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TMI BlogELIGIBILITY NORMS FOR COMPANIES ISSUING SECURITIESX X X X Extracts X X X X X X X X Extracts X X X X ..... ng the Prospectus with ROC. Provided further that the period within which the Board may specify changes or issue observations, if any, on the draft Prospectus shall be 30 days from the date of receipt of the draft Prospectus by the Board. Provided further that where the Board has sought any clarification or additional information from the Lead Manager/s to the Issue, the period within which the Board may specify changes or issue observations, if any, on the draft Prospectus shall be 15 days from the date of receipt of satisfactory reply from the Lead Manager/s to the Issue. Provided further that where the Board has made any reference to or sought any clarification or additional information from any regulator or such other agencies, the Board may specify changes or issue observations, if any, on the draft Prospectus after receipt of comments or reply from such regulator or other agencies. Provided further that the Board may specify changes or issue observations, if any, on the draft Prospectus only after receipt of copy of in-principle approval from all the stock exchanges on which the issuer company intends to list the securities proposed to be offered through the Prospectus.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t three years immediately preceding the reference date; (b) The "average market capitalisation of public shareholding" of the company is at least ₹ 10,000 crores for a period of one year up to the end of the quarter preceding the month in which the proposed issue is approved by the Board of Directors / shareholders of the issuer; (c) The annualized trading turnover of the shares of the company during six calendar months immediately preceding the month of the reference date has been at least two percent of the weighted average number of shares listed during the said six months period; (d) The company has redressed at least 95% of the total shareholder / investor grievances or complaints received till the end of the quarter immediately preceding the month of the reference date; (e) The company has complied with the listing agreement for a period of at least three years immediately preceding the reference date; (f) The impact of auditors' qualifications, if any, on the audited accounts of the company in respect of the financial years for which such accounts are disclosed in the offer document does not exceed 5% of the net profit/ loss after tax of the company for the respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es on at least one stock exchange having nationwide trading terminals.) 2.1.5 Issue of securities in dematerialised form 2.1.5.1 No company shall make public or rights issue or an offer for sale of securities, unless: (a) the company enters into an agreement with a depository for dematerialisation of securities already issued or proposed to be issued to the public or existing shareholders; and (b) the company gives an option to subscribers/ shareholders/ investors to receive the security certificates or hold securities in dematerialised form with a depository. Explanation: A "depository" shall mean a depository registered with the Board under the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996. 2.2 8(Initial Public Offerings by Unlisted Companies) 2.2.1 9(An unlisted company may make an initial public offering (IPO) of equity shares or any other security which may be converted into or exchanged with equity shares at a later date, only if it meets all the following conditions: (a) The company has net tangible assets of at least ₹ 3 crores in each of the preceding 3 full years (of 12 months each), of which not more than 50% i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13(b) Market makers undertake to ensure that the bid-ask spread (difference between quotations for sale and purchase) for their quotes shall not at any time exceed 10%: 14(c) The inventory of the market makers on each of such stock exchanges, as on the date of allotment of securities, shall be at least 5% of the proposed issue of the company.) 15(2.2.2A An unlisted public company shall not make an allotment pursuant to a public issue or offer for sale of equity shares or any security convertible into equity shares unless, in addition to satisfying the conditions mentioned in Clause 2.2.1 or 2.2.2 as the case may be, the prospective allottees are not less than one thousand (1000) in number.) 16(2.2.2B For the purposes of clauses 2.2.1 and 2.2.2 above: (i) "Net Tangible Assets" shall mean the sum of all net assets of the company, excluding 'intangible assets', as defined in Accounting Standard 26 (AS 26) issued by the Institute of Chartered Accountants of India. (ii) "Project" means the object for which the monies proposed to be raised to cover the objects of the issue. (iii) In case of partnership firms which have since been converted into companies, the track record of distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue accounted for by the activity suggested by the new name is not less than 50% of its total revenue in the preceding 1 full-year period.) 2.3.2 22(A listed company which does not fulfill the conditions given in the provisos to Clause 2.3.1 above shall be eligible to make a public issue, subject to complying with the conditions specified in clause 2.2.2.) 2.3.3 23(Deleted) 2.4 Exemption from Eligibility Norms 2.4.1 The provisions of clauses 24(2.2 and 2.3) shall not be applicable in case of: i) a banking company including a Local Area Bank (hereinafter referred to as Private Sector Banks) set up under sub-section (c) of Section 5 of the Banking Regulation Act, 1949 and which has received license from the Reserve Bank of India; or ii) a corresponding new bank set up under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970 Banking Companies (Acquisition and Transfer of Undertaking) Act, 1980, State Bank of India Act 1955 and State Bank of India (Subsidiary Banks) Act, 1959 (hereinafter referred to as "public sector banks"); iii) an infrastructure company: a) 25(whose project has been appraised by a Public Financial Institution (PFI) or Infrastructure D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e); and (iii) the expenses incurred for grading IPO have been borne by the unlisted company obtaining grading for IPO.) 2.6 Outstanding Warrants or Financial Instruments 2.6.1 No unlisted company shall make a public issue of equity share or any security convertible at later date into equity share, if there are any outstanding financial instruments or any other right which would entitle the existing promoters or shareholders any option to receive equity share capital after the initial public offering. 2.7 Partly Paid-up Shares 2.7.1 No company shall make a public or rights issue of equity share or any security convertible at later date into equity share, unless all the existing partly paid-up shares have been fully paid or forfeited in a manner specified in clause 8.6.2. 34(2.8 Means of Finance No company shall make a public or rights issue of securities unless firm arrangements of finance through verifiable means towards 75% of the stated means of finance, excluding the amount to be raised through proposed Public/ Rights issue, have been made.) ****** 1 Substituted vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003 for the following: "The companies issuing secu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before filing the draft letter of offer with RSE." 5 In SEBI Circular No. SEBI/CFD/DIL/DIP/25/2007/30/4 dated April 30, 2007, the words "where the aggregate value of such securities, including premium, if any, exceeds ₹ 50 lacs," were inadvertently omitted in the opening para of the amended clause 2.1.2. The same clarified vide SEBI Circular No. SEBI/CFD/DIL/DIP/26/ 2007/24/5 dated May 24, 2007. 6 Inserted vide SEBI Circular No. SEBI/CFD/DIL/DIP/28/2007/29/11 dated November 29, 2007. 7 Inserted vide SEBI/CFD/DIL/DIP/36/2009/09/07 dated July 9, 2009 8 Substituted vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003 for the following: "Public Issue by Unlisted Companies". 9 Substituted clause 2.2.1, vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003, for the following: "2.2.1 An unlisted company shall make a public issue of any equity shares or any security convertible into equity shares at a later date subject to the following:- i.) It has a pre-issue networth of not less than ₹ 1 crore in three (3) out of preceding five (5) years, with a minimum networth to be met during immediately preceding two (2) years; and ii.) It has a track record of dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viz. the company's name containing the words 'software, hardware, info, infotech, .com, informatics, technology, computer, information, etc.; ii.) In case of partnership firms which have since been converted into companies, the track record of distributable profits of the firm shall be considered only if the financial statements of the partnership business for the said years conform to and are revised in the format prescribed for companies under the Companies Act, 1956 and also comply with the following: a. adequate disclosures are made in the financial statements as required to be made by the companies as per Schedule VI of the Companies Act, 1956; b. the financial statements shall be duly certified by a Chartered Accountant stating that: I. the accounts as revised or otherwise and that the disclosures made are in accordance with the provisions of Schedule VI of the Companies Act, 1956; and II. the accounting standards of the Institute of Chartered Accountants of India(ICAI) have been followed and that the financial statements present a true and fair picture of the firm's accounts. iii) the lead merchant banker shall also verify and confirm that the financial statements fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintenance h. computer consultancy i. e-commerce / internet related activities." Prior to the above, sub-clauses (g) and (h) of sub-clause (ii) of Explanation 2 were substituted vide SEBI Circular No. RMB (Compendium) Series Circular No. 1 (2001-2002) dated July 17, 2001 for the following: "g) Foreign Venture Capital investors registered with SEBI h) State Industrial Development corporations" Prior to the above, clause 2.2.2 was substituted vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000 for the following: "2.2.2 An unlisted company which does not satisfy the requirement specified in Clause 2.2.1 above, can make a public issue of equity share capital or any security convertible at later date into equity share capital, provided a public financial institution or a scheduled commercial bank:- a) has appraised the project to be financed through the proposed offer to the public; and ; b) not less than 10% of the project cost is financed by the said appraising bank or institution by way of loan, equity, participation in the issue of security in the proposed issue or combination of any of them. c) the appraising bank or institution shall bring in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bulleted sub-clause, vide SEBI Circular No. SEBI/CFD/DIL/DIP/14/2005/25/1 dated January 25, 2005. 14 Numbered the bulleted sub-clause, vide SEBI Circular No. SEBI/CFD/DIL/DIP/14/2005/25/1 dated January 25, 2005. 15 Inserted vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003. . 16 Inserted vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003. 17 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/34/2009/24/09 dated February 24, 2009, for the words "sub-clause (iv)". 18 Omitted the following sub-clause 2.2.2B(v) vide SEBI/CFD/DIL/DIP/32/2008/28/08 dated August 28, 2008: "(v) Qualified Institutional Buyer" shall mean: a. public financial institution as defined in section 4A of the Companies Act, 1956; b. scheduled commercial banks; c. mutual funds; d. foreign institutional investor registered with SEBI; e. multilateral and bilateral development financial institutions; f. venture capital funds registered with SEBI; g. foreign venture capital investors registered with SEBI; h. state industrial development corporations; i. insurance companies registered with the Insurance Regulatory and Development Authority (IRDA); j. provident funds with minimum corpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not fulfill the condition given in the proviso to clause 2.3.1 above, shall be eligible to make a public issue only through the book building process. Provided that sixty percent (60%) of the issue size shall be allotted to the Qualified Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded." Prior to the above, clause 2.3.2 was substituted vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000 for the following: "2.3.2 Public issue by listed companies which has changed its name to indicate as if it was engaged in the business / activities in information technology sector during a period of three years prior to filing of offer document with the Board, shall be eligible to make a public issue of equity share or securities convertible at a later date into equity share, if; (a) (i) it has a track record of distributable profits in terms of Section 205 of Companies Act, for at least three (3) out of immediately preceding five (5) years from the information technology business / activities, and (ii) it has a pre-issue networth of not less than Rs.One Crore in three (3) out of preceding five (5) years, with the minimum net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t less than investment grade is obtained from not less than two credit rating agencies registered with SEBI and disclosed in the offer document;" 30 Omitted vide circular No. SEBI/CFD/DIL/DIP/32/2008/28/08 dated August 28, 2008 the following" "2.5.1B An issuer company shall not make an allotment of non-convertible debt instrument pursuant to a public issue if the proposed allottees are less than fifty (50) in number. In such a case the company shall forthwith refund the entire subscription amount received. If there is a delay beyond 8 days after the company becomes liable to pay the amount, the company shall pay interest @15% p.a. to the investors.)" Prior to the above, clause 2.5.1B was substituted vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003, for clause 2.5.1, the details of which are given in the footnote on pre-page. 31 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/29/2007/03/12 dated December 3, 2007 for the following: "Where credit ratings are obtained from more than two credit rating agencies, all the credit rating/s, including the unaccepted credit ratings, shall be disclosed" Prior to the above, clause 2.5.2 was substituted vide SEBI/CFD/DIL/DIP/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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