Laws and Regulations, 1957 or the Rules, Bye-laws and Regulations of the Derivatives Segment shall have the same meanings respectively assigned to them in the above mentioned acts, rules, bye-laws and regulations. 3. Incorporation of Bombay Stock Exchange Limited 3.1 The First Shareholders shall incorporate a public company limited by shares under section 12 of the Companies Act, 1956 in the name and style of Bombay Stock Exchange Limited . 3.2 The First Shareholders shall each subscribe to and pay for 10,000 fully paid-up equity shares of the face value of Re.1/- each for cash at par of Bombay Stock Exchange Limited. 4. Governing Board of Bombay Stock Exchange Limited 4.1 The first Governing Board shall comprise of such of the members of the Governing Board of BSE on the date of incorporation of Bombay Stock Exchange Limited as are named as first directors in the Articles of Association of Bombay Stock Exchange Limited, subject to the condition that the representatives of the Members do not exceed one-fourth of the total strength of the Governing Board. 4.2 The first Governing Board may hold office till Due Date. 4.3 The Governing Board, on or after Due Date, shall be constituted in accordance with the provisions of the Articles of Association of Bombay Stock Exchange Limited in force from time to time, provided that - (i) the representation of Trading Members does not exceed one-fourth of the total strength of the Governing Board, and the remaining directors are appointed in the manner as may be specified by SEBI from time to time, and (ii) the Chief Executive, by whatever name called, is an ex-officio director. 4.4 Notwithstanding anything contained in clause 4.3, SEBI may nominate directors on the Governing Board as and when deemed fit. 5. Allotment of Shares of Bombay Stock Exchange Limited 5.1 Every Member or his nominee, as the case may be, (other than the First Shareholders) as on the Record Date shall be entitled to 10,000 fully paid-up equity shares of the face value of Re.1/- each for cash at par of Bombay Stock Exchange Limited. 5.2 Every Member or his nominee, as the case may be, who has more than one membership card as on the Record Date, shall be entitled to additional 10,000 fully paid-up equity shares of face value of Re.1/- each for cash at par for every additional membership card held by him 5.3 Bombay Stock Exchange Limited shall allot the equity shares to the entitled Members or their nominees, as the case may be, by the Due Date. Provided that the allotment to a Member suspended by BSE shall be held in abeyance till the suspension continues. 5.4 The invitation to subscribe to, and the offer, issue and allotment of equity shares of Bombay Stock Exchange Limited pursuant to this clause shall not be considered as being an invitation, offer, issue or allotment to the public. 6. Listing of Shares of Bombay Stock Exchange Limited. Bombay Stock Exchange Limited may at any time list its securities on any recognized stock exchange. 7. Transfer to Bombay Stock Exchange Limited Pursuant to this Scheme, on and from the Due Date,: 7.1 all assets, properties, undertakings, segments (including the Derivatives Segment), business, books, records, registers, funds, reserves, rights (including, in particular, intellectual property rights, leasehold rights, tenancy rights if any and all rights of nomination of former Members which have vested in BSE), powers, authorities, interests, privileges, exemptions, permissions, licenses, registrations and recognitions (including, in particular, the recognition of BSE as a recognized stock exchange under the Securities Contracts (Regulation) Act, 1956) of or belonging to or in the possession or control of BSE or to which BSE may be entitled, including those held by any trustees in trust for BSE or for the Members or Limited Trading Members of BSE and Trading Members and/or Clearing Members of the Derivatives Segment of BSE or for the objects and purposes of BSE, and including those vested in or held by any committee of BSE, shall stand transferred to and shall vest in and shall be in the possession or control of and shall become the entitlement of Bombay Stock Exchange Limited, and Bombay Stock Exchange Limited shall have the same right, title and interest therein or thereto as BSE and such trustees or committees had immediately prior to the Due Date. 7.2 all obligations and liabilities of BSE shall stand transferred to and shall become obligations and liabilities of Bombay Stock Exchange Limited. 7.3 Bombay Stock Exchange Limited shall, in place and stead of BSE, become a party to, and shall be bound by and entitled to, all contracts, agreements and other instruments to which BSE is a party or by which BSE is bound or to which BSE is entitled, and the same may be enforced and acted upon by or against Bombay Stock Exchange Limited accordingly. 7.4 all notices, actions, claims and proceedings (including all legal, quasi legal, revenue, disciplinary and arbitration notices, actions and proceedings and including also disciplinary, suspension, default, delisting and other notices, actions and proceedings by BSE to or against the Members or Limited Trading Members of BSE or Trading Members and/or Clearing Members of the Derivatives Segment of BSE, any companies and others) of, by or against BSE shall not abate and shall be deemed to be made, instituted or continued by or against Bombay Stock Exchange Limited in place and stead of BSE. 7.5 the employees of BSE shall become the employees of Bombay Stock Exchange Limited in place and stead of BSE on the same terms and conditions as existing immediately prior to the Due Date. 7.6 notices and circulars issued and acts done by the Governing Board of BSE shall, unless and until such notices and circulars are modified or rescinded by the Governing Board, continue to subsist in relation to Bombay Stock Exchange Limited and shall be deemed to have been issued and done by the Governing Board. 7.7 all resolutions passed and acts done by the Governing Board of BSE or general body of Members shall, unless and until modified or rescinded by Governing Board or general body of Shareholders of Bombay Stock Exchange Limited, as the case may be, continue to subsist in relation to Bombay Stock Exchange Limited and shall be deemed to have been passed and done by the Governing Board or general body of Shareholders of Bombay Stock Exchange Limited, as the case may be. 8. Trading Rights 8.1 A Member or a Limited Trading Member of BSE, who is registered as a stock broker on the day preceding the Due Date shall become a Trading Member of the Cash Segment of Bombay Stock Exchange Limited on the Due Date; 8.2 A Member who is not registered as a stock broker on the day preceding the Due Date shall become a Trading Member of the Cash Segment of Bombay Stock Exchange Limited on being registered as a stock broker under the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 within 3 months from the Due date. 8.3 A Trading Member and/or a Clearing Member of the Derivatives Segment of BSE on the day preceding the Due Date shall become a Trading Member and/or a Clearing Member of the Derivatives Segment of Bombay Stock Exchange Limited on the Due date. 8.4 After the Due Date, a person desirous of becoming a Trading Member of any segment of Bombay Stock Exchange Limited shall be admitted if he complies with requirements and brings in specified fees and deposits as specified in the Rules, Bye-laws and Regulations of Bombay Stock Exchange Limited. 8.5 Bombay Stock Exchange Limited shall, for the purpose of admitting any person as a Trading Member of a segment, follow uniform standards in terms of capital adequacy, deposits, fees etc. irrespective of mode of acquisition of trading right by that person: Provided that different standards may be followed for admission of a person as a Trading Member who has acquired trading right by way of transmission; Provided further that different standards may be followed for admission of Trading Members in different segments. 8.6 A Trading Member may surrender his membership of any segment to Bombay Stock Exchange Limited in the manner specified in the Rules, Bye-laws and Regulations of Bombay Stock Exchange Limited 8.7 Trading Members of the Cash Segment of Bombay Stock Exchange Limited and the Clearing Members of the Derivatives Segment of Bombay Stock Exchange Limited shall clear and settle trades respectively till the clearing and settlement function is transferred to a recognized clearing corporation under clause 13.1 of this Scheme. 8.8 Irrespective of the date or mode of acquisition of trading right, the Trading Members in a segment of Bombay Stock Exchange Limited shall have uniform rights and privileges. Provided that Bombay Stock Exchange Limited may, with the prior approval of SEBI, grant additional privileges to those Trading Members who were Members on the day preceding the Due Date. 8.9 Trading Members of Bombay Stock Exchange Limited on the Due Date shall continue to have the same rights and privileges in respect of their clients and constituents and other members arising out of or under any act, omission or contract or law, notification, order, direction, etc. as had accrued to them while being Members or Limited Trading Members of BSE or Trading Members and or Clearing Member of Derivative Segment of BSE on or before the Due Date. 8.10 Trading Members of Bombay Stock Exchange Limited shall be bound by all obligations and liabilities towards their clients and constituents, SEBI, BSE and other authorities or other persons arising out of or under any act, omission or contract or law, notification, order, direction, etc. while being Members or Limited Trading Members of BSE or Trading Members and or Clearing Members of Derivative Segment of BSE on or before the Due Date 9. Demutualisation 9.1 A Trading Member may or may not be a Shareholder. 9.2 A Shareholder may or may not be a Trading Member. 10. Voting Rights 10.1 Bombay Stock Exchange Limited shall ensure that atleast 51% of its equity shares are held by public other than shareholders having trading rights in the manner and within the period prescribed in sub-section (8) of Section 4B of the Securities Contracts (Regulation) Act, 1956. 10.2 On and from the Appointed Date, Bombay Stock Exchange Limited shall ensure that public other than shareholders having trading rights continuously hold at least 51% of equity shares. 10.3 On and from Due Date, no Shareholder, who is a Trading Member, shall have voting rights (taken together with voting rights held by him and by persons acting in concert with him) exceeding 5% of the voting rights in Bombay Stock Exchange Limited. 11. Dissolution of BSE On and from the Due Date: (i) Bombay Stock Exchange Limited shall be entitled to, and shall, commence business and operations as the successor of BSE; and (ii) BSE shall stand dissolved. 12. Rules, Bye-Laws and Regulations of Bombay Stock Exchange Limited 12.1 The Rules, Bye-laws and Regulations, 1957 and the Rules, Bye-laws and Regulations of the Derivatives Segment of BSE on the day preceding the Due Date shall, unless contrary to or inconsistent with or excluded by this Scheme, apply to Bombay Stock Exchange Limited on and from the Due Date. 12.2 Bombay Stock Exchange Limited shall incorporate the provisions of this Scheme appropriately in the Rules, Bye-laws and Regulations of Bombay Stock Exchange Limited on or before the Due Date. 12.3 The Rules, Bye-laws and Regulations of Bombay Stock Exchange Limited may be amended after the Due Date in accordance with the applicable laws, provided that no such amendment is inconsistent with any provision of this Scheme. 13. Clearing Corporation of Bombay Stock Exchange Limited 13.1 Bombay Stock Exchange Limited shall, within one year of the Due Date, subject to the prior approval of SEBI, transfer the duties and functions of the clearing house of Bombay Stock Exchange Limited to a clearing corporation, being a company incorporated under the Companies Act, 1956 and recognized by SEBI as a clearing corporation under the Securities Contracts (Regulation) Act, 1956. 13.2 Until the duties and functions of the clearing house are transferred as provided in clause 13.1, the clearing and settlement functions in relation to trading on Bombay Stock Exchange Limited shall be carried out by the clearing and settlement mechanism as used by BSE or in such other manner as the Governing Board may determine. 14. Utilisation of Assets and Reserves 14.1 Bombay Stock Exchange Limited shall not do anything contrary to the provisions of section 4B (3) of the Securities Contracts (Regulation) Act, 1956. 14.2 Without prejudice to the generality of the provisions in 14.1, Bombay Stock Exchange Limited shall not use the assets and reserves (other than current assets) of BSE transferred to it under clause 7.1 of this Scheme or the proceeds from disposal of such assets or the proceeds from disposal of successive species of assets acquired from the proceeds of disposal of such assets for any purpose other than the business operations of the stock exchange. 15. Compliance with the scheme 15.1 BSE and Bombay Stock Exchange Limited, as the case may be, shall ensure compliance with the provisions of this Scheme at all times and shall not do anything contrary to the provisions of this Scheme. 15.2 Without prejudice to the generality of the provisions in 15.1, BSE and Bombay Stock Exchange Limited, as the case may be, shall continuously comply with the provisions in Clauses 4.3, 8.4, 8.5, 8.6, 8.8, 10.2, 10.3, and 14. 15.3 BSE and Bombay Stock Exchange Limited, as the case may be, shall report compliance with the provisions of this Scheme in such manner as may be required by SEBI from time to time. 16. Power to Relax Provisions of this Scheme If any difficulty arises in giving effect to the provisions of this Scheme, SEBI may, at the written request of BSE or Bombay Stock Exchange Limited, as the case may be, relax any of the provisions of this Scheme.