Original 1683103392 1641535804 Securities Laws Reference Material

CERTIFICATE
COURSE ON
SECURITIES LAWS
Reference Material
January 2022
© THE INSTITUTE OF COMPANY SECRETARIES OF INDIA
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Preface
An Investment in Knowledge pay the best interest
– Benjamin Franklin
The mention of securities markets bring us to a view of hustle and bustle, the
cheer and the chaos and the element of mystery and surprise which governs
the decision making. But, for a Company Secretary, the said view has to be
both microscopic as well as macroscopic. On one hand, we may deliberate
upon the larger role of these markets in steering Indian Economy and being
a mirror image of the same economy simultaneously; the realisation of our
own roles and responsibilities in equally deeply registered in each one of us.
Each and every aspect of the Indian Capital markets have been encased in
dedicated laws, soliciting not just support but wholehearted participation of
the Governance Professionals.
It is these laws that have not only been the backbone of these markets but
the confidence builders of the most significant stakeholders-the investors and
shareholders. It is these retail investor who while considering these markets
as wealth creators have been the drivers for Regulatory Authorities to make
conscious decision and undertake deliberate actions to develop and strengthen
the legal a& regulatory build-up of these market. Even further, the laws and
regulations put in place are followed up by regular and in-time amendments,
thus ensuring smooth functioning of the securities market.
In the era of wide framework of legislations, rules, and regulations, the role
and responsibility of experts such as Governance Professional are heightened
inevitability. The modern day Compliance Officer is entrusted with the
responsibility of carrying out numerous core functions including co-ordination
with recognised stock exchange(s) and depositories vis-à-vis compliance with
rules, regulations and other directives of SEBI; maintenance of appropriate
procedures to ensure correctness, authenticity and comprehensiveness in
information being filed with SEBI Etc., and so on. All theses and more requisite
on his part the development of capabilities and competencies, a nee dwell
understood by the ICSI. It is for this reason that the Institute of Company
Secretaries of India has launched the Certificate Course on Securities laws.
(iii)
I am delighted to share that this reference material for Certificate Course
on Securities Laws is prepared by the ICSI to attain an understanding of
the various Securities Laws, respective legislative changes. I commend the
dedicated efforts put in by CS Surbhi Jain, and the entire Secretariat in bringing
out this reference material under the stewardship of CS Manish Gupta, Central
Council Member and Chairman- PMQ Course Committee, ICSI and the overall
supervision & guidance of CS Asish Mohan, Secretary, ICSI.
I am sure that this reference material will be immensely useful for all readers
and their suggestions for improvement are most welcome.
Place : Bengaluru CS Nagendra D. Rao

Date : 6th January 2022 President
The Institute of Company Secretaries of India
(iv)
CONTENTS
Sl. Content Page
No No.
1 SEBI Act, 1992 and the Securities Contracts (Regulation) 1

Act, 1956: An Overview
2 An Overview of SEBI (Issue of Capital and Disclosure 18

Requirements) Regulations, 2018
3 An Overview of SEBI (Listing Obligations and Disclosure 58

4 An Overview of SEBI (Substantial Acquisition of Shares 98

and Takeovers) Regulations, 2011
5 SEBI (Delisting of Equity Shares) Regulations, 2021 137
6 Issuance of Debt Instruments and SEBI Laws 159
7 SEBI (Prohibition of Insider Trading) Regulations, 2015 171
8 SEBI (Buy-Back of Securities) Regulations, 2018 191
9 Case Laws, Case Studies & Practical Aspects 216
(v)
(vi)
Certificate Course on securities lawS
Chapter 1
SEBI Act, 1992 and the Securities Contracts
(Regulation) Act, 1956: An Overview
SECURITIES CONTRACTS (REGULATION) ACT, 1956
INTRODUCTION
Stock Market plays a significant role in development of a country’s economy.
The stock market helps in the mobilization of the funds from the small savings
of the investors and channelizes such resources into different development
needs of various sectors of the economy. In order to prevent undesirable
transactions in securities by regulating the business of dealing therein, and
by providing for certain other matters connected therewith, the Securities
Contracts (Regulation) Act, 1956 was enacted by Parliament.
The stock market is the platform of securities trading. The stock exchanges
also suffer from certain limitations and require strict control over their activities
in order to ensure safety in dealings thereon. Hence, in 1956, the Securities
Contracts (Regulation) Act (‘SCRA’) was passed which provided for recognition
of stock exchanges by the Central Government. The provisions of this Act
came into force with effect from February 20, 1957.
The Government promulgated the Securities Contracts (Regulations) Rules,

1957 for carrying into effect the objects of the Securities Contracts (Regulation)
Act.
The Securities Contracts (Regulation) Act, 1956, provides for direct and indirect
control of all aspects of the securities trading including the running of stock
exchanges which aims to prevent undesirable transaction in securities by
regulating the business of dealing therein. It gives the Central Government
regulatory jurisdiction over:
(a) Stock exchanges through a process of recognition and continued

supervision,
(b) contracts in securities, and
(c) listing of securities on stock exchanges.

1
KEY DEFINITIONS
Section 2 of this Act contains definitions of various terms used in the Act.
Some of the important definitions are given below:
Securities Securities include

(i) shares, scrips, stocks, bonds, debentures, debenture
stock or other marketable securities of a like nature
in or of any incorporated company or a pooled
investment vehicle or other body corporate;
(ii) derivative;
(iii) units or any other instrument issued by any Collective
Investment Scheme to the Investors in such
schemes;
(iv) security receipt as defined in clause (zg) of Section 2
of the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act,
2002;
(v) units or any other such instrument issued to the
investors under any mutual fund scheme;
(vi) units or any other instrument issued by any pooled
investment vehicle;
(vii) any certificate or instrument (by whatever name
called) issued to an investor by any issuer being a
special purpose distinct entity which possess any
debt or receivable, including mortgage debt, assigned
to such entity, and acknowledging beneficial interest
of such investor in such debt or receivable, including
mortgage debt, as the case may be;
(viii) government securities;
(ix) such other instruments as may be declared by the
Central Government to be securities; and
(x) rights or interests in securities.
2
Contract “Contract” means a contract for or relating to the purchase

or sale of securities.
Spot Delivery Spot delivery contract means a contract which provides for –
Contract
(a) actual delivery of securities and the payment of
a price therefore either on the same day as the
date of the contract or on the next day, the actual
period taken for the dispatch of the securities or
the remittance of money therefor through the post
being excluded from the computation of the period
aforesaid if the parties to the contract do not reside
in the same town or locality;
(b) transfer of the securities by the depository from
the account of a beneficial owner to the account of
another beneficial owner when such securities are
dealt with by a depository.
Stock Stock Exchange means –

Exchange
(a) any body of individuals, whether incorporated
or not, constituted before corporatisation and
demutualisation under Sections 4A and 4B, or
(b) a body corporate incorporated under the Companies
Act, 2013 (erstwhile Companies Act, 1956)
whether under a scheme of corporatisation and
demutualisation or otherwise,
for the purpose of assisting, regulating or controlling the
business of buying, selling or dealing in securities.
Recognised Recognised Stock Exchange means a stock exchange which

Stock is for the time being recognised by the Central Government.
Exchange
Government Government security means a security created and issued

security whether before or after the commencement of this Act, by
the Central Government or a State Government for the
purpose of raising a public loan and having one of the forms
specified in clause (2) of section 2 of the Public Debt Act,
1944.
3
Additional Means a trading ring or trading facility offered by a

Trading Floor recognised stock exchange outside its area of operation
to enable the investors to buy and sell securities through
such trading floor under the regulatory framework of that
stock exchange.
Non Applicability
the Government, the Reserve Bank of India,

any local authority or any corporation set up by
a special law.
any convertible bond or share warrant or any

option or right, in so far as it entitles the person
Section 28 provides that the in whose favour any of the foregoing has been
provisions of SCRA shall not issued, whether by conversion of the bond or
warrant or otherwise, on the basis of the price
apply to - agreed upon when the same was issued
the Central Government, in the interest of trade

and commerce or the economic development
of the country, may specify any class of
contracts as contracts to which this Act or any
provision contained therein shall not apply
PUNISHMENT FOR CONTRAVENTION

Section 9(3) of the Act provides that the bye-laws made may:
a) specify the bye-laws, the contravention of which shall make a contract
entered into otherwise than in accordance with the bye- laws void.
b) provide that the contravention of any of the byelaws shall render the
member concerned liable to one or more of the following punishments,
namely;
i. fine,
ii. expulsion from membership,
iii. suspension from membership for a specified period,
iv. any other penalty of a like nature not involving the payment of
money.
4
Any bye-laws shall be subject to such conditions in regard to previous

publication as may be prescribed, and, when approved by the SEBI, shall be
published in the Gazette of India and also in the Official Gazette of the State
in which the principal office of the recognised stock exchange is situated, and
shall have effect as from the date of its publication in the Gazette of India.
However, if the SEBI is satisfied in any case that in the interest of the trade
or in the public interest any bye-laws should be made immediately, it may,
by order in writing specify the reasons therefor, dispense with the condition
of previous publication.
CLEARING CORPORATION
Role of Clearing Corporation:-
 for clearing and settlement of all trades executed on Stock Exchange
and deposit and collateral management and risk management
functions;
 to bring and sustain confidence in clearing and settlement of securities;
 to promote and maintain, short and consistent settlement cycles;
 to provide counter-party risk guarantee; and
 to operate a tight risk containment system.
Section 8A(1) provides that a recognised stock exchange may, with the prior
approval of the SEBI, transfer the duties and functions of a clearing house to
a clearing corporation, being a company incorporated under the Companies
Act, 2013, for the purpose of –
a) the periodical settlement of contracts and differences thereunder;
b) the delivery of, and payment for, securities;
c) any other matter incidental to, or connected with, such transfer.
Every clearing corporation shall, for the purpose of transfer of the duties and
functions of a clearing house to a clearing corporation, make bye-laws and
submit the same to the SEBI for its approval.
SEBI may, on being satisfied that it is in the interest of the trade and also
in the public interest to transfer the duties and functions of a clearing house
to a clearing corporation, grant approval to the bye-laws submitted to it and
approve transfer of the duties and functions of a clearing house to a clearing
corporation.
5
National
Commodity
Clearing Ltd.
Metropolitan Indian
Clearing Clearing
Corporation Corporation
of India Ltd. Ltd.
Clearing
Corporations
India National
International Securities
Clearing Clearing
Corporation Corporation
(IFSC) Ltd. Multi Ltd.
Commodity
Exchange
Clearing
Corporation
Ltd.
POWERS OF THE SEBI

To make or
amend Bye- laws To Issue Power to To make
of Recognised directions adjudicate Regulations
Stock Exchanges [Section 12A] [Section 23 -I] [Section 31]
[Section 10]
The SEBI may, by notification in the Official Gazette, make regulations

consistent with the provisions of this Act and the rules made thereunder to
carry out the purposes of this Act. In particular, and without prejudice to the
generality of the foregoing power, such regulations may provide for all or any
of the following matter namely:
a) the manner, in which at least fifty-one percent of equity share capital
of a recognised stock exchange is held, within twelve months from
the date of publication of the order under sub-section (7), of Section
4B by the public other than shareholders having trading rights under
sub-section (8) of that section;
b) the eligibility criteria and other requirements under Section 17A;
c) the terms determined by the SEBI Board for settlement of proceeding
under sub-section (2) of section 23JA and
6
d) any other matter which is required to be, or may be, specified by

regulations or in respect of which provision is to be made by regulation.
Every regulation made under this

Act shall be laid, as soon as may be
after it is made, before each House of
SEBI Regulations Parliament, while it is in session for a
•SEBI (Listing Obligations total period of thirty days which may
and Disclosures
Requirements), 2015 be comprised in one session or in two
• SEBI (Issue of Capital and or more successive sessions, and
Disclosure Requirements)
Regulations, 2018 if, before the expiry of the session
•SEBI (Issue and Listing of
Debt Securities) immediately following the session or
Regulations, 2008 the successive sessions aforesaid,
•SEBI (Prohibition of Insider
Trading) Regulations, 2015 both Houses agree in making any
modification in the regulation or both
Houses agree that the regulation
should not be made, the regulation
shall thereafter have effect only in such modified form or be of no effect, as
the case may be; so, however, that any such modification or annulment shall
be without prejudice to the validity of anything previously done under that
regulation:
Powers of SEBI not to apply to International Financial Services Centre.
The powers exercisable by the SEBI under this Act,—
a. shall not extend to an International Financial Services Centre set up
under sub-section (1) of section 18 of the Special Economic Zones
Act, 2005;
b. shall be exercisable by the International Financial Services Centres
Authority established under sub-section (1) of section 4 of the
International Financial Services Centres Authority Act, 2019,
in so far as regulation of financial products, financial services and financial
institutions that are permitted in the International Financial Services Centres
are concerned.
PUBLIC ISSUE AND LISTING OF SECURITIES

Section 17A provides for public issue and listing of securities referred to in
sub-clause (ie) of clause (h) of section 2.
7
Section 2(h)(ie) provides that any certificate or instrument (by whatever

name called), issued to an investor by any issuer being a special purpose
distinct entity which possesses any debt or receivable, including mortgage
debt, assigned to such entity, and acknowledging beneficial interest of
such investor in such debt or receivable, including mortgage debt, as the
case may be
l No securities of the nature referred to in sub-clause (ie) of clause (h) of

section 2 shall be offered to the public or listed on any recognized stock
exchange unless the issuer fulfil such eligibility criteria and complies with
such other requirements as may be specified by regulations made by the
SEBI.
l Every issuer intending to offer the certificates or instruments referred
therein to the public shall make an application, before issuing the offer
document to the public, to one or more recognized stock exchanges for
permission for such certificates or instruments to be listed on the stock
exchange or each such stock exchange.
l Where the permission applied for listing has not been granted or
refused by the recognized stock exchanges or any of them, the issuer
shall forthwith repay all moneys, if any, received from applicants in
pursuance of the offer document, and if any such money is not repaid
within 8 days after the issuer becomes liable to repay it, the issuer
and every director or trustee thereof, as the case may be, who is in
default shall, on and from the expiry of the eighth day, be jointly and
severally liable to repay that money with interest at the rate of fifteen
percent per annum.
In reckoning the eighth day after another day, any intervening day which
is a public holiday under the Negotiable Instruments Act, 1881, shall be
disregarded, and if the eighth day (as so reckoned) is itself such a public
holiday, there shall for the said purposes be substituted the first day
thereafter which is not a holiday
l All the provisions of this Act relating to listing of securities of a public

company on a recognized stock exchange shall, mutatis mutandis, apply
to the listing of the securities of the nature referred to in sub-clause (ie) of
clause of section 2 by the issuer, being a special purpose distinct entity.
8
RIGHT TO APPEAL
Right of appeal to Central Government against refusal of stock exchanges

to list securities of public companies
Where a recognised stock exchange refuses to list the securities of any public
company or collective investment scheme, the company or scheme shall be
entitled to be furnished with reasons for such refusal, and may, –
a. within fifteen days from the date on which the reasons for such refusal
are furnished to it, or
b. where the stock exchange has omitted or failed to dispose of, within
the time specified in section 40 of the Companies Act, 2013 (hereafter
in this section referred to as the “specified time”), the application for
permission for the shares or debentures to be dealt with on the stock
exchange, within fifteen days from the date of expiry of the specified
time or within such further period, not exceeding one month, as the
Central Government may, on sufficient cause being shown, allow,
appeal to the Central Government against such refusal, omission or
failure, as the case may be, and thereupon the Central Government
may, after giving the stock exchange an opportunity of being heard,–
i. vary or set aside the decision of the stock exchange, or
ii. where the stock exchange has omitted or failed to dispose of
the application within the specified time, grant or refuse the
permission,
and where the Central Government sets aside the decision of the recognised
stock exchange or grants the permission, the stock exchange shall act in
conformity with the orders of the Central Government.
Right of appeal to Securities Appellate Tribunal (SAT) against refusal to

list securities of public companies by Stock exchanges
Where a recognised stock exchange, acting in pursuance of any power given
to it by its bye-laws, refuses to list the securities of any company, the company
shall be entitled to be furnished with reasons for such refusal, and may, –
a. within fifteen days from the date on which the reasons for such refusal
are furnished to it, or
b. where the stock exchange has omitted or failed to dispose of, within
the time specified in section 40 of the Companies Act, 2013, the
application for permission for the shares or debentures to be dealt
9
with on the stock exchange, within fifteen days from the date of expiry
of the specified time or within such further period, not exceeding one
month, as the Securities Appellate Tribunal may, on sufficient cause
being shown, allow appeal to the Securities Appellate Tribunal having
jurisdiction in the matter against such refusal, omission or failure, as
the case may be, and thereupon the Securities Appellate Tribunal may,
after giving the stock exchange, an opportunity of being heard, –
a. vary or set aside the decision of the stock exchange; or
b. where the stock exchange has omitted or failed to dispose off
the application within the specified time, grant or refuse the
permission,
and where the Securities Appellate Tribunal sets aside the decision of the
recognised stock exchange or grants the permission, the stock exchange
shall act in conformity with the orders of the Securities Appellate Tribunal.
Every appeal shall be in such form and be accompanied by such fee as may
be prescribed. The Securities Appellate Tribunal shall send a copy of every
order made by it to SEBI and parties to the appeal. The appeal filed before
the Securities Appellate Tribunal shall be dealt with by it as expeditiously as
possible and endeavour shall be made by it to dispose off the appeal finally
within six months from the date of receipt of the appeal.
The appeal filed before the Securities Appellate Tribunal is as per the
procedure laid down under the Securities Contracts (Regulation) (Appeal to
Securities Appellate Tribunal) Rules, 2000.
Procedure and Powers of Securities Appellate Tribunal

Section 22B stipulates that the Securities Appellate Tribunal shall not be
bound by the procedure laid down by the Code of Civil Procedure, 1908, but
shall be guided by the principles of natural justice and, subject to the other
provisions of this Act and of any rules, the Securities Appellate Tribunal shall
have powers to regulate their own procedure including the places at which
they shall have their sittings.
The Securities Appellate Tribunal shall have, for the purpose of discharging
their functions under this Act, the same powers as are vested in a civil court
under the Code of Civil Procedure, 1908 while trying a suit, in respect of the
following matters, namely :–
I. summoning and enforcing the attendance of any person and examining
him on oath;
10
II. requiring the discovery and production of documents;

III. receiving evidence on affidavits;
IV. issuing commissions for the examination of witnesses or documents;
V. reviewing its decisions;
VI. dismissing an application for default or deciding it ex parte;
VII. setting aside any order of dismissal of any application for default or
any order passed by it ex parte; and
VIII. any other matter which may be prescribed.
Right to Legal Representation

The appellant may either appear in person or authorise one or more chartered
accountants or company secretaries or cost accountants or legal practitioners
or any of its officers to present his or its case before the Securities Appellate
Tribunal.
“Company Secretary” means a company secretary as defined in clause

(c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980
and who has obtained a certificate of practice under sub-section (1) of
section 6 of that Act.
Limitation
The provisions of the Limitation Act, 1963 shall, as far as may be, apply to
an appeal made to a Securities Appellate Tribunal.
Civil Court not to have jurisdiction

No civil court shall have jurisdiction to entertain any suit or proceeding in
respect of any matter which a Securities Appellate Tribunal is empowered by
or under this Act to determine and no injunction shall be granted by any court
or other authority in respect of any action taken or to be taken in pursuance
of any power conferred by or under this Act.
Appeal to Supreme Court

Any person aggrieved by any decision or order of the Securities Appellate
Tribunal may file an appeal to the Supreme Court within 60 days from the date
of communication of the decision or order of the Securities Appellate Tribunal
to him on any question of law arising out of such order.
11
However the Supreme Court may, if it is satisfied that the appellant was
prevented by sufficient cause from filing the appeal within the said period,
allow it to be filed within a further period not exceeding sixty days.
PENALTIES AND PROCEDURES

Any person who –
a) without reasonable excuse (the burden of proving which shall be on
him) fails to comply with any requisition made under sub-section (4)
of section 6; or
b) enters into any contract in contravention of any of the provisions
contained in section 13 or section 16; or
c) contravenes the provisions contained in section 17 or section 17A or
section 19; or
d) enters into any contract in derivative in contravention of section 18A
or the rules made under section 30; or
e) owns or keeps a place other than that of a recognised stock exchange
which is used for the purpose of entering into or performing any
contracts in contravention of any of the provisions of this Act and
knowingly permits such place to be used for such purposes; or
f) manages, controls, or assists in keeping any place other than that
of a recognised stock exchange which is used for the purpose of
entering into or performing any contracts in contravention of any of the
provisions of this Act or at which contracts are recorded or adjusted
or rights or liabilities arising out of contracts are adjusted, regulated
or enforced in any manner whatsoever; or
g) not being a member of a recognised stock exchange or his agent
authorised as such under the rules or byelaws of such stock exchange
or not being a dealer in securities licensed under section 17 willfully
represents to or induces any person to believe that contracts can be
entered into or performed under this Act through him; or
h) not being a member of a recognised stock exchange or his agent
authorised as such under the rules or byelaws of such stock exchange
or not being a dealer in securities licensed under section 17,
canvasses, advertises or touts in any manner either for himself or on
behalf of any other person for any business connected with contracts
in contravention of any of the provisions of this Act; or
12
i) joins, gathers or assists in gathering at any place other than the place
of business specified in the byelaws of a recognised stock exchange
any person or persons for making bids or offers or for entering into or
performing any contracts in contravention of any of the provisions of this
Act shall, without prejudice to any award of penalty by the Adjudicating
Officer or the SEBI under this Act, on conviction, be punishable with
imprisonment for a term which may extend to ten years or with fine,
which may extend to twenty five crore rupees or with both.
Any person who enters into any contract in contravention of the provisions
contained in section 15 or who fails to comply with the provisions of section
21 or section 21A or with the orders of or the Central Government under
section 22 or with the orders of the Securities Appellate Tribunal shall, without
prejudice to any award of penalty by the Adjudicating Officer under this Act, on
conviction, be punishable with imprisonment for a term which may extend to ten
years or with fine which may extend to twenty five crore rupees, or with both.
The Act prescribes various penalties against persons who might be found
guilty of offences under section 23 the Act.
Section Contravention Penalty

23A(a) Any person who fails to furnish Fine of at least 1 lakh
any information, document, books, rupees but may extend
returns or report to the recognised to 1 lakh rupees per day
stock exchange or to the SEBI, during which such failure
fails to furnish the same within the continues, subject to
time specified therefor in the listing a maximum of 1 crore
agreement or conditions or bye-laws rupees
of the recognised stock exchange or
the Act or rules made thereunder,
or who furnishes false, incorrect or
incomplete information, document,
books return or report.
23A(b) Any person who fails to maintain Fine of at least 1 lakh
books of account or records, as per rupees but may extend
the listing agreement or conditions, to 1 lakh rupees per day
or bye-laws of a recognised stock during which such failure
exchange continues, subject to
a maximum of 1 crore
rupees
13

23B Any person who fails to enter into an Fine of at least 1 lakh
agreement with clients rupees but may extend
to 1 lakh rupees per day
during which such failure
continues, subject to
a maximum of 1 crore
rupees
23C Failure by a stock broker or sub- Fine of at least 1 lakh
broker or a listed company or rupees but may extend
proposed listed company to redress to 1 lakh rupees per day
investors’ grievances within the time during which such failure
stipulated by SEBI or recognised continues, subject to
stock exchange a maximum of 1 crore
rupees
23D Failure to segregate securities or At least 1 lakh rupees but
money of client or clients or using may extend to rupees 1
the securities or money of client for crore
self-use or for any other client
23E Failure to comply with the provisions Liable for at least 5 lakh
of listing conditions or delisting rupees which may extend
conditions or grounds or breach to rupees 25 crores
thereof is committed, by a company
or a person managing collective
investment scheme or mutual fund
or real estate investment trust or
infrastructure investment trust or
alternative investment fund.
23F If any issuer makes an excess At least 5 lakh rupees
dematerialisation or delivery of which may extend to 25
unlisted securities crores rupees
23G Failure by recognised stock exchange At least 5 lakh rupees
to furnish periodical return or furnish which may extend to 25
false, incorrect or incomplete periodical crores rupees
returns to SEBI or fails or neglects to
make or amend its rules or bye-laws
as directed by SEBI or fails to comply
with the directions of SEBI
14

23GA Where a stock exchange / a At least 5 crore rupees
clearing corporation fails to conduct which may extend to 25
its business with its members / crore rupees or three
any issuer/ its agent/ any person times the amount of gains
associated with the securities markets made out of such failure,
in a manner not in accordance with whichever is higher.
the rules/ regulations made by the
SEBI and the directions issued by it
under this Act
23H Whoever fails to comply with any At least 1 lakh rupees
provision of this Act, the rules of which may extend to
articles or bye-laws or the regulations rupees 1 crore
of recognised stock exchange or
directions issued by SEBI for which
no separate penalty has been
provided
Factors to be taken into account while adjudging the quantum of penalty

by the Adjudicating Officer
Section 23J provides for the factors to be taken into account by the adjudicating
officer. While adjudging the quantum of penalty under section 12A and section
23-I, the SEBI or adjudicating officer shall have due regard to the following
factors, namely –
a. the amount of disproportionate gain or unfair advantage, wherever
quantifiable, made as a result of the default;
b. the amount of loss caused to an investor or group of investors as a
result of the default;
c. the repetitive nature of the default.
Appeal to Securities Appellate Tribunal

Section 23L stipulates that any person aggrieved, by the order or decision of
the recognized stock exchange or the adjudicating officer or any order made
by the Securities and Exchange Board of India under or sub-section of section
23-I, may prefer an appeal before the Securities Appellate Tribunal.
Every appeal shall be filed within a period of forty-five days from the date on
which a copy of the order or decision is received by the appellant and it shall
be in such form and be accompanied by such fee as may be prescribed.
15
However, the Securities Appellate Tribunal may entertain an appeal after

the expiry of the said period of forty- five days if it is satisfied that there was
sufficient cause for not filing it within that period.
On receipt of an appeal the Securities Appellate Tribunal may, after giving
the parties to the appeal, an opportunity of being heard, pass such orders
thereon as it thinks fit, confirming, modifying or setting aside the order appealed
against.
The Securities Appellant Tribunal shall send a copy of every order made by
it to the parties to the appeal and to the concerned adjudicating officer. The
appeal filed before the Securities Appellate Tribunal shall be dealt with by it
as expeditiously as possible and endeavour shall be made by it to dispose
of the appeal finally within six months from the date of receipt of the appeal.
The appeal may be prefer before the Securities Appellate Tribunal as per the
procedure laid down under the Securities Contracts (Regulation) (Appeal to
Securities Appellate Tribunal) Rules, 2000.
SAT shall
give an Every
Person SAT to
Appeal to opportunity appeal filed
aggrieved send a copy
be filed of being before SAT
by the order of every
within 45 heard and to be
of stock order to the
days pass an disposed of
exchange/ parties to
(unless order within 6
adjudicating appeal and
further confirming/ months
officer/order to
extension modifying from the
of SEBI concerned
granted by setting date of
may appeal adjudicating
(SAT) aside the receipt of
to SAT officer
appealed appeal
order
Offences
Section 23M provides that if any person contravenes or attempts to contravene
or abets the contravention of the provisions of this Act or of any rules or
regulations or bye-laws made thereunder, for which no punishment is provided
elsewhere in this Act, he shall be punishable with imprisonment for a term
which may extend to ten years, or with fine, which may extend to twenty-five
crore rupees or with both.
If any person fails to pay the penalty imposed by the adjudicating officer or
the SEBI or fails to comply with the direction or order, he shall be punishable
with imprisonment for a term which shall not be less than one month but
which may extend to ten years, or with fine, which may extend to twenty-five
crore rupees, or with both.
16
ROLE OF COMPANY SECRETARY

Company Secretary has the Right to Legal Representation before Securities
Appellate Tribunal (SAT). The appellant may either appear before SAT in
person or authorise one or more chartered accountants or company secretaries
or cost accountants or legal practitioners or any of its officers to present his
or its case.
17
Chapter 2
An Overview of SEBI (Issue of Capital and
Disclosure Requirements) Regulations, 2018
INTRODUCTION
Management of a public issue involves co-ordination of activities and
co-operation of a number of agencies such as managers to the issue,
underwriters, brokers, registrar to the issue, solicitors/legal advisors, printers,
publicity and advertising agents, financial institutions, auditors and other
Government/Statutory agencies such as Registrar of Companies, Reserve
Bank of India, SEBI etc. The whole process of issue of shares can be divided
into two parts (i) pre-issue activities and (ii) post issue activities. All activities
beginning with the planning of capital issue till the opening of the subscription
list are pre-issue activities while, all activities subsequent to the opening of
the subscription list may be called post issue activities. As the demat shares
are being admitted for dealings on the stock exchanges, the securities can be
issued only with the purpose of allotting the shares in Dematerialised form.
SEBI vide its notification dated 11th September, 2018 issued the SEBI (Issue of
Capital and Disclosure Requirements) Regulations, 2018 (‘ICDR Regulations,
2018’) which was effective from 60th day of its publication in Official Gazette.
Chapter as per ICDR Particulars

Regulations, 2018
I Preliminary
II Initial Public Offer (IPO) on Main Board
III Right Issue
IV Further Public Offer
V Preferential Issue
VI Qualified Institutions Placement
VII IPO of Indian Depositary Receipts (IDR)
VIII Rights Issue of IDR
IX IPO by Small and Medium Enterprises (SME)
18
X Innovators Growth Platform (IGP)

XI Bonus Issue
XI-A Power to Relax Strict Enforcement of the
Regulations
XII Miscellaneous
TYPES OF ISSUES
Initial Public
Offer
Private Further
Placement Public Offer
Types of
Qualified Issues Bonus
Institutional
Issue
Placement
Preferential Rights
Issue Issue
Primary Market deals with those securities which are issued to the public for
the first time. Primary Market provides an opportunity to issuers of securities,
Government as well as corporates, to raise financial resources to meet their
requirements of investment and/or discharge their obligations.
The following are the various types of issues in the capital market –
Initial Public Offer: It means an offer of specified securities by an
–
unlisted issuer to the public for subscription and includes an offer for
sale of specified securities to the public by any existing holder of such
securities in an unlisted issuer. In order to qualify as an Initial public
offer, the offer of securities must be by an unlisted issuer company
and such an issue shall be made to the public and not to the existing
shareholders of the unlisted issuer company.
19
Further Public Offer (FPO): It is an offer of specified securities by a

–
listed issuer company to the public for subscription. In other words,
another issue to the public other than its existing shareholders or to
a select group of persons by the listed persons is referred to as a
Further Public offer.
Rights Issue: Rights issue of securities is an issue of specified
–
securities by a company to its existing shareholders as on a record
date in a predetermined ratio.
Preferential Allotment: It refers to an issue, where a listed issuer
–
issues shares or convertible securities, to a select group of persons
on a private placement basis it is called a preferential allotment. The
issuer is required to comply with various provisions which inter alia
include pricing, disclosures in the notice, lock in etc., in addition to the
requirements specified in the Companies Act, 2013.
Qualified Institutional Placement (QIP): It refers to an issue by
–
a listed entity to only qualified institutional buyers in accordance of
Chapter VI of the SEBI (ICDR) Regulations, 2018.
Bonus Issue: Bonus issue of shares means additional shares issued
–
by the Company to its existing shareholders to reward for their royalty
and is an opportunity to enhance the shareholders wealth. The bonus
shares are issued without any cost to the Company by capitalizing the
available reserves.
APPLICABILITY OF THE SEBI (ISSUE OF CAPITAL AND DISCLOSURE

REQUIREMENTS) REGULATIONS, 2018 [REGULATION 3]
20
MEANING OF DRAFT OFFER DOCUMENT, LETTER OF OFFER AND

RED HERRING PROSPECTUS
“Draft Offer document” “Offer document” means “Red Herring
means the offer Prospectus in case of Prospectus” is a
document in draft a public issue or offer prospectus, which does
stage. The draft offer for sale and Letter of not have details of
documents are filed with Offer in case of a right either price or number
the SEBI, at least 30 issue, which is filed with of shares being offered,
days prior to the filing Registrar of Companies or the amount of issue.
of the Offer Document (ROC) and Stock This means that in case
w i t h RO C / S t o c k Exchanges. An offer price is not disclosed,
Exchanges. The SEBI document covers all the the number of shares
may specify changes, relevant information to and the upper and
if any, in the Draft help an investor to make lower price bands are
Offer Document and his/ her investment disclosed. An RHP for
the Issuer or the Lead decision. an FPO can be filed
Merchant banker shall with the ROC without
carry out such changes the price band and the
in the draft off document issuer, in such a case
before filing the Offer will notify the floor price
document with ROC/ or a price band by way
SEs. The Draft Offer of an advertisement one
document is available day prior to the opening
on the SEBI website for of the issue.
public comments for a
period of 21 days from
the filing of the Draft
Offer Document with
the SEBI.
INITIAL PUBLIC OFFER / FURTHER PUBLIC OFFER

A public issue of specified securities by an issuer can be either an Initial Public
Offer (IPO) or a Further Public Offer (FPO). An IPO is done by an unlisted
issuer while a FPO is done by a listed issuer. As per the ICDR Regulations,
the issuer shall comply with the following conditions before making an IPO
of specified securities. The conditions need to be satisfied both at the time of
filing the draft offer document (commonly referred to as the Draft Red Herring
Prospectus) and the time of registering or filing the final offer document
(commonly referred to as the Prospectus) with the Registrar of Companies.
21
ELIGIBILITY REQUIREMENTS TO BE COMPLIED WITH FOR IPO

Entities not eligible to make an initial public offer
a) If the issuer, any of its promoters, promoter group, selling shareholders are
debarred from accessing the capital market by the SEBI.
[Regulation 5(1) & (2)]
b) If any of the promoters or directors of the issuer is a promoter or a director of any

other company
c) If the issuer or any of its promoters or directors is a willful defaulter
d) If any of the promoters or directors of the issuer is a fugitive offender
e) If there are any outstanding convertible securities or any other right which would
entitled any person with any option to receive equity shares of the issuer
Note: The restrictions under (a) and (b) above shall not apply to the persons
or entities mentioned therein, who were debarred in the past by the SEBI and
the period of debarment is already over as on the date of filing of the draft
offer document with the SEBI.
Non applicability of Regulation 5(1) & (2)
outstanding options granted to employees, fully paid-up outstanding convertible

whether currently an employee or not, securities which are required to be
pursuant to an employee stock option scheme converted on or before the date of
in compliance with the Companies Act, 2013, filing of the red herring prospectus (in
the relevant Guidance Note or accounting case of book-built issues) or the
standards, if any, issued by the Institute of prospectus (in case of fixed price
Chartered Accountants of India or pursuant to issues), as the case may be.
the Companies Act, 2013, in this regard;
22
Eligibility requirements for an initial public offer [Regulation 6(1) &

6(2)]
An issuer shall be eligible to make an IPO only if:
a. the issuer has net tangible assets of atleast Rs. 3 crores,

calculated on a restated and consolidated basis, in each of the
preceding three full years of (12 months each) of which not more
than 50% is held in monetary assets. However, if more than 50%
of the net tangible assets are held in monetary assets, the issuer
has utilized or made firm commitments to utilize such excess
monetary assets in its business or project. This limit of 50% shall
not apply in case of IPO is made entirely through an offer for sale.
b. the issuer has an average operating profit of at least Rs.15
crores, calculated on a restated and consolidated basis, during
the three preceding 3 years, with operating profit in each of the
three preceding years;
c. the issuer has a networth of atleast Rs.1 crore in each of
the preceding three full years, calculated on a restated and
consolidated basis.
In case the issuer has changed its name within the last one year, atleast
50% of the revenue calculated on a restated and consolidated basis,
for the preceding one full year has been earned by it from the activity
indicated by the new name.
In case the Eligibility conditions are not met
An issuer not satisfying the above-mentioned conditions shall be eligible
to make an initial public offer only if the issue is made through the book-
building process and the issuer undertakes to allot at least 75% of the
net offer to qualified institutional buyers (QIBs) and to refund the full
subscription money if it fails to do so.
General Conditions [Regulation 7]

 An issuer making an initial public offer shall ensure that:
o it has made an application to one or more stock exchanges to
seek an in-principle approval for listing of its specified securities
on such stock exchanges and has chosen one of them as the
designated stock exchange;
23
o it has entered into an agreement with a depository for

dematerialisation of the specified securities already issued and
proposed to be issued;
o all its specified securities held by the promoters are in
dematerialised form prior to filing of the offer document;
o all its existing partly paid-up equity shares have either been fully
paid-up or have been forfeited;
o it has made firm arrangements of finance through verifiable means
towards 75% of the stated means of finance for a specific project
proposed to be funded from the issue proceeds, excluding the
amount to be raised through the proposed public issue or through
existing identifiable internal accruals
 The amount for general corporate purposes, as mentioned in objects
of the issue in the draft offer document and the offer document shall
not exceed 25% of the amount being raised by the issuer
The holding period of
such convertible
Shall be held by the securities, including
sellers for a period of at depository receipts, as
least one year prior to the well as that of resultant
filing of the draft offer equity shares together
document shall be considered for
the purpose of calculation
of one year period.
Further, such holding

period of one year shall
Shares must be fully be required to be
paid-up. complied with at the time
Additional of filing of the draft offer
document
Conditions for
an Offer to
Sale (Reg. 8)
24
 In case the equity shares received on conversion or exchange of

fully paid-up compulsorily convertible securities including
depository receipts are being offered for sale
 If the equity shares arising out of the conversion or exchange of
the fully paid-up compulsorily convertible securities are being
offered for sale, the conversion or exchange should be completed
prior to filing of the offer document (i.e., red herring prospectus in
the case of a book built issue and prospectus in the case of a fixed
price issue), provided full disclosures of the terms of conversion or
exchange are made in the draft offer document
Provided further that the requirement of holding equity shares for a

period of one year shall not apply:
 in case of an offer for sale of a government company or statutory
authority or corporation or any special purpose vehicle set up and
controlled by any one or more of them, which is engaged in the
infrastructure sector;
 if the equity shares offered for sale were acquired pursuant to any
scheme approved by a High Court under the sections 391 to 394
of Companies Act, 1956, or approved by a tribunal or the Central
Government under the sections 230 to 234 of Companies Act, 2013,
as applicable, in lieu of business and invested capital which had been
in existence for a period of more than one year prior to approval of
such scheme;
 if the equity shares offered for sale were issued under a bonus issue
on securities held for a period of at least one year prior to the filing
of the draft offer document with the Board and further subject to the
following:
o such specified securities being issued out of free reserves and
share premium existing in the books of account as at the end of
the financial year preceding the financial year in which the draft
offer document is filed with the Board; and
o such equity shares not being issued by utilisation of revaluation
reserves or unrealized profits of the issuer.
25
ELIGIBILITY CRITERIA FOR FURTHER PUBLIC OFFER (FPO)
Entities not eligible to make a FPO [Regulation 102]

An issuer shall not be eligible to make a FPO of specified securities:
if the issuer, any of its promoters, promoter group or directors,
selling shareholders are debarred from accessing the capital
market by the Board;
if any of the promoters or directors of the issuer is a promoter or

director of any other company which is debarred from accessing
the capital market by the Board;
if the issuer or any of its promoters or directors is a wilful

defaulter ;
if any of its promoters or directors is a fugitive economic

offender.
Note : The restrictions under (a) and (b) above shall not apply to the persons
or entities mentioned therein, who were debarred in the past by the SEBI and
the period of debarment is already over as on the date of filing of the draft
offer document with the SEBI.
Eligibility requirements for FPO [Regulation 103]

l An issuer may make a FPO if it has changed its name within the last
one year and atleast 50% of the revenue in the preceding one full year
has been earned from the activity suggested by the new name.
l If an issuer does not satisfy the above-mentioned condition, it may
make a FPO only, if, the issue is made through the book-building
process and the issuer undertakes to allot at least 75% of the net offer,
to qualified institutional buyers and to refund full subscription money
if it fails to make the said minimum allotment to qualified institutional
buyers.
General Conditions for FPO [Regulation 104]

An issuer making an FPO shall ensure that:
26
An application is made for listing of the specified securities to one

or more of the recognized stock exchanges and choose one of the
exchanges as the designated stock exchange.
An agreement is entered into with a depository for dematerialization

of specified securities already issued and proposed to be issued.
All its existing partly paid up equity shares have either been fully
paid up or have been forfeited. In other words, if a company has
partly paid up equity shares, they shall not be permitted to make a
public issue.
The issuer should make firm arrangements of finance through

verifiable means towards 75% of the stated means of finance for
the specific project proposed to be funded from the issue proceeds,
excluding the amount to be raised through the proposed public
issue or through existing identifiable internal accruals.
Amount for General Corporate Purposes as mentioned in objects of

the issue in the draft offer document and the offer document shall
not exceed 25% of the amount being raised by the issuer.
Issue of Warrants [Regulation 111]

An issuer shall be eligible to issue warrants in a further public offer subject
to the following conditions:
 the tenure of such warrants shall not exceed eighteen months from
the date of their allotment in the public issue;
 a specified security may have one or more warrants attached to it;
 the price or formula for determination of exercise price of the warrants
shall be determined upfront and at least 25% of the consideration
amount based on the exercise price shall also be received upfront.
However, in case the exercise price of warrants is based on a formula,
25% consideration amount based on the cap price of the price band
determined for the linked equity shares or convertible securities shall
be received upfront.
 in case the warrant holder does not exercise the option to take
equity shares against any of the warrants held by the warrant holder,
within three months from the date of payment of consideration, such
consideration made in respect of such warrants shall be forfeited by
the issuer
27
PROMOTERS’ CONTRIBUTION
In Case of IPO [Regulation 14]
The promoters of the issuer shall hold at least 20% of the post-issue capital.
However, in case the post-issue shareholding of the promoters is less than
20%., alternative investment funds or foreign venture capital investors or
scheduled commercial banks or public financial institutions or insurance
companies registered with IRDA may contribute to meet the shortfall in
minimum contribution as specified for the promoters, subject to a maximum
of ten percent of the post-issue capital without being identified as promoter(s).
Non applicability
The requirement of minimum promoters’ contribution shall not apply in case
an issuer does not have any identifiable promoter.
Minimum Promoters’ Contribution
The minimum promoters’ contribution shall be as follows:
Promoters shall contribute 20%, as the case may be, either by way
of equity shares including SR equity shares held, if any, or by way
of subscription to convertible securities.
If the price of the equity shares allotted pursuant to conversion is not pre-
determined and not disclosed in the offer document, the promoters shall
contribute only by way of subscription to the convertible securities being
issued in the public issue and shall undertake in writing to subscribe to the
equity shares pursuant to conversion of such securities.
For issue of convertible For initial public offer of

securities which are convertible convertible debt instruments
or exchangeable on different without a prior public issue of
dates and if the promoters’ equity shares
contribution is by way of equity
the promoters shall bring in a
shares (conversion price being
contribution of at least 20% of the
pre-determined)
project cost in the form of equity
such contribution shall not be at shares, subject to contributing at
a price lower than the weighted least 20% of the issue size from
average price of the equity share their own funds in the form of equity
capital arising out of conversion of shares
such securities.
28
However, if the project is to be implemented in stages, the promoters’

contribution shall be with respect to total equity participation till the respective
stage vis-à-vis the debt raised or proposed to be raised through the public
issue.
Promoters’ Contribution to be brought in before Public Issue Opens

[Regulation 14(4)]
l Timing: The promoters shall bring full amount of the promoters’
contribution including premium at least one day prior to the date of
opening of the issue. In case the promoters have to subscribe to
equity shares or convertible securities towards minimum promoters’
contribution, the amount of promoters’ shall be kept in an escrow
account with a scheduled commercial bank, which shall be released
to the issuer along with the release of the issue proceeds. However,
where the promoters’ contribution has already been brought in and
utilised, the issuer shall give the Cash flow statement disclosing the
use of such funds in the offer document.
l Pro-rata basis: Where the minimum promoters’ contribution is more
than Rs.100 crore and the initial public offer is for partly paid shares,
the promoters shall bring in at least Rs.100 crore before the date of
opening of the issue and the remaining amount may be brought on a
pro-rata basis before the calls are made to the public.
Promoters’ contribution shall be computed on the basis of the post-issue
expanded capital:
(a) assuming full proposed conversion of convertible securities into equity
shares;
(b) assuming exercise of all vested options, where any employee stock
options are outstanding at the time of initial public offer.
Securities Ineligible for Minimum Promoters’ Contribution [Regulation 15]

For the computation of minimum promoters’ contribution, the following specified
securities shall not be eligible:
a. Specified securities acquired during the preceding three years, if these
are:-
i. acquired for consideration other than cash and revaluation of
assets or capitalisation of intangible assets is involved in such
transaction; or
29
ii. resulting from a bonus issue by utilisation of revaluation reserves

/unrealised profits of the issuer/from bonus issue against equity
shares which are ineligible for minimum promoters’ contribution.
b. specified securities acquired by promoters and AIFs/ FVCIs / scheduled
commercial banks/ PFIs/ insurance companies during the preceding
one year at a price lower than the price at which specified securities
are being offered to public in the initial public offer.
c. promoters and AIFs during the preceding one year at a price less than
the issue price, against funds brought in by them during that period,
in case of an issuer formed by conversion of one or more partnership
firms/LLPs, where the partners of the erstwhile partnership firms/
LLPs are the promoters of the issuer and there is no change in the
management.
d. specified securities pledged with any creditor.
In clause (c), specified securities, allotted to promoters against capital

existing in such firms for a period of more than one year on a continuous
basis, shall be eligible.
However, Clause (b) shall not apply:
l if the promoters and AIFs, as applicable pay to the issuer, the
difference between the price at which specified securities are
offered in the initial public offer and the price at which the specified
securities had been acquired;
l if such specified securities are acquired in terms of the scheme
under section 391 to 394 of the Companies Act, 1956 or sections
230-240 of the Companies Act, 2013, as approved by a High Court
or a tribunal or the Central Government, as applicable, by promoters
in lieu of business and invested capital that had been in existence
for a period of more than one year prior to such approval;
l to an initial public offer by a government company, statutory authority
or corporation or any special purpose vehicle set up by any of them,
which is engaged in infrastructure sector;
Specified securities referred above shall be eligible for the computation of
promoters’ contribution, if such securities are acquired pursuant to a scheme
which has been approved by a High Court under sections 391- 394 of the
Companies Act, 1956 or approved by Tribunal or the Central Government
under sections 230-240 of the Companies Act, 2013
30
In Case of FPO
Exemption from Requirement of Promoters’ Contribution [Regulation 112]
The requirements of minimum promoters’ contribution shall not apply in case of
(a) An issuer which does not have any identifiable promoter;
(b) Where the equity shares of the issuer are frequently traded on a stock
exchange for a period of at least three years immediately preceding
the reference date, and:
I. the issuer has redressed at least ninety five per cent of the
complaints received from the investors till the end of the quarter
immediately preceding the month of the reference date, and;
II. the issuer has been in compliance with the SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015
for a minimum period of three years immediately preceding the
reference date.
Minimum Promoters’ Contribution [Regulation 113]
A. The promoters shall contribute in the public issue as follows:
a. either to the extent of 20% of the proposed issue size or to the
extent of 20% of the post-issue capital;
b. in case of a composite issue (i.e., further public offer cum rights
issue), either to the extent of 20% of the proposed issue size or
to the extent of 20% of the post-issue capital excluding the rights
issue component.
B. In case of a public issue or composite issue of convertible securities,
the minimum promoters’ contribution shall be as follows:
a. the promoters shall contribute 20%, as the case may be, either by
way of equity shares or by way of subscription to the convertible
securities. However, if the price of the equity shares allotted
pursuant to conversion is not pre-determined and not disclosed
in the offer document, the promoters shall contribute only by way
of subscription to the convertible securities being issued in the
public issue and shall undertake in writing to subscribe to the
equity shares pursuant to conversion of such securities.
b. in case of any issue of convertible securities which are convertible
or exchangeable on different dates and if the promoters’
contribution is by way of equity shares (conversion price being
31
pre- determined), such contribution shall not be at a price lower

than the weighted average price of the equity share capital arising
out of conversion of such securities.
C. In case of a further public offer or composite issue where the promoters
contribute more than the stipulated minimum promoters’ contribution,
the allotment with respect to excess contribution shall be made at
a price determined in terms of the provisions relating to pricing of
frequently trading shares or the issue price, whichever is higher.
D. In case the promoters have to subscribe to equity shares or convertible
securities towards promoters’ contribution, the promoters shall satisfy
the requirements of at least one day prior to the date of opening of
the issue and the amount of promoters’ contribution shall be kept in
an escrow account with a scheduled commercial bank and shall be
released to the issuer along with the release of the issue proceeds.
Further, where the minimum promoters’ contribution is more than one
hundred crore rupees and the further public offer is for partly paid
shares, the promoters shall bring in at least one hundred crore rupees
before the date of opening of the issue and the remaining amount
may be brought on a pro-rata basis before the calls are made to the
public.
E. The SR equity shares of promoters, if any, shall be eligible towards
computation of minimum promoters’ contribution.
“Weighted average price”:-

(a) “weight” means the number of equity shares arising out of conversion
of such specified securities into equity shares at various stages;
(b) “price” means the price of equity shares on conversion arrived at
after taking into account predetermined conversion price at various
stages.
Securities ineligible for minimum promoters’ contribution [Regulation

114]
For the computation of minimum promoters’ contribution, the following specified
securities shall not be eligible:
a. specified securities acquired during the preceding three years, if these
are:
i. acquired for consideration other than cash and revaluation of
32
assets or capitalisation of intangible assets is involved in such

transaction; or
ii. resulting from a bonus issue by utilisation of revaluation reserves
or unrealised profits of the issuer or from bonus issue against
equity shares which are ineligible for minimum promoters’
contribution;
b. specified securities pledged with any creditor other than those for
borrowings by the issuer or its subsidiaries.
Specified securities referred shall be eligible for the computation of promoters’
contribution, if such securities are acquired pursuant to a scheme which has
been approved by the High Court under section 391 to 394 of the Companies
Act, 1956 or approved by a tribunal or the Central Government under section
230 to 234 of the Companies Act, 2013.
Lock-In-Requirements
For securities a. The promoters contribution including contribution
held by made by AIFs or FVCIs or scheduled commercial
Promoters banks or PFIs or insurance companies registered
[Regulations with IRDA, shall be locked in for a period of 3 years
16 & 115] from the date of commencement of commercial
production or from the date of allotment in the
In a public
IPO/FPO, whichever is later
issue, the
specified b. Promoters’ holding in excess of minimum
securities promoters’ contribution shall be locked-in for a
held by period of 1 year from the date of allotment in the
promoters initial public offer.
shall be
c. SR equity shares shall be under lock-in until
locked-in for
conversion into equity shares having voting
the period
rights same as that of ordinary shares or shall be
stipulated
locked-in for a period specified above, whichever
is later. In case of FPO, the SR equity shares
shall be under lock-in until their conversion to
equity shares having voting rights same as that of
ordinary shares, provided they are in compliance
with the other provisions of these regulations.
33
“Date of commencement of commercial production” means the last date

of the month in which commercial production of the project in respect of
which the funds raised are proposed to be utilized as stated in the offer
document, is expected to commence.
Securities The entire pre-issue share capital, held by persons other
held by than the promoters, shall be locked-in for a period of one
persons year from the date of allotment in the initial public offer.
other than The provisions of this regulation shall not apply, in case of:
Promoters
(i) Equity shares allotted to employees under
[Regulation
employee stock option or employee stock
17]
purchase scheme prior to initial public offer, if the
issuer has made full disclosures with respect to
such option; and
(ii) Equity shares held by an employee stock option
trust or transferred to the employees by an
employee stock option trust pursuant to exercise
of options by the employees, in accordance with
the employee stock option plan or employee stock
purchase scheme;
(iii) Equity shares held by a venture capital fund or
AIF of category I & II or a FVCI and such equity
shares shall be locked-in for a period of at least
one-year from the date of purchase by the venture
capital or AIF or FVCI.
Lock-in of If the specified securities which are subject to lock-in
partly-paid are partly paid-up and the amount called-up on such
securities specified securities is less than the amount called-up on
[Regulations the specified securities issued to the public, the lock- in
19 & 117] shall end only on the expiry of three years after such
specified securities have become pari passu with the
specified securities issued to the public.
Inscription The certificates of specified securities which are subject
or recording to lock-in shall contain the inscription “non-transferable”
of non- and specify the lock-in period
transferability
[Regulations
20 & 118]
34
Pledge of Specified securities, except SR equity shares, held by

locked- the promoters and locked in may be pledged as collateral
in shares security for a loan granted by a scheduled commercial
[Regulations bank or a public financial institution or a systemically
21 & 119] important non-banking finance company or a housing
finance company, subject to the following:
a. if the specified securities are locked-in as per
Regulation 16 (a)- Lock-in of specified securities
held by the promoters, the loan has been
granted to the issuer company or its subsidiary/
subsidiaries for the purpose of financing one or
more of the objects of the issue and pledge of
specified securities is one of the terms of sanction
of the loan.
b. if the specified securities are locked-in as per
Regulation 16 (b)- Lock-in of specified securities
held by the promoters and the pledge of specified
securities is one of the terms of sanction of the
loan.
However, such lock-in shall continue pursuant to the
invocation of the pledge and such transferee shall not be
eligible to transfer the specified securities till the lock-in
period stipulated in these regulations, has expired.
Transferability Subject to the provisions of the SEBI (Substantial
of locked- Acquisition of shares and Takeovers) Regulations, 2011,
in specified the specified securities except SR equity shares held
securities by the promoters and locked-in as per regulation 115
[Regulations may be transferred to another promoter or any person
22 & 120] of the promoter group or a new promoter or a person in
control of the issuer. However, lock-in on such specified
securities shall continue for the remaining period with
the transferee and such transferee shall not be eligible
to transfer them till the lock-in period stipulated in these
regulations has expired.
35
OTHER REQUIREMENTS FOR IPO & FPO

Appointment of Lead Managers, Other Intermediaries and Compliance Officer
[Regulation 23 & 121]
l The issuer shall appoint one or more merchant bankers, which are
registered with the SEBI, as lead manager(s) to the issue.
l Where the issue is managed by more than one lead manager, the
rights, obligations and responsibilities, relating inter alia to disclosures,
allotment, refund and underwriting obligations, if any, of each lead
manager shall be predetermined and be disclosed in the draft offer
document and the offer document.
l At least one lead manager to the issue shall not be an associate, as
defined under the SEBI (Merchant Bankers) Regulations, 1992 of the
issuer.
l If any of the lead manager is an associate of the issuer, it shall disclose
itself as an associate of the issuer and its role shall be limited to
marketing of the issue.
l The issuer shall, in consultation with the lead manager(s), appoint
other intermediaries which are registered with the SEBI after the
lead manager(s) have independently assessed the capability of other
intermediaries to carry out their obligations.
l The issuer shall enter into an agreement with the lead manager(s) and
enter into agreements with other intermediaries as required under the
respective regulations applicable to the intermediary concerned.
l Such agreements may include such other clauses as the issuer and
the intermediaries may deem fit without diminishing or limiting in
any way the liabilities and obligations of the lead manager(s), other
intermediaries and the issuer under the Act, the Companies Act, 2013
or the Companies Act, 1956 (to the extent applicable), the Securities
Contracts (Regulation) Act, 1956, the Depositories Act, 1996 and the
rules and regulations made thereunder or any statutory modification
or statutory enactment thereof.
l In case of ASBA process, the issuer shall take cognizance of the
deemed agreement of the issuer with the self-certified syndicate banks.
l The issuer shall, in case of an issue made through the book building
process, appoint syndicate member(s) and in the case of any other
issue, appoint bankers to issue, at centres.
l The issuer shall appoint a registrar to the issue, registered with the
SEBI which has connectivity with all the depositories.
36
l If the issuer itself is a registrar, it shall not appoint itself as registrar

to the issue.
l The lead manager shall not act as a registrar to the issue in which it
is also handling the post-issue responsibilities.
l The issuer shall appoint a compliance officer who shall be responsible
for monitoring the compliance of the securities laws and for redressal
of investors’ grievances.
OTHER REQUIREMENTS FOR IPO & FPO

Disclosures l The draft offer document and the offer document
in draft offer shall contain all material disclosures which are
document and true and adequate to enable the applicants to
offer document take an informed investment decision.
[Regulation 24
l The red-herring prospectus, shelf prospectus and
& 122]
prospectus shall contain:
(i) disclosures specified in the Companies Act,
2013; and
(ii) disclosures specified in Part A of Schedule
VI of ICDR Regulations 2018. In case of
FPO the disclosures are subject to the
provisions of Parts C and D thereof.
l The lead manager(s) shall exercise due diligence
and satisfy themselves about all aspects of the
issue including the veracity and adequacy of
disclosures made in the draft offer document and
the offer document.
l The lead manager(s) shall call upon the issuer,
its promoters and its directors or in case of an
offer for sale, the selling shareholders, to fulfil
their obligations as disclosed by them in the draft
offer document and the offer document and as
required in terms of the ICDR Regulations 2018.
l The lead manager(s) shall ensure that the
information contained in the offer document and
the particulars as per audited financial statements
in the offer document are not more than six
months old from the issue opening date.
37
Face Value of The disclosure about the face value of equity shares shall
Equity Shares be made in the draft offer document, offer document,
[Regulations offer document, advertisements and application forms,
27 & 125] along with price band or the issue price in identical font
size.
Pricing An issuer in an IPO and FPO may determine the price of
[Regulations specified securities in consultation with the lead manager
28 & 126] or through the book building process.
Minimum The minimum net offer to the public shall be subject to
Offer to Public the provision of clause (b) of sub-rule (2) of rule 19 of
[Regulation 31] Securities Contracts (Regulations) Rules, 1957.
Availability of The lead manager(s) shall ensure availability of the offer
issue material document and other issue material including application
[Regulations forms to stock exchanges, syndicate members, registrar
36 &133] to issue, registrar and share transfer agents, depository
participants, stock brokers, underwriters, bankers to
the issue, and self-certified syndicate banks before the
opening of the issue.
Security The issuer shall, before the opening of the subscription
Deposit list, deposit with the stock exchange or stock exchanges
[Regulations an amount calculated at the rate of 1% of the amount
38 & 135] of the issue size available for subscription to the public
in the manner as may be specified by the SEBI and the
amount so deposited shall be refundable or forfeitable
in the manner specified by the SEBI.
Issue-related l Subject to the provisions of the Companies Act,
Advertisements 2013, the issuer shall, after filing the red herring
[Regulations prospectus (in case of a book built issue) or
43 & 139] prospectus (in case of fixed price issue) with
the Registrar of Companies, make a pre-issue
advertisement in one English national daily
newspaper with wide circulation, Hindi national
daily newspaper with wide circulation and
one regional language newspaper with wide
circulation at the place where the registered office
of the issuer is situated.
38
l The pre-issue advertisement shall contain the

disclosures specified in Part A of Schedule X of
the SEBI ICDR Regulations, 2018. However, the
disclosures in relation to price band or floor price
and financial ratios contained therein shall only
be applicable where the issuer opts to announce
the price band or floor price along with the pre-
issue advertisement.
l The issuer may release advertisements for issue
opening and issue closing, which shall be in the
formats specified in Parts B and C of Schedule
X of the SEBI ICDR Regulations, 2018.
l During the period the issue is open for
subscription, no advertisement shall be released
giving an impression that the issue has been
fully subscribed or oversubscribed or indicating
investors’ response to the issue
Opening of A public issue (both IPO and FPO), subject to compliance
the Issue with the provisions of the Companies Act, 2013, may be
[Regulations opened within 12 months from the date of issuance of the
44 & 140] observations by the SEBI. In case of a fast-track issue, the
issue shall open within the period specifically stipulated
under the Companies Act, 2013. In case the issuer has filed
a shelf prospectus, the first issue may be opened within 3
months of the issuance of observations by the SEBI. An
IPO and an FPO shall be opened after at least 3 working
days from the date of filing the red herring prospectus in
case of a book built issue or the prospectus in case of a
fixed price issue with the Registrar of Companies.
Minimum The minimum subscription to be received in an issue
Subscription shall be not less than 90% of the offer through offer
[Regulations document except in case of an offer for sale of specified
45 & 141] securities. In case of an IPO, the minimum subscription
to be received shall be subject to allotment of minimum
number of specified securities, as prescribed under
the Securities Contracts (Regulation) Rules, 1957. In
the event of non-receipt of minimum subscription, all
application monies received shall be refunded to the
applicants forthwith, but not later than fifteen days from
the closure of the issue.
39
Period of l An IPO/FPO shall be kept open for at least 3

Subscription working days and not more than 10 working days.
[Regulations
l In case of a revision in the price band, the issuer
46 & 142]
shall extend the bidding (issue) period disclosed
in the red herring prospectus, for a minimum
period of 3 working days.
l In case of force majeure, banking strike or similar
circumstances, the issuer may, for reasons to be
recorded in writing, extend the bidding (issue)
period disclosed in the red herring prospectus
(in case of a book built issue) or the issue period
disclosed in the prospectus (in case of a fixed
price issue), for a minimum period of 3 working
days.
Allotment l The issuer shall not make an allotment pursuant
Procedure to a public issue if the number of prospective
and Basis allottees is less than 1000.
of Allotment
l The issuer shall not make any allotment in excess
[Regulations
of the specified securities offered through the offer
49 & 145]
document except in case of over subscription for
the purpose of rounding off to make allotment, in
consultation with the designated stock exchange.
l The allotment of specified securities to applicants
other than to the retail individual investors and
anchor investors shall be on a proportionate
basis within the respective investor categories
and the number of securities allotted shall be
rounded off to the nearest integer, subject to
minimum allotment being equal to the minimum
application size as determined and disclosed
in the offer document. However, the value of
specified securities allotted to any person, except
in case of employees, in pursuance of reservation
made under these regulations, shall not exceed
Rs.2 Lakh for retail investors or up to Rs.5 Lakh
for eligible employees.
40
l The allotment of specified securities to each

retail individual investor shall not be less than
the minimum bid lot, subject to the availability of
shares in retail individual investor category, and
the remaining available shares, if any, shall be
allotted on a proportionate basis.
l The authorised employees of the designated
stock exchange, along with the lead manager(s)
and registrars to the issue, shall ensure that the
basis of allotment is finalised in a fair and proper
manner in accordance with the procedure as
specified in Part A of Schedule XIV.
Over However, in case of over-subscription, an allotment of
Subscription not more than one percent of the net offer to the public
[Proviso to for the purpose of making allotment in minimum lots.
Regulations
49(2) & 145(2)]
Post-issue l The responsibility of the lead manager(s) shall
responsibilities continue until completion of the issue process
of the lead and for any issue related matter thereafter.
manager(s)
l The lead manager(s) shall:
[Regulations
52 & 148] l regularly monitor redressal of investor
grievances arising from any issue related
activities.
l be responsible for post-issue activities till
the applicants have received the securities
certificates, credit to their demat account or
refund of application monies and the listing
agreement is entered into by the issuer with
the stock exchange and listing or trading
permission is obtained.
l co-ordinate with the registrars to the issue
and with various intermediaries at regular
intervals after the closure of the issue
to monitor the flow of applications from
syndicate member(s) or collecting bank
branches and/ or self-certified syndicate
41
banks, processing of the applications

including application form for ASBA and
other matters till the basis of allotment is
finalised, credit of the specified securities
to the demat accounts of the allottees and
unblocking of ASBA accounts/ dispatch of
refund orders are completed and securities
are listed, as applicable.
l Any act of omission or commission on the part
of any of the intermediaries noticed by the lead
manager(s) shall be duly reported by them to
SEBI.
l In case there is a devolvement on the underwriters,
the lead manager(s) shall ensure that the notice
for devolvement containing the obligation of the
underwriters is issued within ten days from the
date of closure of the issue.
l In the case of under-subscribed issues that are
underwritten, the lead manager(s) shall furnish
information in respect of underwriters who have
failed to meet their underwriting devolvement to
SEBI.
Reporting of The issuer shall ensure that all transactions in securities

transactions of by the promoter and promoter group between the date of
the promoters filing of the draft offer document or offer document, as the
and promoter case may be, and the date of closure of the issue shall
group be reported to the stock exchange(s), within twenty-four
[Regulations hours of such transactions.
54 & 150]
Post-issue The lead manager(s) shall submit a final post-issue

reports report, along with a due diligence certificate as, within
[Regulations seven days of the date of finalization of basis of allotment
55 & 151] or within seven days of refund of money in case of failure
of issue.
42
Restriction The issuer shall not make any further issue of specified
on Further securities in any manner whether by way of a public
Capital Issues issue, rights issue, bonus issue, preferential issue,
[Regulation qualified institutions placement or otherwise except
152] pursuant to an employee stock option scheme:
l In case of a fast track issue, during the period
between the date of filing the offer document
(in case of a book built issue) or prospectus (in
case of a fixed price issue) with the Registrar
of Companies and the listing of the specified
securities offered through the offer document or
refund of application monies; or
l in case of other issues, during the period between
the date of filing the draft offer document and the
listing of the specified securities offered through
the offer document or refund of application
monies;
unless full disclosures regarding the total number of
specified securities or amount proposed to be raised from
such further issue are made in such draft offer document
or offer document, as the case may be.
FAST TRACK FPO [Regulation 155]
Eligibility
An Issuer Company need not file the draft offer document with SEBI and obtain
observations from SEBI, if it satisfies the following conditions for making a
further public offer through fast track route:
A Listing Equity shares of the issuer have been listed on any

stock exchange for a period of at least three years
immediately preceding the reference date.
B Demat form Entire shareholding of the promoter group of
the issuer is held in dematerialised form on the
reference date.
C Market Average market capitalisation of public shareholding
Capitalisation of the issuer is at least Rs.1000 crores in case of
public.
43
D Trading Annualised trading turnover of the equity shares of

the issuer during six calendar months immediately
Turnover
preceding the month of the reference date has been
at least 2% of the weighted average number of equity
shares listed during such six months’ period. However,
if the public shareholding is less than fifteen per cent
of its issued equity capital, the annualised trading
turnover of its equity shares has been at least 2%
of the weighted average number of equity shares
available as free float during such six months’ period.
E Delivery Annualized delivery-based trading turnover of
based trading the equity shares during six calendar months
immediately preceding the month of the reference
date has been at least 10% of the annualised
trading turnover of the equity shares during such
six months period.
F Compliance The issuer has been in compliance with the equity
with SEBI listing agreement or Securities and Exchange
(LODR) Board of India (Listing Obligations and Disclosure
Regulations, Requirements) Regulations, 2015, as applicable,
2015 for a period of at least three years immediately
preceding the reference date.
However, if the issuer has not complied with
the provisions of the listing agreement or SEBI
(LODR) Regulations, 2015, as applicable, relating
to composition of board of directors, for any quarter
during the last three years immediately preceding
the reference date, but is compliant with such
provisions at the time of filing of letter of offer, and
adequate disclosures are made in the letter of offer
about such non-compliances during the three years
immediately preceding the reference date, it shall be
deemed as compliance with the condition.
Further, imposition of monetary fines by stock
exchange on the issuer shall not be a ground for
ineligibility for undertaking issuances under these
regulations.
44
G Investor Issuer has redressed at least 95% of the complaints

Complaints received from the investors till the end of the quarter
immediately preceding the month of the reference
date.
(h) No Show- No show-cause notices have been issued or
cause prosecution proceedings have been initiated by the
notices SEBI and pending against the issuer or its promoters
or whole-time directors as on the reference date;
(i) No alleged Issuer or promoter or promoter group or director of
violations the issuer has not settled any alleged violation of
securities laws through the consent or settlement
mechanism with the SEBI during three years
immediately preceding the reference date.
(j) Disciplinary Equity shares of the issuer have not been
measures suspended from trading as a disciplinary measure
during last three years immediately preceding the
reference date.
(k) Conflict of There shall be no conflict of interest between the
interest lead merchant banker(s) and the issuer or its group
or associate company in accordance with applicable
regulations.
(l) Audit Impact of audit qualifications, if any and where
Qualification quantifiable, on the audited accounts of the issuer
in respect of those financial years for which such
accounts are disclosed in the letter of offer does
not exceed 5% of the net profit or loss after tax of
the issuer for the respective years.
“Average Market Capitalisation of Public Shareholding” means the sum of

daily market capitalisation of public shareholding for a period of one year up
to the end of the quarter preceding the month in which the proposed issue
was approved by the shareholders or the board of the issuer, as the case
may be, divided by the number of trading days.
45
RIGHTS ISSUE
Definition of Right Issue
“Rights issue” means an offer of specified securities by a listed issuer to

the shareholders of the issuer as on the record date fixed for the said
purpose.
In general, fresh shares offered to existing shareholders in proportion to their

existing holding in the share capital of the company are termed as “Rights
shares” popularly known as rights issue. In the rights issue the shareholders
have a right to participate in the issue. It is pre-emptive rights given by the
status to existing shareholders. In this rights issue, the offer is required to be
made to the existing shareholders on pro-rata to their existing holdings. The
shareholders who are offered may or may not subscribe to the same. They
may subscribe partly or fully the offer. They have a power to renounce the
shares offered to any other person who need not be an existing shareholder
of the company.
An issuer offering specified securities of aggregate value of ten crore rupees
or more, through a rights issue shall satisfy the conditions of Chapter III of
SEBI (ICDR) Regulations, 2018 at the time of filing the draft letter of offer with
the SEBI and also at the time of filing the final letter of offer with the stock
exchanges, as the case may be.
Entities not eligible to make a rights issue [Regulation 61]

An issuer shall not be eligible to make a rights issue of specified securities:
(a) if the issuer, any of its promoters, promoter group or directors of
the issuer are debarred from accessing the capital market by the
SEBI
(b) if any of the promoters or directors of the issuer is a promoter or

director of any other company which is debarred from accessing the
capital market by the SEBI
(c) if any of its promoters or directors is a fugitive economic offender
Explanation: The restrictions under (a) and (b) above will not apply to the
promoters or directors of the issuer who were debarred in the past by the
SEBI and the period of debarment is already over as on the date of filing of
the draft letter of offer with the SEBI.
46
General conditions [Regulation 62]

(1) The issuer making a rights issue of specified securities shall ensure that:
 it has made an application to one or more stock exchanges to seek
an in-principle approval for listing of its specified securities on such
stock exchanges and has chosen one of them as the designated stock
exchange.
 all its existing partly paid-up equity shares have either been fully paid-
up or have been forfeited.
 it has made firm arrangements of finance through verifiable means
towards 75% of the stated means of finance for the specific project
proposed to be funded from issue proceeds, excluding the amount
to be raised through the proposed rights issue or through existing
identifiable internal accruals.
(2) The amount for general corporate purposes, as mentioned in objects of
the issue in the draft letter of offer and the letter of offer, shall not exceed
25% of the amount raised by the issuer.
(3) Where the issuer or any of its promoters or directors is a willful defaulter,
the promoters or promoter group of the issuer shall not renounce their rights
except to the extent of renunciation within the promoter group.
(4) Where the issuer has issued SR equity shares to its promoters or founders,
then such a SR shareholder shall not renounce their rights and the SR shares
received in a rights issue shall remain under lock-in until conversion into equity
shares having voting rights same as that of ordinary equity shares along with
existing SR equity shares.
Preferential Issue
Definition of Preferential Issue
“Preferential issue” means an issue of specified securities by a listed issuer
to any select person or group of persons on a private placement basis in
accordance with Chapter V of these regulations and does not include an offer
of specified securities made through employee stock option scheme, employee
stock purchase scheme or an issue of sweat equity shares or depository
receipts issued in a country outside India or foreign securities.
An issuer offering specified securities through preferential issue shall satisfy
the conditions of Chapter V of SEBI (ICDR) Regulations, 2018.
47
Issuers ineligible to make a Preferential Issue [Regulation 159]

Preferential issue of specified securities shall not be made to any person who
has sold or transferred any equity shares of the issuer during the six months
preceding the relevant date. However, in respect of the preferential issue of
equity shares and compulsorily convertible debt instruments, whether fully
or partly, the SEBI may grant relaxation from the requirements of this sub-
regulation, if the SEBI has granted relaxation in terms of regulation 11(2) of
the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
to such a preferential allotment.
Explanation: Where any person belonging to promoter(s) or the promoter group
has sold/ transferred their equity shares in the issuer during the six months
preceding the relevant date, the promoter(s) and promoter group shall be
ineligible for allotment of specified securities on preferential basis.
However the above restriction shall not apply to any sale of equity shares by
any person belonging to promoter(s) of the promoter group which qualifies
for inter-se transfer amongst qualifying persons under regulation 10(1) (a) of
the SEBI (Substantial Acquisition of Shares and Takeover Regulations), 2011
or in case of transfer of shares held by the promoters or promoter group on
account of invocation of pledge by a scheduled commercial bank or public
financial institution or a systemically important non-banking finance company
or mutual fund or insurance company registered with the Insurance Regulatory
and Development Authority.
However, where any person belonging to promoter(s) or the promoter group
has previously subscribed to warrants of an issuer but has failed to exercise
the warrants, the promoter(s) and promoter group shall be ineligible for issue
of specified securities of such issuer on preferential basis for a period of one
year from:
l the date of expiry of the tenure of the warrants due to non-exercise
of the option to convert;or
l the date of cancellation of the warrants, as the case may be.
An issuer shall not be eligible to make a preferential issue if any of its
promoters or directors is a fugitive economic offender.
Conditions for preferential issue [Regulation 160]

A listed issuer making a preferential issue of specified securities shall ensure
that:
 Fully Paid-up: All equity shares allotted by way of preferential issue
shall be made fully paid up at the time of the allotment.
48
 Special Resolution: A special resolution has been passed by its

shareholders.
 Demat form: All equity shares held by the proposed allottees in the
issuer are in dematerialised form.
 Compliance: The issuer is in compliance with the conditions for
continuous listing of equity shares as specified in the listing agreement
with the stock exchange where the equity shares of the issuer are listed
and SEBI (LODR) Regulations, 2015 as amended, and any circular or
notification issued by the SEBI thereunder.
 PAN: The issuer has obtained the Permanent Account Numbers (PAN)
of the proposed allottees, except those allottees which may be exempt
from specifying their PAN for transacting in the securities market by
the SEBI.
INITIAL PUBLIC OFFER BY SMALL AND MEDIUM ENTERPRISES

An issuer making an initial public offer of specified securities shall satisfy the
conditions of Chapter IX of SEBI (ICDR) Regulations, 2018 as on the date of
filing of the draft offer document with the SME exchange and also as on the
date of filing the offer document with the Registrar of Companies.
Entities not eligible to make an initial public offer [Regulation 228]

An issuer shall not be eligible to make an initial public offer:
(a) if the issuer, any of its promoters, promoter group or directors or selling
shareholders are debarred from accessing the capital market by the
SEBI
(b) if any of the promoters or directors of the issuer is a promoter or
director of any other company which is debarred from accessing the
capital market by the SEBI
(c) if the issuer or any of its promoters or directors is a willful defaulter
(d) if any of its promoters or directors is a fugitive economic offender
Explanation: The restrictions under clauses (a) and (b) shall not apply to the
persons or entities mentioned therein, who were debarred in the past by the
SEBI and the period of debarment is already over as on the date of filing of
the draft offer document with the SME Exchange.
49
Eligibility requirements for an initial public offer [Regulation 229]

(a) If post issue paid-up capital is <= Rs.10 Crores - list only on SME
Board
(b) If post issue paid-up capital is > Rs 10 crores but up to Rs.25 crores
– Option to list either on SME Board or on Main Board
(c) SEBI does not issue any observation on the offer document
(d) The lead manager(s) shall submit a due-diligence certificate to SEBI
(e) IPO shall be 100% underwritten. The lead manager(s) shall underwrite
at least 15%
(f) Compulsory market making for a minimum period of 3 years from the
date of listing
(g) Minimum application size in IPO & Trading lot shall be one lakh rupees
(h) May migrate to Main Board if SR is passed through postal ballot with
majority of minority
In case of an issuer formed out of merger or a division of an existing
company, the track record of the resulting issuer shall be considered only
if the requirements regarding financial statements as specified above are
complied with.
General conditions [Regulation 230] (1)

1. An issuer making an initial public offer shall ensure that:
a. it has made an application to one or more SME exchanges for
listing of its specified securities on such SME exchange(s) and
has chosen one of them as the designated stock exchange;
b. it has entered into an agreement with a depository for
dematerialisation of its specified securities already issued and
proposed to be issued;
c. all its existing partly paid-up equity shares have either been fully
paid-up or forfeited;
d. all specified securities held by the promoters are in the
dematerialised form;
e. it has made firm arrangements of finance through verifiable
means towards 75% of the stated means of finance for the project
proposed to be funded from the issue proceeds, excluding the
50
amount to be raised through the proposed public offer or through

existing identifiable internal accruals.
2. The amount for general corporate purposes, as mentioned in objects
of the issue in the draft offer document and the offer document shall
not exceed 25% of the amount being raised by the issuer.
INNOVATORS GROWTH PLATFORM
Definition of Innovators growth platform
“Innovators growth platform” means the trading

platform for listing and trading of specified securities
of issuers that comply with the eligibility criteria
specified in regulation 283 of SEBI (ICDR), 2018.
Listing on Innovators Growth Platform (IGP)
Aimed to list start ups which are intensive in the use of technology,
information technology, intellectual property, data analytics, bio-technology
or nano-technology to provide products, services or business platform
At least 25% of pre-issue capital is held by QIBs, Innovators Growth
Platform Investors, any other class of investors as specified by SEBI for
atleast a 1 year
Listing is allowed with or without IPO. SEBI will issue its observations in
both the cases
The minimum offer size shall be ten crore rupees in case of IPO
Minimum application size shall be two lakh rupees and in multiples thereof
Number of allottees in the initial public offer shall at least be fifty
Minimum trading lot shall be two lakh rupees and in multiples thereof
BONUS ISSUE
Bonus issue of shares means additional shares issued by the company to
its existing shareholders to reward for their royalty and is an opportunity to
enhance the shareholders wealth. The bonus shares are issued without any
cost to the Company by capitalizing the available reserves.
A listed company issuing bonus shares shall comply with the requirements of
Companies Act, 2013 and also Chapter XI of SEBI (ICDR) Regulations, 2018.
51
Conditions for a bonus issue [Regulation 293]

Subject to the provisions of the Companies Act, 2013 or any other applicable
law, a listed issuer shall be eligible to issue bonus shares to its members if:
l it is authorised by its articles of association for issue of bonus shares,
capitalisation of reserves, etc.
l If there is no such provision in the articles of association, the issuer
shall pass a resolution at its general body meeting making provisions
in the articles of associations for capitalisation of reserve
l it has not defaulted in payment of interest or principal in respect of
fixed deposits or debt securities issued by it
l it has not defaulted in respect of the payment of statutory dues of the
employees such as contribution to provident fund, gratuity and bonus
l any outstanding partly paid shares on the date of the allotment of the
bonus shares, are made fully paid-up
l any of its promoters or directors is not a fugitive economic offender
Restrictions on a bonus issue [Regulation 294]

 An issuer shall make a bonus issue of equity shares only if it has
made reservation of equity shares of the same class in favour of the
holders of outstanding compulsorily convertible debt instruments if any,
in proportion to the convertible part thereof.
 The equity shares so reserved for the holders of fully or partly
compulsorily convertible debt instruments, shall be issued to the
holder of such convertible debt instruments or warrants at the time of
conversion of such convertible debt instruments, optionally convertible
instruments, warrants, as the case may be, on the same terms or same
proportion at which the bonus shares were issued.
 A bonus issue shall be made only out of free reserves, securities
premium account or capital redemption reserve account and built out
of the genuine profits or securities premium collected in cash and
reserves created by revaluation of fixed assets shall not be capitalised
for this purpose.
 Bonus shares shall not be issued in lieu of dividends.
 If an issuer has issued SR equity shares to its promoters or founders,
any bonus issue on the SR equity shares shall carry the same ratio of
52
voting rights compared to ordinary shares and the SR equity shares

issued in a bonus issue shall also be converted to equity shares having
voting rights same as that of ordinary equity shares along with existing
SR equity shares.
Completion of a bonus issue [Regulation 295]

 An issuer, announcing a bonus issue after approval by its board of
directors and not requiring shareholders’ approval for capitalisation of
profits or reserves for making the bonus issue, shall implement the
bonus issue within fifteen days from the date of approval of the issue
by its board of directors.
 Where the issuer is required to seek shareholders’ approval for
capitalisation of profits or reserves for making the bonus issue, the
bonus issue shall be implemented within two months from the date of
the meeting of its board of directors wherein the decision to announce
the bonus issue was taken subject to shareholders’ approval.

Explanation: For the purpose of a bonus issue to be considered
as ‘implemented’ the date of commencement of trading shall be
considered.
 A bonus issue, once announced, shall not be withdrawn.
PROCEDURE FOR ISSUE OF SECURITIES

In the light of the provisions of the Companies Act and the guidelines issued
by Government/SEBI under the Securities Contracts (Regulation) Rules, 1957
and the SEBI Act, 1992, the procedure for issue of securities to be followed
by companies is given below. This procedure should be read along with the
relevant SEBI regulations and provisions of the other Acts.
Issue of Shares to the Public

A company proposing to raise resources by a public issue should first select
the type of securities, i.e., shares and/ or debentures to be issued by it. In
case the company has applied for financial assistance to any of the financial/
investment institutions, the requirement of the funds to be raised from the
public is to be decided in consultation with the said institution while appraising
the project of the company. The decision regarding the issue of shares to be
made at par or premium should be taken. The various steps involved in public
issue of shares are enumerated below:
53
1. Compliance with the SEBI Regulations: Before making any issue

of capital, it is to be ensured that the proposed issue complies with
the eligibility norms and other provisions of SEBI (Issue of Capital and
Disclosure Requirements) Regulations, 2009.
Holding of general meeting: A general meeting of the shareholders
2.
(annual or extraordinary) is to be convened for obtaining their consent
to the proposed issue of shares if the articles so require. In case the
proposed issue requires any increase in authorised share capital
(Section 61, 62, 64), alteration in capital clause of the Memorandum
of Association (Section 13), alteration of the Articles of Association
(Section 14) etc. the approvals for the same should also be obtained
at the General Meeting.
Appointment of managers to the issue: The Company issuing shares
3.
is to appoint one or more Merchant Bankers to act as managers to
the public issue.
Appointment of various other agencies: The company should
4.
in consultation with the Managers to the issue, decide upon the
appointment of the following other agencies: (a) Registrars to the
Issue; (b) Collecting bankers to the Issue; (c) Advisors to the Issue;
(d) Underwriters to the Issue; (e) Brokers to the Issue; (f) Printers; (g)
Advertising Agents, (h) Self Certified Syndicate Banks, etc.
Drafting of prospectus: Next step is to draft a prospectus in
5.
accordance with Section 26 of the Companies Act, 2013 and an
abridged prospectus as required under Section 33(1) of the Companies
Act, 2013. The prospectus should contain the disclosures as required
by the SEBI Regulations under Schedule VIII.
Intimation to Stock Exchange: A copy of the Memorandum and
6.
Articles of Association of the company is to be sent to the Stock
Exchanges where the shares are to be enlisted, for approval.
Approval of prospectus: The draft offer document along with the
7.
application form for issue of shares should be got approved by the
solicitors/legal advisors of the company to ensure that it contains all
disclosures and information as required by various statutes, rules,
regulations, notifications, etc. The managers to the issue should also
verify and approve the draft prospectus.
The financial institutions providing loan facilities generally stipulate
that the prospectus should be got approved by them. The company
54
should in such a case, forward a copy of the draft prospectus for their
verification and approval as well. The approval of underwriters should
also be taken if they so require.
Approval of board of directors to prospectus and other documents:
8.
After getting observations of the SEBI in the draft prospectus and the
application form, the board of directors of the company should approve
the final draft before filing with the Registrar of Companies. The
company should, therefore, hold the meeting of the board of directors
to transact the following business:
a. to approve and accept consent letters received from various
parties agencies to act in their respective capacities;
b. to approve and accept appointment of underwriters, brokers,
bankers to the issue registrar to the issue, solicitors and
advocates to the issue, etc.
c. to accept the Auditors’ Report for inclusion in the prospectus;
d. to approve the date of opening of subscription list as also earliest
and latest dates for closing of subscription list with the authority
in favour of any director for earlier closing if necessary;
e. to approve draft prospectus/draft abridged prospectus and the
draft share application form;
f. to authorise filing of the prospectus signed by all the directors or
their constituted attorneys with the Registrar of Companies;
g. to authorise any officer of the company to deliver the prospectus
for registration with the Registrar of Companies and to carry out
the corrections, if any, at the office of the Registrar of Companies;
h. to approve the format of the statutory announcement;
Making application to Stock Exchange(s) for permission to listing:
9.
Before filing prospectus with the Registrar of Companies the company
should submit an application(s) to the Stock Exchange(s) for enlistment
of securities offered to the public by the said issue [Section 40(1) of the
Companies Act, 2013]. The fact that an application(s) has/have been
made to the Stock Exchange(s) must be stated in the prospectus.
Printing and distribution of prospectus and application forms:
10.
After receipt of the intimation from Registrar of Companies regarding
registration of prospectus, the company should take steps to issue the
prospectus within 90 days of its registration with ROC. For the purpose,
55
the first step is to get adequate number of prospectuses and application

forms printed. The provisions of Section 33 of the Companies Act, 2013
should be kept in view in this regard which provide that no one shall
issue any form of application for shares in or debenture of a company
unless the form is accompanied by a memorandum containing such
salient features of a prospectus as may be prescribed. At least 2
weeks before the announcement is made in any newspaper, journal
etc. requisite number of copies of the prospectus and application forms
accompanied by the abridged prospectus should be distributed to the
brokers, underwriters, merchant bankers, lead managers, bankers etc.
to the issue.
Pricing
11.
12. Promoters contribution and lock-in-period
13. Underwriting
14. Mandatory Collection Centres
15. Certificate relating to promoters’ contribution: The SEBI Regulations
require that atleast one day prior to the date of opening of the issue,
a certificate from the Chartered Accountant to the effect that the
promoters’ contribution in its entirety has been brought in advance
before the public issue opens should be forwarded to it. The certificate
should be accompanied by a list of names and addresses of friends,
relatives and associates who have contributed to the promoters’ quota,
along with the amount of subscription made by each of them. The same
shall be applicable if the promoter do not hold shares equivalent to
minimum 20% of Post issue paid up capital.
Coordination with the bankers to the issue: The date of opening and
16.
closing of the subscription list should be intimated to all the collecting
and controlling branches of the bank with whom the company has
entered into an agreement for the collection of application forms.
Further, the company should ensure that a separate bank account is
opened for the purpose of collecting the proceeds of the issues as
required by Section 40(3) of the Companies Act, 2013 and furnish to
the controlling branches the resolution passed by the Board of directors
for opening bank account.
Minimum subscription
17.
18. Allotment of shares: A return of allotment in Form PAS-3 of the
Companies (Prospectus and Allotment of Securities) should be
56
filed with the Registrar of Companies within 30 days of the date of

allotment along with the fees as rules, 2014 specified in the Companies
(Registration Offices and Fees) Rules, 2014.
Refund orders: The company shall disclose the mode in which it shall
19.
made refunds to applicants in the prospectus and abridged prospectus.

SEBI Circular Certification by Practising Company Secretary in case of offer/
allotment of securities by companies to more than 49 and up to 200 investors.
To issue a certificate regarding issuance of securities to more than 49 and
up to 200 investors that the refund procedure as prescribed by the SEBI has
been duly complied with [SEBI Circular No. CFD/DIL3/CIR/P/2016/53 dated
May 03, 2016]
In addition to the above, the Company Secretaries also have a major role to
play in ensuring compliance with SEBI (ICDR) Regulations, 2018 and other
Capital market regulations including:
 The Company Secretaries have to guide the management in various
regulatory and compliance activities in public issue and listing
 The Company Secretary also has a key role to play in drafting of
prospectus, securities documents and approval listing or delisting of
the securities.
 Co-coordinating and working closely with the Bankers, Registrars,
Underwriters and relevant intermediaries.
 Operating as required under various laws including Companies Act,
Regulations and Guidelines issued by SEBI and Stock Exchange
needs.
 Ensuring compliance with the regulations relating to Issue of Capital
and Disclosure Requirements.
 The Company Secretary shall also ensure compliance with the rules
and provisions related to the internal audit, certifications and other
applicable rules.
57
Chapter 3
An Overview of SEBI
(Listing Obligations and Disclosure
INTRODUCTION
In India, the Securities and Exchange Board of India (SEBI) regulates listed
companies through the medium of listing agreement entered into between
each listed company with the concerned stock exchange. Compliance with
the listing conditions is mandatory by virtue of the governing law. SEBI has
modified the provisions relating to Listing Agreement that the companies need
to enter into with the stock exchanges while listing securities and replaced the
Listing agreement with the new the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 (‘Listing Regulations’).
Listing of securities with stock exchange is a matter of great importance for
companies and investors, because this provides the liquidity to the securities
in the market. Any company intending to offer its shares to the public for
subscription is required to be listed on the stock exchange and has to comply
with SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015
(SEBI (LODR) Regulations). A company seeking listing of securities on the
Stock Exchange is required to enter into a formal listing agreement with the
Stock Exchange.
KEY DEFINITIONS
“Listed entity” means an entity which has listed, on a recognised stock

exchange(s), the designated securities issued by it or
designated securities issued under schemes managed
by it, in accordance with the listing agreement entered
into between the entity and the recognised stock
exchange(s).
58
“Designated means specified securities, non-convertible debt

securities” securities, non-convertible redeemable preference
shares, perpetual debt instrument, perpetual non-
cumulative preference shares, Indian depository
receipts, securitised debt instruments, security receipts,
units issued by mutual funds and any other securities
as may be specified by the SEBI
“Specified means ‘equity shares’ and ‘convertible securities’ as
securities” defined under clause (eee) of sub- regulation (1) of
regulation 2 of the Securities and Exchange Board of
India (Issue of Capital and Disclosure Requirements)
Regulations, 2018.
“Listing Means an agreement that is entered into between
agreement” a recognised stock exchange and an entity, on the
application of that entity to the recognised stock
exchange, undertaking to comply with conditions for
listing of designated securities.
“Independent means a non-executive director, other than a nominee
Director” director of the listed entity:
i. who, in the opinion of the board of directors,
is a person of integrity and possesses relevant
expertise and experience;
ii. who is or was not a promoter of the listed entity
or its holding, subsidiary or associate company
or member of the promoter group of the listed
entity;
iii. who is not related to promoters or directors in the
listed entity, its holding, subsidiary or associate
company;
iv. who, apart from receiving director’s remuneration,
has or had no material pecuniary relationship
with the listed entity, its holding, subsidiary
or associate company, or their promoters, or
directors, during the two immediately preceding
financial years or during the current financial
year;
59
v. none of whose relatives has or had pecuniary

relationship or transaction with the listed entity,
its holding, subsidiary or associate company,
or their promoters, or directors, amounting to
two per cent. or more of its gross turnover or
total income or fifty lakh rupees or such higher
amount as may be prescribed from time to time,
whichever is lower, during the two immediately
preceding financial years or during the current
financial year;
vi. who, neither himself, nor whose relative(s) —
(A) holds or has held the position of a key
managerial personnel or is or has been an
employee of the listed entity or its holding,
subsidiary or associate company in any
of the three financial years immediately
preceding the financial year in which he is
proposed to be appointed;
(B) is or has been an employee or proprietor or
a partner, in any of the three financial years
immediately preceding the financial year in
which he is proposed to be appointed, of
—
1. a firm of auditors or company
secretaries in practice or cost auditors
of the listed entity or its holding,
subsidiary or associate company; or
2. any legal or a consulting firm that
has or had any transaction with the
listed entity, its holding, subsidiary or
associate company amounting to ten
per cent or more of the gross turnover
of such firm;
(C) holds together with his relatives two per
cent or more of the total voting power of
the listed entity; or
60
(D) is a chief executive or director, by whatever

name called, of any non-profit organisation
that receives twenty-five per cent or more
of its receipts or corpus from the listed
entity, any of its promoters, directors or its
holding, subsidiary or associate company
or that holds two per cent or more of the
total voting power of the listed entity;
(E) is a material supplier, service provider or
customer or a lessor or lessee of the listed
entity;
vii. who is not less than 21 years of age
viii. who is not a non-independent director of
another company on the board of which any
non- independent director of the listed entity is
an independent director
APPLICABILITY
These regulations shall apply to a listed entity which has listed any of the
following designated securities on recognised stock exchange(s):
a. specified securities listed on main board or SME Exchange or
[Innovators Growth Platform
b. NCDs, NCRPs, Perpetual Debt Instrument
c. Indian depository receipts
d. Securitised debt instruments
e. Security receipts
f. Units issued by mutual funds
g. Any other securities as may be specified by SEBI
OBLIGATIONS OF LISTED ENTITIES

The obligations of listed entities have been classified under following
categories –
 Common obligations (Applicable for all listed entities)
 Obligations of Listed entity which has listed its Specified Securities
61
 Obligations of Listed entity which has listed its Non- Convertible Debt
Securities or Non-Convertible Redeemable Preference Shares or both
 Obligations of Listed entity which has listed its Indian depository
receipts
 Obligations of Listed entity which has listed its securitised debt
instruments
 Obligations of Listed entity which has listed its Security Receipts
 Obligations of Listed entity which has listed its units issued by mutual
fund
 Obligations of Listed entity which has listed its Specified Securities and
either Non-Convertible Debt Securities or Non-Convertible Redeemable
Preference Shares or both
COMMON OBLIGATIONS OF LISTED ENTITIES

The listed entity shall ensure that key managerial personnel, directors,
promoters or any other person dealing with the listed entity, complies with
responsibilities or obligations, if any, assigned to them under these regulations.
General obligations applicable to all listed companies

Following are the key obligations applicable to all listed companies:
 Compliance officer and his/her obligations: A listed company shall
appoint a qualified Company Secretary as the Compliance officer who
shall be responsible for:
l ensuring conformity with the regulatory provisions applicable to
the listed entity in letter and spirit
l Co-ordination and reporting to Board, recognised stock
exchange(s) and depositories
l Ensuring correct procedures are followed and reports are filed
l 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
62
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-
l documents whose preservation shall be permanent in nature
l 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) on the electronic platform as specified by the SEBI or 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, in the manner specified in
Schedule I, for the payment of dividends, interest, redemption or
repayment amounts.
 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 or such other electronic platform or system of the
SEBI as shall be mandated from time to time.
 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), in the manner
specified by the SEBI or the recognised stock exchange(s).
63
One Time
Compliances
Event Based Quarterly

Compliances Compliances
Comliances
under SEBI
(LODR), 2015
Annual Half-Yearly
Compliances Compliances
One-time Compliances
The following are the 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
9 The listed entity shall have a policy for preservation of
documents, approved by its Board of Directors
64
Quarterly Compliances
Regulation Title Particulars Time Limit
13(3) Investor The listed entity shall file within 21

complaints with the recognised stock days from
Statement exchange, a statement end of
giving the number of investor quarter
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
27(2) Quarterly The listed entity shall submit within 21

Compliance a quarterly compliance report days from
report on corporate governance in the end
the format as specified by of each
SEBI from time to time to the quarter
recognized stock exchange(s)
31(1)(b) Shareholding The listed entity shall submit within 21

pattern to the stock exchange(s) a days from
statement showing holding of the end
securities and shareholding of each
pattern separately for each quarter
class of securities, in the
format specified by SEBI from
time to time
32(1) Statement of The listed entity shall submit Quarterly

deviation(s) to the stock exchange a Basis till
or statement of deviation or such time
Variation(s) variation (for public issue, the issue
rights issue, preferential issue proceeds
etc.) have been
fully utilized
or the
purpose
65
for which
these
proceeds
were raised
has been
achieved.
32(6) Monitoring Where the listed entity has within 45

Agency appointed a monitoring days from
Report agency to monitor utilisation the end
of proceeds of a public or of each
rights issue, the listed entity quarter
shall submit to the stock
exchange(s) any comments
or report received from the
monitoring agency
33(3) Financial The listed entity shall submit within

results quarterly and year-to-date 45 days
standalone financial results of end
to the stock exchange. of each
quarter,
In case the listed entity has
other than
subsidiaries, the listed entity
the last
shall also submit quarterly/
quarter
year- to date consolidated
financial results
47 Advertise- Financial results, along- Within 48

ments in with the modified opinion(s) hours of
Newspapers or reservation(s), if any, conclusion
expressed by the auditor of the
meeting of
board of
directors at
which the
financial
results
were
approved
66
Half-Yearly Compliances
Regulation Title Particular Time Limit

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

7(3) Compliance The listed entity shall Within 30 from
Certificate s u b m i t a c o m p l i a n c e the end of the
certificate to the exchange, financial year
duly signed by both the
c o m p l i a n c e o ff i c e r o f
the listed entity and the
authorised representative
of the share transfer agent
certifying that all activities
in relation to share transfer
facility of the listed entity
are maintained either in
house or by Registrar to
an issue and share transfer
agent registered with the
SEBI
67

14 Annual The listed entity shall pay within 30 days
Listing Fees all such fees or charges, as of the end of
applicable, to the recognised financial year
stock exchange(s), in the
manner specified by SEBI
or the recognised Stock
Exchange (s)
33(3) Annual The listed entity shall submit within 60 days
Financial annual audited standalone from the end
results financial results with audit of the financial
report and Statement on year
Impact of Audit Qualifications
applicable only for audit
report with modified opinion,
to the stock exchange
34 Annual The listed entity shall submit Not later than
Report the annual report along with the day of
the Notice of the Annual commencement
General Meeting to the stock of dispatch to its
exchange. shareholders.
34(1)(b) Changes In case any changes to the within 48 hours
to annual annual report, the revised after the annual
report copy along with the details general meeting
of and explanation for the
changes shall be sent
36 Annual The listed entity shall send Not less than 21
reports to annual report to the holders days before the
securities of securities annual general
holders meeting (in soft
or hard copy)
40(9) Certificate The listed entity shall within 30 days
ensure that the share from the end
transfer agent and/or the of the financial
in-house share transfer year
facility, as the case may
be, produces a certificate
from a practising company
68

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
Event Based Compliances

7(5) Share- The listed entity shall Within 7 days of
transfer intimate the appointment of Agreement with
agent Share Transfer Agent, to the RTA
stock exchange(s)
28(1) In-principle The listed entity shall obtain P r i o r t o
approval In-principle approval from i s s u a n c e o f
recognised stock exchange Security
29(1)(a) read Intimations The listed entity shall give At least 5 days
along with prior intimations of Board in advance
proviso to Meeting for financial result (excluding the
29 (2) viz, quarterly, half yearly date of the
or annual, to the stock intimation and
exchange(s) the date of the
meeting)
29(1) (b), (c), Intimations The listed entity shall give At least 2
(d), (e) & (f) prior intimations of Board working days
read along Meeting for Buyback, in advance
with 29 (2) Voluntary delisting, Fund (excluding the
raising by way of FPO, date of the
Rights Issue, ADR, GDR, intimation and
QIP, FCCB, Preferential date of the
issue, debt issue or any meeting)
other method, declaration/
recommendation of
dividend, issue of convertible
69

securities including
convertible debentures or of
debentures carrying a right to
subscribe to equity shares or
the passing over of dividend,
proposal for declaration of
Bonus securities etc., to the
stock exchange(s)
29(3) Intimations The listed entity shall give A t l e a s t 11
prior intimations of Board working days in
Meeting for alteration in advance
nature of Securities, alteration
in the date on which interest
on debentures/ bonds/
redemption amount, etc.
shall be payable to the stock
exchange(s)
30(6) Disclosure The listed entity shall Not later than
of events disclose all events, as 24 hours from
specified in Part A of the occurrence
Schedule III of SEBI (LODR) of the event or
Regulations, to the stock information
exchange(s)
31(1)(a) Holding of The listed entity shall submit One day prior
Specified to the stock exchange(s) a t o l i s t i n g o f
securities statement showing holding of Securities
securities and shareholding
pattern separately for each
class of securities prior to
listing of securities
31(1)(c) Sharehold- The listed entity shall submit Within 10 days
ing pattern to the stock exchange(s) a of any capital
statement showing holding of restructuring
securities and shareholding exceeding 2%
pattern separately for each of the total
class of securities in case of paid-up share
Capital Restructuring capital
70

31A (8) Disclosure The listed entity shall disclose within 24
of material to the stock exchange the hours from the
events in deemed material events, occurrence of
case for i.e., receipt of request for the event
reclassifica- re-classification by the listed
tion of any entity from the promoter(s)
person as seeking re-classification,
promoter/ Minutes of the board
public meeting considering such
request which would include
the views of the board on
the request, etc.
37(1) Scheme of The listed entity shall Prior approval
arrangement f i l e d r a f t S c h e m e o f before filing
Arrangement to the stock with Court or
exchange(s) Tribunal
39(2) Issue of The listed entity shall issue within 30 days
Certificate certificates or receipts or from the date of
advices, as applicable, such lodgement
of sub-division, split,
consolidation, renewal,
exchanges, endorsements,
issuance of duplicates
thereof or issuance of new
certificates or receipts or
advices, as applicable, in
cases of loss or old decrepit
or worn out certificates or
receipts or advices, as
applicable
39(3) Information The listed entity shall submit Within 2 days
relating loss information with respect to o f g e t t i n g
of securities loss of share certificates information
and issue of the duplicate
certificates to the stock
exchange
71

40(3) Registering The listed entity shall within 15 days
the transfer register transfers of its from the date
of securities securities in the name of of such receipt
the transferee(s) and issue of request for
certificates or receipts or transfer
advices, as applicable, of
transfers; or issue any valid
objection or intimation to the
transferee or transferor, as
the case may be
Transmis- The listed entity shall I n c a s e
sion request proceed the transmission securities held
request for securities held in in Dematerialised
dematerialization mode and Mode, within 7
physical mode days after receipt
of the documents
In case of
Physical Mode,
within 21 days
after receipt of
the documents
42(2) Record The listed entity shall In case of Right
Date / Book intimate the record date or Issue, at least
Closure date of closure of transfer 3 working days
books to all the stock in advance
exchange(s) specifying (excluding
the purpose of the record the date of
date where it is listed or intimation and
where stock derivatives are record date)
available on the stock of the
Other than
listed entity or where listed
Right Issue, at
entity’s stock form part of an
least 7 working
index on which derivatives
days in advance
are available. The listed
(excluding
entity shall intimate the
the date of
following events:
intimation and
record date)
72

(a) d e c l a r a t i o n of
dividend
(b) issue of right or
bonus shares
(c) i s s u e o f s h a r e s
for conversion of
debentures or any
other convertible
security
(d) shares arising out
of rights attached to
debentures or any
other convertible
security
(e) corporate actions
like mergers, de-
mergers, splits, etc
(f) such other purposes
as may be specified
by the stock
exchange(s)
* For securities held in
physical form the listed
entity may announce
transfer book closure
43A Dividend Dividend Distribution Policy To f o r m u l a t e

distribution by the top 1000 listed a dividend
policy entities based on market distribution
capitalization (calculated policy which
as on March 31 of every shall be
financial year) disclosed on
the website of
the listed entity
and a web-link
shall also be
provided in their
annual reports.
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44(3) Voting The listed entity shall submit Within 2
results to the stock exchange details working days of
regarding voting results in conclusion of its
the format specified by SEBI General Meeting
46 Maintenance The listed entity shall within 2 working
of website m a i n t a i n a f u n c t i o n a l days from the
website containing the basic date of change
information about the listed in content
entity and update any change
in the content of its website.
Note: as per Regulation 36(4), the information and documents made by the
listed entity-
(a) to the stock exchanges shall be in XBRL; and
(b) to the stock exchanges and on its website, shall be in a format that allows
users to find relevant information easily through a searching tool.
CORPORATE GOVERNANCE UNDER SEBI (LODR) REGULATIONS, 2015

The listed entities which has listed its specified securities on any recognised
stock exchange(s) either on the main board or on SME Exchange or on
Innovators Growth Platform has to comply with certain corporate governance
provisions which are specified in Regulations 17 to 27 and clause (b) to (i)
of regulation 46(2) and para C, D and E of Schedule V of the SEBI (LODR)
Regulations.
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:-
a. paid up equity share capital not exceeding rupees 10 crore and
b. 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 and para C, D and E of Schedule
74
V 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 such time
the equity share capital or the networth of such entity reduces
and remains below the specified threshold for a period of three
consecutive financial years.
Question: A Company XYZ 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 in respect of a listed
entity which is undergoing corporate insolvency resolution process
under the Insolvency Code: However, the role and responsibilities of
the board of directors as specified under regulation 17 shall be fulfilled
by the interim resolution professional or resolution professional in
accordance with sections 17 and 23 of the Insolvency Code.
4. Regulations 18, 19, 20 and 21 shall not be applicable during the
insolvency resolution process period in respect of a listed entity which
is undergoing corporate insolvency resolution process under the
Insolvency Code.
However, the roles and responsibilities of the committees specified in
the respective regulations shall be fulfilled by the interim resolution
professional or resolution professional.
5. Notwithstanding any provisions under Regulation 15(2) stated above,
the provisions of Companies Act, 2013 shall continue to apply, wherever
applicable.
KEY PROVISIONS PERTAINING TO CORPORATE GOVERNANCE

Composition of Board of Directors 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.
75
However, the Board of directors of the top 500 listed entities shall have at
least one independent woman director by April 1, 2019 and the Board of
directors of the top 1000 listed entities shall have at least one independent
woman director by April 1, 2020.
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 • at least one-third of the
director board of directors shall
Further in case- comprise of independent
directors
• non-executive chairperson is a
promoter of the listed entity or • at least half of the board
of directors shall be
• is related to any promoter or person
independent directors
occupying management positions at
the level of board of director or at one
level below the board of directors
In case listed entity does not have a at least half of the board of
regular non-executive chairperson directors shall comprise of
With effect from April 1, 2022, the top 500 listed entities shall ensure that the
Chairperson of the board of such listed entity shall –
l be a non-executive director;
l not be related to the Managing Director or the Chief Executive Officer
as per the definition of the term “relative” defined under the Companies
Act, 2013.
However, the above shall not be applicable to the listed entities which do
not have any identifiable promoters as per the shareholding pattern filed with
stock exchanges.
Maximum age of non-executive directors

No listed entity shall appoint a person or continue the directorship of any
76
person as a non-executive director who has attained the age of 75 years unless
a special resolution is passed to that effect, in which case the explanatory
statement annexed to the notice for such motion shall indicate the justification
for appointing such a person.
Explanation: The top 1000 and 2000 entities shall be determined on the basis
of market capitalisation as at the end of the immediate previous financial year.
Minimum Directors Requirement

The board of directors of the top 1000 listed entities (with effect from April
1, 2019) and the top 2000 listed entities (with effect from April 1, 2020) shall
comprise of not less than six directors.
Meetings of Board
Board shall meet at least four times a year, with a maximum time gap of one
hundred and twenty days between any two meetings.
Quorum of board meeting
The quorum for every meeting of the board of directors of the top 1000 listed
entities with effect from April 1, 2019 and of the top 2000 listed entities with
effect from April 1, 2020 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

l Periodically review compliance reports pertaining to all laws applicable
to the listed entity, as well as steps taken by the listed entity to rectify
instances of non-compliances.
l Satisfy itself that plans are in place for orderly succession for
appointment to the board of directors and senior management.
l Lay down a code of conduct for all members of board of directors and
senior management and incorporate duties of independent directors.
l Recommend all fees or compensation, if any, paid to non-executive
directors, including independent directors and shall require approval
of shareholders in general meeting.
l Lay down procedures to inform members of board of directors about
risk assessment and minimization procedures
l Responsible for framing, implementing and monitoring the risk
management plan for the listed entity.
77
l Performance evaluation of independent directors.

l The minimum information to be placed before the board of directors
is specific in Part A of Schedule II.
l The chief executive officer and the chief financial officer shall provide
the compliance certificate to the board of directors as specified in Part
B of Schedule II.
Maximum Number of Directorships / Committee Membership &
Chairpersonship
A person shall not be a director in more than eight listed entities with effect from April
1, 2019 and in not more than seven listed entities with effect from April 1, 2020.
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.
[Explanation - For the purpose of this regulation, the count for the number of listed
entities on which a person is a director / independent director shall be only those
whose equity shares are listed on a stock exchange.]
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 in which he / she is a director
which shall be determined as follows:
• 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;
• for the purpose of determination of limit, chairpersonship and membership of the
audit committee and the Stakeholders’ Relationship Committee alone shall be
considered.
Board Committees
Mandatory Board
Committees
• Audit Committee
• Nomination and Remunerationm
Committee
• Risk Management Committee
• Stakeholders Relationship
Committee
78
Particulars Audit Nomination & Stakeholders Risk

Committee Remuneration Relationship Management
Committee Committee Committee
Composition The The The The Risk
committee committee committee Management
shall shall shall Committee
comprise of comprise of comprise of shall have
at least three at least three atleast three minimum
directors. directors. directors. three
members with
Two-thirds of All directors of The
majority of
the members the committee committee
them being
of audit shall be non- shall have
members of
committee executive at least one
the board
shall be directors. independent
of directors,
independent director.
At least fifty including at
directors.
percent of In case least one
In case the directors of a listed independent
of a listed shall be entity having director.
entity having independent outstanding
In case
outstanding directors. SR equity
of a listed
SR equity shares, at
In case entity having
shares, least two
of a listed outstanding
the audit thirds of the
entity having SR equity
committee Stakeholders
outstanding shares, at
shall only Relationship
SR equity least two
comprise of Commi
shares, two thirds of
independent t t e e shall
thirds of the the Risk
directors. comprise of
nomination Management
independent
All members and Committee
directors.
of audit remuneration shall comprise
committee committee independent
shall be shall directors.
financially comprise of
literate and independent
at least one directors.
member
shall have
accounting
or related
financial
management
expertise
79

Chairperson The The The The
chairperson Chairperson chairperson of Chairperson
shall be an shall be an this committee of the Risk
independent independent shall be a management
director. director. non-executive committee
Provided director. shall be a
The
that the member of
Chairperson The
chairperson the board
shall be Chairperson
of the listed of directors
present of the
entity, whether and senior
at Annual
executive Stakeholders executives
general
or non- Relationship of the listed
meeting
executive, Committee entity may be
to answer
may be shall be members of
shareholder
appointed as present at the committee.
queries.
a member of the annual
the Committee general
and shall not meetings
chair such to answer
Committee. queries of
the security
The
holders.
Chairperson
of may be
present at
the annual
general
meeting, to
answer the
shareholders’
queries;
however,
it shall be
up to the
chairperson
to decide who
shall answer
the queries.
Secretarial Standard 2 prescribes that the Chairman of the Audit
Committee, Nomination and Remuneration Committee and the
Stakeholders Relationship Committee, or any other Member of
any such Committee authorised by the Chairman of the respective
Committee to attend on his behalf, shall attend the General Meeting.
80

Meetings The The The The
committee committee committee committee
shall meet shall meet at shall meet at shall meet at
at least four least once in least once in least twice in
times in a a year. a year. a year.
year and not
more than one
hundred and
twenty days
shall elapse
between two
meetings.
Quorum The quorum The quorum The quorum

for audit for a meeting for a meeting
committee of the of the Risk
meeting shall nomination Management
either be two and Committee
members or remuneration shall be either
one third of committee two members
the members shall be either or one third of
of the audit two members the members
committee, or one third of of the
whichever is the members committee,
greater, with of the whichever
at least two committee, is higher,
independent whichever including at
directors. is greater, least one
including at member of
least one the board of
independent directors in
director in Attendance.
attendance
The meetings
of the risk
management
committee
shall be
conducted
in such a
manner
that on a
continuous
basis not
81

more than one

hundred and
eighty days
shall elapse
between
any two
consecutive
meetings.
Secretarial Standard 1 prescribes that unless otherwise stipulated

in the Act or the Articles or under any other law, the Quorum for
Meetings of any Committee constituted by the Board shall be as
specified by the Board.
If no such Quorum is specified as stated above, the presence of
all the members of any such Committee is necessary to form the
Quorum.
Role of The role of The role of The role of the The board
Committee the audit the audit Stakeholders of directors
committee committee Relationship shall define
and the and the Committee the role and
information to information to shall be as responsibility
be reviewed be reviewed specified as in of the Risk
by the audit by the audit Part D of the Management
committee committee Schedule II. Committee
shall be as shall be as and may
specified in specified in delegate
Part C of Part C of monitoring
Schedule II Schedule II. and reviewing
of the risk
management
plan to the
committee and
such other
functions as
it may deem
fit (such
function shall
specifically
cover cyber
security).
82

The role and
responsibilities
of the Risk
Management
Committee
shall
mandatorily
include the
performance
of functions
specified in
Part D of
Schedule II.
Vigil Mechanism
l The listed entity shall formulate a vigil mechanism / whistle blower
policy for directors and employees to report genuine concerns.
l The vigil mechanism shall provide for adequate safeguards against
victimization of director(s) or employee(s) or any other person who
avail the mechanism.
l The vigil mechanism shall also provide for direct access to the
chairperson of the audit committee in appropriate or exceptional cases.
83
Related Party Transactions
Under SEBI LODR, 2015 Under Companies Act, 2013

As per Regulation 2(1) (zb) “related According to section 2 (76) “related
party” means a related party as party”, with reference to a company,
defined under sub-section (76) means –
of section 2 of the Companies
i. a director or his relative;
Act, 2013 or under the applicable
accounting standards. ii. a key managerial personnel or
his relative;
Provided that any person or entity
belonging to the promoter or promoter iii. a firm, in which a director,
group of the listed entity and holding manager or his relative is a
20% or more of shareholding in the partner;
listed entity shall be deemed to be
a related party. iv. a private company in which
a director or manager or his
Provided further that this definition relative is a member or director;
shall not be applicable for the
units issued by mutual funds which v. a public company in which a
are listed on a recognised stock director or manager is a director
exchange(s). and holds or holds along with
his relatives, more than two per
As per Regulation 2(1)(zc) “related cent of its paid-up share capital;
party transaction” means a transfer
of resources, services or obligations vi. any body corporate whose Board
between a listed entity and a related of Directors, managing director
party, regardless of whether a price or manager is accustomed
is charged and a “transaction” with to act in accordance with the
a related party shall be construed advice, directions or instructions
to include a single transaction or a of a director or manager;
group of transactions in a contract: vii. any person on whose advice,
Provided that this definition shall not directions or instructions
be applicable for the units issued by a director or manager is
mutual funds which are listed on a accustomed to act; However,
recognised stock exchange(s). nothing in sub-clauses (vi)
and shall apply to the advice,
directions or instructions given
in a professional capacity;
84
viii. Any body corporate which is –

(A) a holding, subsidiary or an
associate company of such
company;
(B) a subsidiary of a holding
company to which it is also
a subsidiary; or
(C) an investing company or the
venturer of the company;
Explanation. – For the purpose
of this clause, “the investing
company or the venturer of
a company” means a body
corporate whose investment
in the company would result
in the company becoming an
associate company of the body
corporate.
ix. a d i r e c t o r o t h e r t h a n a n
independent director or key
managerial personnel of the
holding company or his relative
with reference to a company,
shall be deemed to be a related
party.
When will a transaction with a related party be material?

The listed entity shall formulate a policy on materiality of related party
transactions and on dealing with related party transactions [including clear
threshold limits duly approved by the board of directors] and such policy shall
be reviewed by the board of directors at least once every three years and
updated accordingly
85
With effect from July 01, 2019 a

transaction involving payments made to
A transaction with a related party shall
a related party with respect to brand
be considered material if the
usage or royalty shall be considered
transaction(s) to be entered into
material if the transaction(s) to be
individually or taken together with
entered into individually or taken
previous transactions during a financial
together with previous transactions
year, exceeds 10% of the annual
during a financial year, exceed five
consolidated turnover of the listed entity
percent of the annual consolidated
as per the last audited financial
turnover of the listed entity as per the
statements of the listed entity
last audited financial statements of the
listed entity
Approval of Audit Committee

All related party transactions shall require prior approval of the audit committee.
This approval is required irrespective of transaction is material or not
Omnibus Approval: Audit committee may grant omnibus approval for related
party transactions proposed to be entered into by the listed entity subject to
the following conditions-
a. the audit committee shall lay down the criteria for granting the omnibus
approval in line with the policy on related party transactions of the listed
entity and such approval shall be applicable in respect of transactions
which are repetitive in nature;
b. the audit committee shall satisfy itself regarding the need for such
omnibus approval and that such approval is in the interest of the listed
entity;
c. the omnibus approval shall specify
i. the name(s) of the related party, nature of transaction, period
of transaction, maximum amount of transactions that shall be
entered into;
ii. the indicative base price / current contracted price and the formula
for variation in the price if any; and
iii. such other conditions as the audit committee may deem fit.
However, where the need for related party transaction cannot be
86
foreseen and aforesaid details are not available, audit committee

may grant omnibus approval for such transactions subject to their
value not exceeding rupees one crore per transaction.
d. the audit committee shall review, at least on a quarterly basis, the
details of related party transactions entered into by the listed entity
pursuant to each of the omnibus approvals given.
e. Such omnibus approvals shall be valid for a period not exceeding one
year and shall require fresh approvals after the expiry of one year.
Approval of the shareholders

All material related party transactions shall require approval of the shareholders
through resolution and no related party shall vote to approve such resolutions
whether the entity is a related party to the particular transaction or not.
However, the requirements specified above shall not apply in respect of a
resolution plan approved under section 31 of the Insolvency Code, subject
to the event being disclosed to the recognized stock exchanges within one
day of the resolution plan being approved.
Exceptions
The approval of Audit Committee and shareholders shall not be required in
the following cases:
a. transactions entered into between two government companies;
b. transactions entered into between a holding company and its wholly
owned subsidiary whose accounts are consolidated with such holding
company and placed before the shareholders at the general meeting
for approval.
Government Company(ies) means Government Company as defined in sub-
section (45) of section 2 of the Companies Act, 2013.
Corporate Governance requirements related to Subsidiary

 “Material Subsidiary” shall mean a subsidiary, whose income or net
worth exceeds ten percent of the consolidated income or net worth
respectively, of the listed entity and its subsidiaries in the immediately
preceding accounting year.

Explanation.- The listed entity shall formulate a policy for determining
‘material’ subsidiary.
 At least one independent director on the board of directors of the
87
listed entity shall be a director on the board of directors of an unlisted

material subsidiary, whether incorporated in India or not.
 The audit committee of the listed entity shall review the financial
statements, in particular, the investments made by the unlisted
subsidiary.
 The minutes of the meetings of the board of directors of the unlisted
subsidiary shall be placed at the meeting of the board of directors of
the listed entity.
 The management of the unlisted subsidiary shall periodically bring
to the notice of the board of directors of the listed entity, a statement
of all significant transactions and arrangements entered into by the
unlisted subsidiary.
Explanation.- For the purpose of this regulation, the term “significant transaction
or arrangement” shall mean any individual transaction or arrangement that
exceeds or is likely to exceed ten percent of the total revenues or total
expenses or total assets or total liabilities, as the case may be, of the unlisted
subsidiary for the immediately preceding accounting year.
Secretarial Audit and Secretarial Compliance Report

l Every listed entity and its material unlisted subsidiaries incorporated
in India shall undertake secretarial audit and shall annex a secretarial
audit report given by a company secretary in practice, in such form as
specified, with the annual report of the listed entity.
l Every listed entity shall submit a secretarial compliance report in such
form as specified, to stock exchanges, within sixty days from end of
each financial year.
Obligations in Respect of Independent Directors

o No person shall be appointed or continue as an alternate director for
an independent director of a listed entity with effect from October 1,
2018.
o The maximum tenure of independent directors shall be in accordance
with the Companies Act, 2013 and rules made thereunder.
o The independent directors of the listed entity shall hold at least one
meeting in a financial year, without the presence of non-independent
directors and members of the management and all the independent
directors shall strive to be present at such meeting.
88
o An independent director who resigns or is removed from the board of

directors of the listed entity shall be replaced by a new independent
director by listed entity at the earliest but not later than the immediate
next meeting of the board of directors or three months from the date
of such vacancy, whichever is later.
o The listed entity shall familiarise the independent directors through

various programmes about the listed entity, including the following:
 nature of the industry in which the listed entity operates;

 business model of the listed entity;
 roles, rights, responsibilities of independent directors; and
 any other relevant information.
o Every independent director shall, at the first meeting of the board
in which he participates as a director and thereafter at the first
meeting of the board in every financial year or whenever there is
any change in the circumstances which may affect his status as an
independent director, submit a declaration that he meets the criteria
of independence.
o With effect from October 1, 2018, the top 500 listed entities by market
capitalization calculated as on March 31 of the preceding financial year,
shall undertake Directors and Officers insurance (‘D and O insurance’)
for all their independent directors of such quantum and for such risks
as may be determined by its board of directors.
Obligation in Respect of Employees including senior Management, key

Managerial persons, Directors and Promoters
l Every director shall inform the listed entity about the committee
positions he or she occupies in other listed entities and notify changes
as and when they take place.
l All members of the board of directors and senior management

personnel shall affirm compliance with the code of conduct of board
of directors and senior management on an annual basis.
l Senior management shall make disclosures to the board of directors

relating to all material, financial and commercial transactions, where
they have personal interest that may have a potential conflict with the
interest of the listed entity at large.
89

Explanation.- For the purpose of this sub-regulation, conflict of interest
relates to dealing in the shares of listed entity, commercial dealings with
bodies, which have shareholding of management and their relatives
etc.
PRIOR INTIMATIONS [REGULATION 29]

The listed entity is required to give prior intimation to stock exchange about
the meeting of the board of directors in which any of the following proposals
is due to be considered. This is to ensure a complete transparency and to
maintain the volatility of the market price of the shares of the Company.
At least 5 At least 2 Working Days in At least 11 Working

Clear Days in advance Days in advance
advance
financial results proposal for buyback of any alteration in the form
viz., quarterly, half securities; proposal for or nature of any of its
yearly, or annual, voluntary delisting fund listed securities or in the
as the case may raising by way of FPO, rights rights or privileges of the
be; issue, ADR/GDR/FCB, QIP, holders thereof.
debt issue, preferential issue
any alteration in the date
or any other method and
on which, the interest on
for determination of issue
debentures or bonds, or
price:
the redemption amount
declaration/ recommendation of redeemable shares or
of dividend, issue of convertible of debentures or bonds,
securities including convertible shall be payable.
debentures declaration of
bonus securities
Outcome of Meetings of the board of directors (to be disclosed to the
Exchange within 30 minutes of the closure of the meeting)
a) dividends and/or cash bonuses recommended or declared or the
decision to pass any dividend and the date on which dividend shall
be paid/dispatched;
b) any cancellation of dividend with reasons thereof;
c) the decision on buyback of securities;
d) the decision with respect to fund raising proposed to be undertaken
e) increase in capital by issue of bonus shares through capitalization
90
including the date on which such bonus shares shall be credited/

dispatched;
f) reissue of forfeited shares or securities, or the issue of shares or
securities held in reserve for future issue or the creation in any form
or manner of new shares or securities or any other rights, privileges
or benefits to subscribe to;
g) short particulars of any other alterations of capital, including calls; h)
financial results;
h) decision on voluntary delisting by the listed entity from stock
exchange(s).
In case of board meetings being held for more than one day, the financial
results shall be disclosed within thirty minutes of end of the meeting for the
day on which it has been considered.
MEETINGS OF SHAREHOLDERS AND VOTING [REGULATION 44]

 The top 100 listed entities by market capitalization, determined as
on March 31st of every financial year, shall hold their annual general
meetings within a period of five months from the date of closing of the
financial year.
 The top 100 listed entities shall provide one-way live webcast of the
proceedings of the annual general meetings.
 the listed entity shall provide the facility of remote e-voting to its
shareholders and submit to the stock exchange, within 2 working days
of conclusion of its General Meeting, details regarding the voting results
in the format specified by the Board.
REGULATIONS APPLICABLE ON TOP 500, TOP 1000 AND TOP 2000

LISTED ENTITIES
TOP 500 LISTED TOP 1000 LISTED TOP 2000 LISTED

ENTITIES ENTITIES ENTITIES
Board of directors Board of directors -
shall have at least one shall have at least one
independent woman independent woman
director by April 1, 2019 director by April 1, 2020
91
With effect from April 1, The board of directors The board of directors
2022, the Chairperson (with effect from April (with effect from April
of the board of such 1, 2019) shall comprise 1, 2020) shall comprise
listed entity shall – of not less than six of not less than six
directors. directors.
(a) be a non-executive
director;
(b) n o t b e r e l a t e d
to the Managing
Director or the Chief
Executive Officer as
per the definition of
the term “relative”
defined under the
Companies Act,
2013.
With effect from The quorum for every The quorum for every
October 1, 2018, meeting of the board meeting of the board
entities shall undertake of directors with effect of directors with effect
Directors and Officers from April 1, 2019 from April 1, 2020
insurance (‘D and O shall be one-third of its shall be one-third of its
insurance’) for all their total strength or three total strength or three
independent directors directors, whichever directors, whichever
of such quantum and is higher, including at is higher, including at
for such risks as may be least one independent least one independent
determined by its board director. director.
of directors.
The provisions of Risk
Management Committee
shall be applicable to
top 1000 listed entities.
- The top 1000 listed -
entities shall formulate
a dividend distribution
policy which shall be
disclosed on the website
of the listed entity and a
web-link shall also be
provided in their annual
reports.
92
The top 500, 1000 and 2000 entities shall be determined on the basis of
market capitalisation, as at the end of the immediate previous financial
year.
COMPLIANCES UNDER SEBI (LODR) REGULATIONS FOR THE

LISTED ENTITY WHICH HAS LISTED ITS NON-CONVERTIBLE DEBT
SECURITIES OR NON-CONVERTIBLE REDEEMABLE PREFERENCE
SHARES OR BOTH
Regulation Title Intimation to Stock Time

Exchanges Limit
50(1) Intimation Prior intimation to the stock Atleast 11
to Stock exchange(s) before the due working
exchanges date for which the interest days
on debentures and bonds,
and redemption amount of
redeemable shares or of
debentures and bonds shall be
payable
50(3) Intimation Intimation regarding the meeting Atleast 2

of Board of its board of directors, at working
meetings which the recommendation or days in
declaration of issue of non- advance
convertible debt securities or
any other matter affecting the
rights or interests of holders of
non- convertible debt securities
or non-convertible redeemable
preference shares is proposed
to be considered
52(1) Half Yearly The listed entity shall prepare Within 45

Financial and submit unaudited or audited days from
results financial results on a half yearly the end
basis in the format as specified of each
by the Board to the recognized of the half
stock exchange accompanied year
by the Limited Review Report
93

Exchanges Limit
Proviso to Copy of The listed entities which have On the
52(1) financial listed their equity shares and same
results to debt securities, a copy of the day on
Debenture financial results submitted which the
Trustee to stock exchanges shall be information
provided to Debenture Trustees is
submitted
to the
stock
exchange
52(2) Annual The listed entity shall prepare Within
Financial and submit audited financial 60 days
Results results from the
end of the
financial
year
52(5) Submission The listed entities shall submit a Within 7
of certificate certificate signed by debenture working
signed by trustee that is has taken days from
Debenture note of the contents of half the date of
Trustee yearly/annual financial results submission
submitted to Stock Exchange of the
information
54(2) Disclosure The listed entity shall disclose Quarterly,
of Asset to the stock exchange the half-yearly,
Cover extent and nature of security year-to-
created and maintained with date and
respect to its secured listed annual
non-convertible debt securities financial
statements
as
applicable
55 Credit Each rating obtained by the Atleast
Ratings listed entity with respect to non- once a
convertible debt securities shall year
be reviewed by a credit rating
agency registered by the SEBI
94

Exchanges Limit
57(1) Certificate The listed entity shall submit a within one
certificate to the stock exchange working
regarding status of payment day of the
in case of non-convertible interest or
securities dividend
or principal
becoming
due
LIABILITY OF A LISTED ENTITY FOR CONTRAVENTION

The listed entity or any other person thereof who contravenes any of the
provisions of these SEBI (LODR) regulations, shall, in addition to liability
for action in terms of the securities laws, be liable for the following actions
by the respective stock exchange(s), in the manner specified in circulars or
guidelines issued by the SEBI:
a. imposition of fines;
b. suspension of trading;
c. freezing of promoter/promoter group holding of designated securities,
as may be applicable, in coordination with depositories;
d. any other action as may be specified by the SEBI from time to time.
For Company Secretary in Employment

 A listed entity shall appoint a Qualified Company Secretary as the
Compliance Officer. The compliance officer of the listed entity shall
be responsible for –
o ensuring conformity with the regulatory provisions applicable to
the listed entity in letter and spirit.
o co-ordination with and reporting to SEBI, recognised stock
exchange(s) and depositories with respect to compliance with
rules, regulations and other directives of these authorities in
manner as specified from time to time.
o ensuring that the correct procedures have been followed that would
95
result in the correctness, authenticity and comprehensiveness of

the information, statements and reports filed by the listed entity
under these regulations.
o monitoring email address of grievance redressal division as
designated by the listed entity for the purpose of registering
complaints by investors.
 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, wherever
applicable, within one month of end of each half of the financial year,
certifying that all activities in relation to both physical and electronic
share transfer facility are maintained either in house or by Registrar
to an issue and share transfer agent registered with SEBI.
 “Senior Management” shall mean Officers/Personnel of the listed entity
who are members of its core management team excluding Board of
directors and normally this shall comprise all members of management
one level below Chief Executive Officer/ Managing Director/ Whole
Time Director/ Manager (including Chief Executive Officer/Manager,
in case they are not part of the board) and shall specifically include
Company Secretary and Chief Financial Officer.
For Company Secretary in Practice

In addition to the above responsibilities, the following are the recognition to
Company Secretary under the SEBI Listing Regulations, 2015 :
 Certificate regarding Transfer of Securities: Certification to the
effect that all transfers have been completed within the stipulated time.
[Regulation 40(9)]
 Certificate Regarding Compliance of Conditions of Corporate
Governance under SEBI Listing Regulations: SEBI listing regulations
authorizes Company Secretary in Practice to issue certificate regarding
compliance of conditions of Corporate Governance. [Schedule V,
clause E]
 Secretarial Audit and Secretarial Compliance Report: Every listed
entity and its material unlisted subsidiaries incorporated in India shall
undertake secretarial audit and shall annex a secretarial audit report
given by a company secretary in practice, in such form as specified,
with the annual report of the listed entity [Regulation 24A].
96
 Certification regarding Director’s Disqualification: A certificate

from a Company Secretary in Practice that none of the directors on
the board of the company have been debarred or disqualified from
being appointed or continuing as Directors of Companies by the Board/
Ministry of Corporate Affairs or any such Statutory Authority. [Schedule
V, Part C, Clause 10 (i)]
97
Chapter 4
An Overview of SEBI (Substantial Acquisition of
Shares and Takeovers) Regulations, 2011
INTRODUCTION
The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,
2011 [SEBI Takeover Regulations or SEBI (SAST) Regulations] prescribes a
systematic framework for acquisition of stake in listed companies. By these
laws the regulatory system ensures that the interests of the shareholders of
listed companies are not compromised in case of an acquisition or takeover
by acquirer. It also protect the interests of minority shareholders, which is
also a fundamental attribute of corporate governance principle. Evidently, it
is equally important to note that in this highly competitive business world, it
is critical for each of the stakeholders in a company to guard their interests
in the company from all forms of third party. So, in case third party (Acquirer)
proposes any such acquisition or control over listed companies, such Acquirer
would provide exit opportunity to Shareholders of that listed company prior to
completion of such transaction.
The SEBI Takeover Regulations ensures that public shareholders of a listed
company are treated fairly and equitably in relation to a substantial acquisition
in, or takeover of, a listed company thereby maintaining stability in the
securities market. The objective of the takeover regulations is to ensure that the
public shareholders of a company are mandatorily offered an exit opportunity
at the best possible terms in case of a substantial acquisition in, or change
in control of, a listed company.
98
Corporate takeovers may be classified under three broad classes:
•This type of takeover takes place with the consent of target

Friendly listed company. It be either by way of agreement between
two management or between two groups. Friendly takeover
Takeover often termed as negotiated takeover.
•This is the takeover which usually takes place when the

acquirer does not offer the target listed company the
Hostile proposal. Rather the acquirer continues to acquire silently to
have control over the target listed company. Unlike Friendly
Takeover Takeover, this type of takeover takes place without consent
between the management of both acquirer and target listed
company.
•As the name suggest, this takeover is made by a financially

strong acquirer to takeover sick or financially sick company.
Bailout In this takeover, generally the acquirer has advantage of
negotiating the price as all lenders / creditors / suppliers of
Takeover financially sick company would like to recover their amount
Important Definitions
Acquirer “Acquirer” means any person who, directly or indirectly,
acquires or agrees to acquire whether by himself, or
through, or with persons acting in concert with him, shares
or voting rights in, or control over a target company. [Reg.
2(1)(a)]
Acquisition “Acquisition” means, directly or indirectly, acquiring or
agreeing to acquire shares or voting rights in, or control
over, a target company. [Reg. 2(1)(b)]
Control “Control” includes the right to appoint majority of the
directors or to control the management or policy decisions
exercisable by a person or persons acting individually
or in concert, directly or indirectly, including by virtue of
their shareholding or management rights or shareholders
agreements or voting agreements or in any other manner.
However, a director or officer of a target company shall not
be considered to be in control over such target company,
merely by virtue of holding such position. [Reg. 2(1)(e)]
99
Enterprise Enterprise value means the value calculated as market

value capitalization of a company plus debt, minority interest
and preferred shares, minus total cash and cash
equivalents. [Reg. 2(1)(h)]
Enterprise Value= Market capitalization+ Debt+ Minority

Interest + Preferred Shares- Total Cash and Cash
Equivalents
Frequently “Frequently traded shares” means shares of a target

traded shares company, in which the traded turnover on any stock
exchange during the twelve (12) calendar months
preceding the calendar month in which the public
announcement is required to be made under these
regulations, is at least ten percent of the total number
of shares of such class of the target company. However,
where the share capital of a particular class of shares
of the target company is not identical throughout such
period, the weighted average number of total shares of
such class of the target company shall represent the total
number of shares. [Reg. 2(1)(j)]
Maximum “Maximum permissible non-public shareholding” means
permissible such percentage shareholding in the target company
non-public excluding the minimum public shareholding required
shareholding under the Securities Contracts (Regulation) Rules, 1957.
Fugitive “Fugitive economic offender” shall mean an individual who
Economic is declared a fugitive economic offender under section
Offender 12 of the Fugitive Economic Offenders Act, 2018. [Reg.
2(1)(ja)]
Identified “Identified date” means the date falling on the tenth
Date working day prior to the commencement of the
tendering period, for the purposes of determining the
shareholders to whom the letter of offer shall be sent.
[Reg. 2(1)(k)]
Immediate “Immediate relative” means any spouse of a person, and
Relative includes parent, brother, sister or child of such person or
of the spouse. [Reg. 2(1)(l)]
100
Offer period “Offer period” means the period between the date of
entering into an agreement, formal or informal, to acquire
shares, voting rights in, or control over a target company
requiring a public announcement, or the date of the
public announcement, as the case may be, and the date
on which the payment of consideration to shareholders
who have accepted the open offer is made, or the date
on which open offer is withdrawn, as the case may be.
[Reg. 2(1)(p)]
Tendering Period and Offer Period both are different.

Offer Period is wider and includes tendering period
Persons “Persons acting in concert” means, –

Acting in
1. persons who, with a common objective or purpose of
Concert
acquisition of shares or voting rights in, or exercising
control over a target company, pursuant to an
agreement or understanding, formal or informal,
directly or indirectly co-operate for acquisition of
shares or voting rights in, or exercise of control over
the target company.
2. Without prejudice to the generality of the foregoing,
the persons falling within the following categories
shall be deemed to be persons acting in concert with
other persons within the same category, unless the
contrary is established, –
i. a company, its holding company, subsidiary
company and any company under the same
management or control;
ii. a company, its directors, and any person entrusted
with the management of the company;
iii. directors of companies referred to in item (i) and
(ii) of this sub-clause and associates of such
directors;
iv. promoters and members of the promoter group;
v. immediate relatives;
101
vi. a mutual fund, its sponsor, trustees, trustee

company, and asset management company;
vii. a collective investment scheme and its collective
investment management company, trustees and
trustee company;
viii. a venture capital fund and its sponsor, trustees,
trustee company and asset management company;
ix. an alternate investment fund and its sponsor,
trustees, trustee company and manager;
x. a merchant banker and its client, who is an
acquirer;
xi. a portfolio manager and its client, who is an
acquirer;
xii. banks, financial advisors and stock brokers of the
acquirer, or of any company which is a holding
company or subsidiary of the acquirer, and where
the acquirer is an individual, of the immediate
relative of such individual. However, this shall
not apply to a bank whose sole role is that of
providing normal commercial banking services or
activities in relation to an open offer under these
regulations;
xiii. an investment company or fund and any person
who has an interest in such investment company
or fund as a shareholder or unitholder having
not less than 10 per cent of the paid-up capital
of the investment company or unit capital of the
fund, and any other investment company or fund
in which such person or his associate holds not
less than 10 per cent of the paid-up capital of that
investment company or unit capital of that fund.
However, this shall not be applicable to holding
of units of mutual funds registered with the SEBI.
[Reg. 2(1)(q)]
102
Target “Target Company” means a company and includes a

company body corporate or corporation established under a Central
legislation, State legislation or Provincial legislation for the
time being in force, whose shares are listed on a stock
exchange. [Reg. 2(1)(z)]
Tendering “Tendering period” means the period within which

period shareholders may tender their shares in acceptance
of an open offer to acquire shares made under these
regulations. [Reg. 2(1)(za)]
Volume “Volume weighted average market price” means the

weighted product of the number of equity shares traded on a stock
average exchange and the price of each equity share divided by
market price the total number of equity shares traded on the stock
exchange. [Reg. 2(1)(zb)]
Number of shares traded on the Stock Exchange on a
particular day: X, Market Price: Y
Volume “Volume weighted average price” means the product of

weighted the number of equity shares bought and price of each
average price such equity share divided by the total number of equity
shares bought. [Reg. 2(1)(zc)]
Weighted “Weighted average number of total shares” means the

average number of shares at the beginning of a period, adjusted
number of for shares cancelled, bought back or issued during the
total shares aforesaid period, multiplied by a time-weighing factor.
[Reg. 2(1) (zd)]
Wilful “wilful defaulter” means any person who is categorized

defaulter as a wilful defaulter by any bank or financial institution or
consortium thereof, in accordance with the guidelines on
wilful defaulters issued by the Reserve Bank of India and
includes any person whose director, promoter or partner
is categorized as such [Reg. 2(1)(ze)]
103
APPLICABILITY & EXCEPTIONS

These regulations shall apply to direct and indirect acquisition of shares or
voting rights, in or control over Target Company.
The Regulations therefore, gets triggered on the following event (on case basis)
l Direct acquisition of shares / voting rights
l Indirect acquisition of shares / voting rights
l Control
TRIGGER POINT FOR MAKING AN OPEN OFFER BY AN ACQUIRER

25% Shares or Voting Rights
An acquirer, along with Persons acting in concert (PAC), if any, who intends to
acquire shares which along with his existing shareholding would entitle him to
exercise 25% or more voting rights, can acquire such additional shares only after
making a Public Announcement (PA) to acquire minimum twenty six percent
shares of the Target Company from the shareholders through an Open Offer.
For example – Mr. A is presently holding 1% in Ram Enterprises Limited, a
listed entity and he further desires to acquire the shares as tabulated below:
Case Pre Proposed Post Applicability of SEBI

Holding Acquisition Holding Takeover Regulation, 2011
1 1% 26% 27% Open offer required
2 1% 23% 24% Open offer NOT required
Creeping Acquisition Limit

An acquirer who holds 25% or more but less than maximum permissible
non-public shareholding of the Target Company, can acquire such additional
shares as would entitle him to exercise more than 5% of the voting rights in
any financial year ending March 31 only after making a Public Announcement
to acquire minimum twenty six percent shares of Target Company from the
shareholders through an Open Offer.
Name Per Creeping Post Applicability of SEBI

Holding Acquisition Holding Takeover Regulation,
2011
A 26% 3% 29% Open offer NOT required
B 26% 6% 32% Open Offer required
104
OPEN OFFER SEBI

Takeover Regulations, 2011 provides certain trigger events wherein the
Acquirer is required to give Open Offer to the shareholders of the Target
Company to provide them exit opportunity. However, it also allows the Acquirer
to make voluntary offer as well.
I. Mandatory Open Offer

Acquisition of Shares (Regulation 3)
SEBI Takeover Regulations, 2011 provide a threshold for mandatory Open
Offer. These regulations provides that whenever an acquirer acquires the
shares in excess of the threshold as prescribed under regulation 3 and in case
of control, Regulation 4 of SEBI Takeover Regulations, 2011, the acquirer is
required to make a public announcement of offer to the shareholders of the
Target Company.
Regulation 3 of the SEBI Takeover Regulations, 2011 provides the Acquirer to
give an open offer to the shareholders of Target Company on the acquisition
of shares or voting rights entitling the Acquirer along with the persons acting in
concert with him to exercise 25% or more voting rights in the Target Company.
Further any Acquirer who holds shares between 25%-75%, together with PACs
can acquire further 5% shares as creeping acquisition without giving an Open
Offer to the shareholders of the Target Company upto a maximum of 75%.
The quantum of acquisition of additional voting rights shall be calculated after
considering the following:
105
ONE TIME EXEMPTION FOR CREEPING ACQUISITION –

The acquisition beyond 5% but up to 10% of the voting rights in the
target company shall be permitted for the financial year 2020-21 only
in respect of acquisition by a promoter pursuant to preferential issue of
equity shares by the target company. This exemption was only permitted
through preferential issue to promoters and not otherwise.
No Netting off allowed: For the purpose of determining the quantum

a.
of acquisition of additional voting rights, the gross acquisitions without
considering the disposal of shares or dilution of voting rights owing
to fresh issue of shares by the target company shall be taken into
account. Case of Mr. A for FY 2020-21:
Details of Present Acquisition Disposal Post

Acquirer holding Holding
A 27% 3% - 30%
A 30% 1% - 31%
A 31% - 4% 27%
A 27% 3% - 30%
The shareholding of Mr. A at the beginning of FY 2020-21 was 27%
and at the closure of FY 2020-21 was 30%. Therefore, during the year
he has increased holding by (30-27=3%).
However, netting is not permitted under Takeover Regulations, therefore
if you add all acquisitions i.e. 3%, 1%, 3%, it amounts to 7%. Therefore,
the 4th transaction whereby Mr. A further acquires 3% would trigger
the Open offer requirements.
Incremental voting rights in case of fresh issue In the case of
b.
acquisition of shares by way of issue of new shares by the target
company, the difference between the pre-allotment and the post-
allotment percentage voting rights shall be regarded as the quantum
of additional acquisition. [Regulation 3(2)]
Acquisition of shares by any person, such that the individual
shareholding of such person acquiring shares exceed the stipulated
thresholds, shall also be attracting the obligation to make an open
offer for acquiring shares of the target company irrespective of where
there is a change in the aggregate shareholding with persons action
in concert. [Regulation 3(3)]
106
This entire Regulation shall not apply to acquisition of shares or

voting rights of a company by the promoters or shareholders in
control, in terms of the provisions of Schedule XX of the SEBI
(Issue of Capital and Disclosure Requirements) Regulations, 2018.
[Regulation 3(4)]
Further for the purpose of this regulation, any reference to “twenty-five
per cent” in case of listed entity which has listed its specified securities
on Innovators Growth Platform shall be read as “forty-nine per
cent”.
Acquisition of Control
Regulation 4 of the SEBI Takeover Regulations, 2011 specifies that if any
acquirer acquires, directly or indirectly, control over the Target Company
irrespective of the fact whether there has been any acquisition of shares or not,
then he has to give public announcement to acquire shares from shareholders
of the Target Company.
Indirect Acquisition of Shares or control
The concept of Indirect acquisition of shares has been recognized under
Regulation 5 of the SEBI Takeover Regulations, 2011. It explains indirect
acquisition as the acquisition of shares, voting rights or control over any
other company which would enable the acquirer of shares, voting rights or
control to exercise such percentage of voting rights, which would otherwise
have triggered an open offer process over which would enable the acquirer
to exercise control over a company. Certain indirect acquisitions are regarded
as ‘deemed direct acquisitions’ if such indirect acquisition satisfy the following
conditions such as:
 proportionate NAV of the target company as % of the consolidated
NAV of the entity or business being acquired exceeds 80 %
 proportionate sales turnover of the target company as % of the
consolidated sales turnover of the entity or business being acquired
exceeds 80 %
 proportionate market cap. of the target company as % of the enterprise
value of the entity or business being acquired exceeds 80 %
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Delisting Offer
Acquirer may opt to delist the target listed company by declaring such intention
upfront.
Declare intention at the time • To comply with delisting regulations

of detailed public statement • Under delisting offer, public
If offer of delisting is not • Make public announcement within 2 working days

successful • To comply with Takeover Regulations
In case of delisting offer not being successful, the timelines will be revised
from such Public Announcement
AND
Acquirer will be required to enhance the offer price for the difference of days
between the actual date of payment as per open offer and the revised date
of payment (at the rate of 10% p.a.)
Regulation 5A deals with delisting in case of certain cases arising out of open
offer which is discussed below:
In the event the acquirer makes a public announcement of an open offer for
acquiring shares of a target company in terms of regulations 3, 4 or 5, he may
delist the company in accordance with provisions of the SEBI (Delisting of
Equity Shares) Regulations, 2009, but the acquirer shall have declared upfront
his intention to so delist at the time of making the detailed public statement
and a subsequent declaration of delisting for the purpose of the offer proposed
to be made under sub regulation (1) of regulation 5A will not suffice.
Where an offer made is not successful-
I. On account of non–receipt of prior approval of shareholders in terms
of regulation 8(1)(b) of SEBI (Delisting of Equity Shares) Regulations,
2009; or
II. In terms of regulation 17of SEBI (Delisting of Equity Shares)
Regulations, 2009; or
III. On account of the acquirer rejecting the discovered price determined
by the book building process in terms of regulation 16(1) of SEBI
(Delisting of Equity Shares) Regulations, 2009,
the acquirer shall make an announcement within 2 working days in respect
of such failure in all the newspapers in which the detailed public statement
was made and shall comply with all applicable provisions of these regulations.
108
In the event of failure of the delisting offer the open offer obligations shall be
fulfilled by the acquirer in the following manner:
i. the acquirer, through the manager to the open offer, shall within five
working days from the date of the announcement, file with the SEBI,
a draft of the letter of offer; and
ii. shall comply with all other applicable provisions of these regulations.
However, the offer price shall stand enhanced by an amount equal to a sum
determined at the rate of ten per cent per annum for the period between the
scheduled date of payment of consideration to the shareholders and the actual
date of payment of consideration to the shareholders.
Explanation: For the purpose of this sub-regulation, scheduled date shall be
the date on which the payment of consideration ought to have been made to
the shareholders in terms of the timelines in these regulations.
Where a competing offer is made –
a. the acquirer shall not be entitled to delist the company;
b. the acquirer shall not be liable to pay interest to the shareholders on
account of delay due to competing offer;
c. the acquirer shall comply with all the applicable provisions of these
regulations and make an announcement in this regard, within two
working days from the date of public announcement made, in all the
newspapers in which the detailed public statement was made.
Shareholders who have tendered shares in acceptance of the offer, shall be
entitled to withdraw such shares tendered, within 10 working days from the
date of the announcement. Shareholders who have not tendered their shares
in acceptance of the offer shall be entitled to tender their shares in acceptance
of the offer made under these regulations.
II. Voluntary Offer
Voluntary Offer means the Open Offer given by the acquirer voluntarily
without triggering the mandatory Open Offer obligations as envisaged under
these regulations. Voluntary Offers are an important means for substantial
shareholders to consolidate their stake and therefore recognized the need to
introduce a specific framework for such Open Offers.
Regulation 6 of the Takeover Regulations provides the threshold and conditions
for making the Voluntary Open Offer which are detailed below:
109
Prior holding of at least 25 % shares and shareholding of the acquirer

and persons acting in concert (PAC) post completion of Open Offer
An acquirer, who together with persons acting in concert with him, holds shares
or voting rights in a target company entitling them to exercise twenty-five per
cent or more but less than the maximum permissible non- public shareholding,
shall be entitled to voluntarily make a public announcement of an open offer
for acquiring shares in accordance with these regulations, subject to their
aggregate shareholding after completion of the open offer not exceeding the
maximum permissible non-public shareholding.
Therefore, under Voluntary Offer the size of the Offer would be as such that
the minimum public shareholding shall be maintained even after acquisition
of shares by the Acquirer.
Further for the purpose of this regulation, any reference to “twenty-five per cent”
in case of listed entity which has listed its specified securities on Innovators
Growth Platform shall be read as “forty-nine per cent”.
Acquisition of shares prior to the voluntary open offer
However, where an acquirer or any person acting in concert with him has
acquired shares of the target company in the preceding fifty-two weeks without
attracting the obligation to make a public announcement of an open offer, he
shall not be eligible to voluntarily make a public announcement of an open
offer for acquiring shares under this regulation.
Prohibition on the acquisition of shares during the Offer Period
SEBI Takeover Regulations, 2011 prohibits the acquirer who has made a
Voluntary Open Offer from further acquiring the shares during the Offer Period
otherwise than under the Open Offer.
Restriction of the acquisition of shares after completion of open offer
An acquirer and persons acting in concert with him, who have made a public
announcement under this regulation to acquire shares of a target company
shall not be entitled to acquire any shares of the target company for a period
of six months after completion of the open offer except pursuant to another
voluntary open offer.
However, such restriction shall not prohibit the acquirer from making a
competing offer upon any other person making an open offer for acquiring
shares of the target company. Shares acquired through bonus issue or stock
splits shall not be considered for purposes of the dis-entitlement set out in
this regulation.
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Wilful Defaulter
No person who is a wilful defaulter shall make a public announcement of an
open offer for acquiring shares or enter into any transaction that would attract
the obligation to make a public announcement of an open offer for acquiring
shares under these regulations.
However, this regulation shall not prohibit the wilful defaulter from making a
competing offer in accordance with regulation 20 of these regulations upon any
other person making an open offer for acquiring shares of the target company.
Therefore, for willful defaulter the only route available is making competing
offer.
Fugitive Economic Offender
Notwithstanding anything contained in these regulations, no person who is a
fugitive economic offender shall make a public announcement of an open offer
or make a competing offer for acquiring shares or enter into any transaction,
either directly or indirectly, for acquiring any shares or voting rights or control
of a target company
Key differences between Compulsory and Voluntary Open Offer
Particulars Compulsory Open Voluntary Open Offer

Offer
Eligibility Can be triggered Can be triggered by acquirer
through both direct and holding in excess of 25% or
indirect acquisition. more.
Further the acquirer or PAC
should not have acquired shares
of target Company without the
obligation to make mandatory
offer during the preceding 52
weeks.
Applicability On crossing the No such applicability is required.
threshold or the
creeping acquisition or
by way of control.
Minimum size Minimum size shall be Minimum size shall be 10% of
of Open Offer 26% of the total shares the total shares of the target
of the target company. company.
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MINIMUM OFFER SIZE

The minimum offer size for an open offer is as under:
Open offer when triggered Minimum open offer size

Direct acquisition under 26% of the total shares of the Target
Regulation 3 & 4 or Indirect Company as on the 10th working day
acquisition under Regulation 5 from the closure of the tendering period.
Voluntary under Regulation 6 10% of the voting rights in the Target
Company of the company. The post offer
shareholding of the Acquirer and PACs in
such case shall not exceed the maximum
permissible non-public shareholding.
CONDITIONAL OFFER
An offer in which the acquirer has stipulated a minimum level of acceptance
is known as a conditional offer.
Minimum level of acceptance implies minimum number of shares which the
acquirer desires under the said conditional offer. If the number of shares
validly tendered in the conditional offer, are less than the minimum level
of acceptance stipulated by the acquirer, then the acquirer is not bound to
accept any shares under the offer. In a conditional offer, if the minimum level
of acceptance is not reached, the acquirer shall not acquire any shares in
the target company under the open offer or the Share Purchase Agreement
which has triggered the open offer.
PUBLIC ANNOUNCEMENT
SEBI (SAST) Regulations, 2011 provides that whenever acquirer acquires the
shares or voting rights of the Target Company in excess of the limits prescribed
under these Regulations, Acquirer is required to give a Public Announcement
of an Open Offer to the shareholder of the Target Company as stated under
Regulation 13. During the process of making the Public Announcement of an
Open Offer, the Acquirer is required to give Public Announcement and publish
Detailed Public Statement. The regulations have prescribed separate timelines
for Public Announcement as well as for Detailed Public Statement.
I. Public Announcement
II. Detailed Public Statement
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Timing of Pubic Announcement

The Public Announcement shall be sent to all the stock exchanges on which
the shares of the target company are listed. Further, a copy of the same shall
also be sent to the SEBI and to the target company at its registered office
within one working day of the date of the public announcement. The time
within which the Public Announcement is required to be made to the Stock
Exchanges under different circumstances is tabulated below:
PUBLIC ANNOUNCEMENT
Regulation Particulars of Time frame within which

Compliances it shall be complied
13(1) Agreement to acquire shares On the same day of entering

or voting rights or control into agreement to acquire
over the Target Company. share, voting rights or control
over the Target Company.
13(2)(a) Market Purchase of shares. Prior to the placement of

purchase order with the stock
broker to acquire the shares.
13(2)(b) Acquisition pursuant to On the same day when

conversion of Convertible the option to convert such
Securities without a fixed securities into shares of the
date of conversion or upon target company is exercised.
conversion of depository
receipts for the underlying
shares of the target company.
13(2)(c) Acquiring shares or voting On the second working day

rights or control pursuant to preceding the scheduled
conversion of Convertible date of conversion of such
Securities with a fixed date securities into shares of the
of conversion. target company.
13(2)(d) In case of disinvestment. On the date of execution of

agreement for acquisition
of shares or voting rights
or control over the target
company.
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13(2)(e) In case of Indirect Acquisition At any time within four

of shares or voting rights in, working days of the following
or control over the target dates, whichever is earlier:
company where none of the
a. W h e n t h e p r i m a r y
parameters mentioned in
acquisition is contracted;
Regulation 5(2) are met.
and
b. D a t e o n w h i c h t h e
intention or decision
to make the primary
acquisition is announced
in the public domain.
13(2)(f) In case of Indirect Acquisition On the following dates,
of shares or voting rights in, whichever is earlier:
or control over the target
a. W h e n t h e p r i m a r y
company where any of the
acquisition is contracted;
parameters mentioned in
and
Regulation 5(2) is / are met.
b. D a t e o n w h i c h t h e
intention or decision
to make the primary
acquisition is announced
in the public domain.
13(2)(g) Acquisition of shares, voting On the date when the board
rights or control over the of directors of the target
Target Company pursuant to company authorizes such
an Preferential Issue. preferential issue.
13(2)(h) An increase in voting rights Not later than the 90th day
consequential to a buy-back from the date of closure of
not qualifying for exemption the buy-back offer by the
under Regulation 10. target company.
13(2)(i) Acquisition of shares, voting Not later than two working
rights or control over the days from the date of receipt
Target Company where the of such intimation of having
specific date on which title to acquired such title.
such shares, voting rights or
control is acquired is beyond
the control of the acquirer.
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13(2A) Pursuant to regulation 3 and On the date of first such

regulation 4 for a proposed acquisition.
acquisition of shares or
(Provided the acquirer
voting rights in or control
discloses in the public
over the target company
announcement the details
through a combination of,–
of the proposed subsequent
(i) an agreement and any acquisition.)
one or more modes of
acquisition referred to
in sub-regulation (2) of
regulation 13, or
(ii) any one or more modes
of acquisition referred
in clause (a) to (i) of
sub-regulation (2) of
regulation 13.
13(3) Voluntary Offer. On the same day when the

Acquirer decides to make
Voluntary Offer.
Timing of Detailed Public Statement

In terms of Regulation 13(4) of SEBI (SAST) Regulations, 2011, a Detailed
Public Statement shall be published by the acquirer through the Manager to
the Open Offer, not later than 5 working days of the Public Announcement.
However, in case of Indirect Acquisition where none of condition specified in
Regulation 5(2) are satisfied, the Detailed Public Statement shall be published
not later than five working days of the completion of the primary acquisition of
shares or voting rights in or control over the company or entity holding shares
or voting rights in, or control over the target company.
Publication of Public Announcement and Detailed Public Statement

Regulation 14 of SEBI (SAST) Regulations, 2011 provides the requirements
relating to publication of Public Announcement and Detailed Public Statement
which are tabulated below:
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Regulation Particulars of Compliances Time frame

within which
it shall be
complied
14(1) Public Announcement shall be sent to the On the same
Stock Exchange, all the stock exchanges day
and same information disseminate to public.
14(2) Copy of Public Announcement shall also Within one
be sent to the SEBI and target company working day
at its Registered Office. of the date
of the public
announcement
14(3) Detailed Public Statement pursuant to the Within 5
public announcement shall be published in working days
all Editions of any one of English Newspaper, from the date
any one Hindi Newspaper and any one of Public
regional language newspaper, where the Announcement
registered office of the target company is
situated and any one regional language
newspaper at place of stock exchange
where highest volume of trading in shares
of the target company are recorded during
the sixty trading days preceding the date
of the public announcement.
14(4) Within the publication of such detailed Immediately
public statement in the newspapers, a
copy of the same shall be sent to -
a) SEBI through the manager to the
open offer ;
b) All the stock exchanges on which
the shares of the target company
are listed and the stock exchanges
shall forthwith disseminate such
information to the public;
c) the target company at its registered
office and the target company shall
forthwith circulate it to the members
of its board.
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OFFER PRICE
Offer price is the price at which the acquirer announces to acquire shares
from the public shareholders under the open offer.
(1) The offer price shall not be less than the price as calculated under
regulation 8 of the SAST Regulations, 2011 for frequently or infrequently
traded shares.
(2) In the case of direct acquisition of shares or voting rights in, or control
over the target company, and indirect acquisition of shares or voting
rights in, or control over the target company where the parameters
referred to in sub-regulation (2) of regulation 5 are met, the offer price
shall be the highest of,—
(a) the highest negotiated price per share of the target company for
any acquisition under the agreement attracting the obligation to
make a public announcement of an open offer;
(b) the volume-weighted average price paid or payable for
acquisitions, whether by the acquirer or by any person acting in
concert with him, during the fifty-two weeks immediately preceding
the date of the public announcement;
(c) the highest price paid or payable for any acquisition, whether by
the acquirer or by any person acting in concert with him, during
the twenty-six weeks immediately preceding the date of the public
announcement;
(d) the volume-weighted average market price of such shares for
a period of sixty trading days immediately preceding the date
of the public announcement as traded on the stock exchange
where the maximum volume of trading in the shares of the target
company are recorded during such period, provided such shares
are frequently traded;
(e) where the shares are not frequently traded, the price determined
by the acquirer and the manager to the open offer taking into
account valuation parameters including, book value, comparable
trading multiples, and such other parameters as are customary
for valuation of shares of such companies; and
(f) the per share value computed under sub-regulation (5), if
applicable.
(3) In the case of an indirect acquisition of shares or voting rights in, or
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control over the target company, where the parameter referred to in

sub-regulation (2) of regulation 5 are not met, the offer price shall be
the highest of, –
(a) the highest negotiated price per share, if any, of the target
company for any acquisition under the agreement attracting the
obligation to make a public announcement of an open offer;
(b) the volume-weighted average price paid or payable for any
acquisition, whether by the acquirer or by any person acting in
concert with him, during the fifty-two weeks immediately preceding
the earlier of, the date on which the primary acquisition is
contracted, and the date on which the intention or the decision to
make the primary acquisition is announced in the public domain;
(c) the highest price paid or payable for any acquisition, whether by
the acquirer or by any person acting in concert with him, during
the twenty-six weeks immediately preceding the earlier of, the
date on which the primary acquisition is contracted, and the
date on which the intention or the decision to make the primary
acquisition is announced in the public domain;
(d) the highest price paid or payable for any acquisition, whether
by the acquirer or by any person acting in concert with him,
between the earlier of, the date on which the primary acquisition is
contracted, and the date on which the intention or the decision to
make the primary acquisition is announced in the public domain,
and the date of the public announcement of the open offer for
shares of the target company made under these regulations;
(e) the volume-weighted average market price of the shares for a
period of sixty trading days immediately preceding the earlier of,
the date on which the primary acquisition is contracted, and the
date on which the intention or the decision to make the primary
acquisition is announced in the public domain, as traded on the
stock exchange where the maximum volume of trading in the
shares of the target company are recorded during such period,
provided such shares are frequently traded; and
(f) the per share value computed under sub-regulation (5).
(4) In the event the offer price is incapable of being determined under any
of the parameters specified in sub regulation (3), without prejudice to
the requirements of sub-regulation (5), the offer price shall be the fair
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price of shares of the target company to be determined by the acquirer

and the manager to the open offer taking into account valuation
parameters including, book value, comparable trading multiples, and
such other parameters as are customary for valuation of shares of
such companies.
(5) In the case of an indirect acquisition and open offers under sub-
regulation (2) of regulation 5 where,–
(a) the proportionate net asset value of the target company as a
percentage of the consolidated net asset value of the entity or
business being acquired;
(b) the proportionate sales turnover of the target company as a
percentage of the consolidated sales turnover of the entity or
business being acquired; or
(c) the proportionate market capitalization of the target company as
a percentage of the enterprise value for the entity or business
being acquired; is in excess of fifteen per cent, on the basis of
the most recent audited annual financial statements, the acquirer
shall, notwithstanding anything contained in sub-regulation (2) or
sub-regulation (3), be required to compute and disclose, in the
letter of off , the per share value of the target company taken
into account for the acquisition, along with a detailed description
of the methodology adopted for such computation.
Explanation. – For the purposes of computing the percentages referred
to in clause (c) of this sub- regulation, the market capitalisation of the
target company shall be taken into account on the basis of the volume
weighted average market price of such shares on the stock exchange
for a period of sixty trading days preceding the earlier of, the date on
which the primary acquisition is contracted, and the date on which the
intention or the decision to make the primary acquisition is announced
in the public domain, as traded on the stock exchange where the
maximum volume of trading in the shares of the target company are
recorded during such period
(6) For the purposes of sub-regulation (2) and sub-regulation (3), where the
acquirer or any person acting in concert with him has any outstanding
convertible instruments convertible into shares of the target company
at a specific price,the price at which such instruments are to be
converted into shares, shall also be considered as a parameter under
sub-regulation (2) and sub-regulation (3).
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(7) For the purposes of sub-regulation (2) and sub-regulation (3), the
price paid for shares of the target company shall include any price
paid or agreed to be paid for the shares or voting rights in, or control
over the target company, in any form whatsoever, whether stated
in the agreement for acquisition of shares or in any incidental,
contemporaneous or collateral agreement, whether termed as control
premium or as non-compete fees or otherwise.
(8) Where the acquirer has acquired or agreed to acquire whether by
himself or through or with persons acting in concert with him any
shares or voting rights in the target company during the offer period,
whether by subscription or purchase, at a price higher than the offer
price, the offer price shall stand revised to the highest price paid or
payable for any such acquisition. However, no such acquisition shall
be made after the third working day prior to the commencement of
the tendering period and until the expiry of the tendering period.
(9) The price parameters under sub-regulation (2) and sub-regulation (3)
may be adjusted by the acquirer in consultation with the manager to
the offer, for corporate actions such as issuances pursuant to rights
issue, bonus issue, stock consolidations, stock splits, payment of
dividend, de-mergers and reduction of capital, where the record date for
effecting such corporate actions falls prior to three working days before
the commencement of the tendering period. However, no adjustment
shall be made for dividend declared with a record date falling during
such period except where the dividend per share is more than fi per
cent higher than the average of the dividend per share paid during
the three fi years preceding the date of the public announcement.
(10) Where the acquirer or persons acting in concert with him acquires
shares of the target company during the period of twenty-six weeks
after the tendering period at a price higher than the offer price under
these regulations, the acquirer and persons acting in concert shall
pay the difference between the highest acquisition price and the offer
price, to all the shareholders whose shares were accepted in the open
offer, within sixty days from the date of such acquisition: However, this
provision shall not be applicable to acquisitions under another open
offer under these regulations or pursuant to the SEBI (Delisting of
Equity Shares) Regulations, 2009, or open market purchases made
in the ordinary course on the stock exchanges, not being negotiated
acquisition of shares of the target company whether by way of bulk
deals, block deals or in any other form.
120
(11) Where the open offer is subject to a minimum level of acceptances, the
acquirer may, subject to the other provisions of this regulation, indicate
a lower price, which will not be less than the price determined under
this regulation, for acquiring all the acceptances despite the acceptance
falling short of the indicated minimum level of acceptance, in the event
the open offer does not receive the minimum acceptance.
(12) In the case of any indirect acquisition, other than the indirect acquisition
referred in sub-regulation (2) of regulation 5, the offer price shall stand
enhanced by an amount equal to a sum determined at the rate of ten
per cent per annum for the period between the earlier of the date on
which the primary acquisition is contracted or the date on which the
intention or the decision to make the primary acquisition is announced
in the public domain, and the date of the detailed public statement,
provided such period is more than five working days.
(13) The offer price for partly paid up shares shall be computed as the
difference between the offer price and the amount due towards calls-
in-arrears including calls remaining unpaid with interest, if any, thereon.
(14) The offer price for equity shares carrying differential voting rights shall
be determined by the acquirer and the manager to the open offer with
full disclosure of justification for the price so determined, being set out
in the detailed public statement and the letter of offer. However, such
price shall not be lower than the amount determined by applying the
percentage rate of premium, if any, that the offer price for the equity
shares carrying full voting rights represents to the price parameter
computed under clause (d) of sub-regulation 2, or as the case may be,
clause (e) of sub-regulation 3, to the volume-weighted average market
price of the shares carrying differential voting rights for a period of sixty
trading days computed on the same terms as specified in the aforesaid
provisions, subject to shares carrying full voting rights and the shares
carrying differential voting rights, both being frequently traded shares.
(15) In the event of any of the price parameters contained in this regulation
not being available or denominated in Indian rupees, the conversion of
such amount into Indian rupees shall be effected at the exchange rate
as prevailing on the date preceding the date of public announcement
and the acquirer shall set out the source of such exchange rate in the
public announcement, the detailed public statement and the letter of
offer.
(16) For purposes of clause (e) of sub-regulation (2) and sub-regulation (4),
the SEBI may, at the expense of the acquirer, require valuation of the
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shares by an independent merchant banker other than the manager

to the open offer or an independent chartered accountant in practice
having a minimum experience of ten years.
FILING OF LETTER OF OFFER WITH THE SEBI

The Acquirer shall submit a draft letter of offer to the SEBI within 5 working
days from the date of detailed public statement along with a non-refundable
fee as applicable. [Regulation 16(1)] Simultaneously, a copy of the draft
letter of offer shall be send to the Target Company at its registered office
and to all the Stock Exchanges where the shares of the Company are listed.
[Regulation 18(1)]
Sr. No. Consideration payable Fees (Rs.)

under the Open Offer
1. Up to ten crore rupees Five lakh rupees (Rs. 5,00,000)
2. More than ten crore rupees 0.5 per cent of the offer size
but less than or equal to one
thousand crore rupees
3. More than one thousand crore F i v e c r o r e r u p e e s ( R s .
rupees 5,00,00,000) plus 0.125 per cent
of the portion of the offer size in
excess of one thousand crore
rupees (1000,00,00,000)
The consideration payable under the open offer shall be calculated at the offer
price, assuming full acceptance of the open offer, and in the event the open
offer is subject to differential pricing, shall be computed at the highest offer
price, irrespective of manner of payment of the consideration.
However in the event of consideration payable under the open offer being
enhanced owing to a revision to the offer price or offer size the fees payable
shall stand revised accordingly, and shall be paid within five working days
from the date of such revision.
DISPATCH OF LETTER OF OFFER

The Acquirer shall ensure that the letter of offer is dispatched to the
shareholders whose names appear on the register of members of the Target
Company as of the identified date, not later than 7 working days from the
date of receipt of communication of comments from the SEBI or where no
comments are offered by the SEBI, within 7 working days from the expiry of
15 working days from the date of receipt of draft letter of offer by SEBI.
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Explanation
I. Letter of offer may also be dispatched through electronic mode in
accordance with the provisions of Companies Act, 2013.
II. On receipt of a request from any shareholder to receive a copy of the
letter of offer in physical format, the same shall be provided.
III. The aforesaid shall be disclosed in the letter of offer.
Simultaneously with the dispatch of the letter of offer to Shareholders, the
acquirer shall send the letter of offer to the custodian of shares underlying
depository receipts, if any, of the target company. [Regulation 18(3)]
The target company shall furnish to the acquirer within two working days
from the identified date, a list of shareholders as per the register of members
of the target company containing names, addresses, shareholding and folio
number, in electronic form, wherever available, and a list of persons whose
applications, if any, for registration of transfer of shares are pending with
the target company. However, the acquirer shall reimburse reasonable costs
payable by the target company to external agencies in order to furnish such
information.
However, it is provided that where a shareholder holding less than 5% of the
voting rights of the Target Company is resident outside India and local laws or
regulations of such jurisdiction may expose the acquirer or the target company
to material risk of civil, regulatory or criminal liabilities in the event, then the
letter of offer in its final form were to be sent without material amendments or
modifications into such jurisdiction, then the acquirer may refrain from dispatch
of the letter of offer into such jurisdiction. [Regulation 18(2)]
OPENING OF THE OFFER

The tendering period shall start not later than 12 working days from date of
receipt of comments from SEBI and shall remain open for 10 working days.
[Regulation 18(8)] Shareholders who have tendered shares in acceptance of
the open offer shall not be entitled to withdraw such acceptance during the
tendering period. [Regulation 18(9)]
COMPLETION OF REQUIREMENTS
Within 10 working days from the last date of the tendering period, the acquirer
shall complete all requirements as prescribed under these regulations and other
applicable law relating to the Open Offer including payment of consideration
to the shareholders who have accepted the open offer. [Regulation 18(10)]
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PROCESS AT GLANCE
Opening of Escrow Account

Appointment of Merchant
Public Announcement - 2 working days prior to the
Banker prior to Public
depending on transaction date of the detailed public
Announcement (PA)
statement
Dispatch Letter of Offer -

Within 7 working days of Filing of Draft Letter of Offer
receiving comments from with SEBI and send a copy Detailed Public Statement –
SEBI or in case no to Target Company and within 5 working days from
comments are received Stock Exchanges within 5 the date of public
within 7 working days from working days from detailed announcement
expiry of 15 days from filing public statement
of the draft LoF.
Tendering Period :
Upward revision of Offer Recommendation of
Commencement - shall start
price, if any by Acquirer - Committee of Independent
not later than 12 working
prior to the commencement Directors to be published -at
days from date of receipt of
of the last 1 working day least two working days
comments from the Board
before the commencement before the commencement
and to remain open for 10
of the tendering period. of the tendering period
working days
Payment of consideration -
Post Offer Advertisement –
within 10 working days from Tendering Period to be
within 5 working days from
the last date of the tendering closed after 10 working days
closure of offer period
period
OBLIGATIONS ON FURTHER ACQUISITION

If the acquirer or persons acting in concert (PAC) with him acquires shares of
the target company during the period of 26 weeks after the tendering period
at a price higher than the offer price, then the acquirer and PAC shall pay the
difference between the highest acquisition price and the offer price, to all the
shareholders whose shares were accepted in the open offer, within 60 days
from the date of such acquisition.
However, such provisions shall not be applicable if the acquisition is made
through another open offer under these regulations or pursuant to the SEBI
(Delisting of Equity Shares) Regulations, 2009 or open market purchase in
the ordinary course on the stock exchange not being negotiated acquisition
of shares of the target company whether by way of bulk deals, block deals
or in any other form. [Regulation 8(10)]
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COMPLETION OF ACQUISITION
The acquirer shall not complete the acquisition of shares or voting rights in,
or control over, the target company, whether by way of subscription to shares
or a purchase of shares attracting the obligation to make an open offer for
acquiring shares, until the expiry of the offer period, provided that in case of an
offer made under sub-regulation (1) of regulation 20, pursuant to a preferential
allotment, the offer shall be completed within the period as provided under
sub-regulation (1) of regulation 17 of Securities and Exchange Board of India
(Issue of Capital and Disclosure) Regulations, 2018.
In case of a delisting offer made under regulation 5A, the acquirer shall
complete the acquisition of shares attracting the obligation to make an offer
for acquiring shares in terms of regulations 3, 4 or 5, only after making the
public announcement regarding the success of the delisting proposal made
in terms of sub-regulation (1) regulation 18 of Securities and Exchange Board
of India (Delisting of Equity Shares) Regulations, 2009.
EXCEPTION TO ABOVE:
Subject to the acquirer depositing in the escrow account, cash of an amount
equal to the entire consideration payable under the open offer assuming full
acceptance of the open offer, the parties to such agreement may after the
expiry of twenty-one working days from the date of detailed public statement,
act upon the agreement and the acquirer may complete the acquisition of
shares or voting rights in, or control over the target company as contemplated.
An acquirer may acquire shares of the target company through preferential
issue or through the stock exchange settlement process subject to such shares
being kept in an escrow account. The acquirer shall not exercise any voting
rights on the shares kept in the escrow account.
DISCLOSURES FOR ACQUISITION DURING OFFER PERIOD

The acquirer shall disclose during the offer period every acquisition made by
the acquirer or persons acting in concert with him of any shares of the target
company in such form as may be specified, to each of the stock exchanges on
which the shares of the target company are listed and to the target company
at its registered office within twenty-four hours of such acquisition, and the
stock exchanges shall forthwith disseminate such information to the public.
However the acquirer and persons acting in concert with him shall not acquire
or sell any shares of the target company during the period between three
working days prior to the commencement of the tendering period and until
the expiry of the tendering period.
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PAYMENT OF INTEREST IN CASE OF DELAY

In case the acquirer is unable to make payment to the shareholders who have
accepted the open offer within such period, the acquirer shall pay interest
for the period of delay to all such shareholders whose shares have been
accepted in the open offer, at the rate of ten per cent per annum. However,
in case the delay was not attributable to any act of omission or commission
of the acquirer, or due to the reasons or circumstances beyond the control of
acquirer, the Board may grant waiver from the payment of interest. Provided
further that the payment of interest would be without prejudice to the SEBI
taking any action under regulation 32 of these regulation or under the Act
[Regulation 18(11A)].
PROVISION OF ESCROW
Not later than two working days prior to the date of the detailed public
statement of the open offer for acquiring shares, the acquirer shall create
an escrow account towards security for performance of his obligations under
these regulations, and deposit in escrow account such aggregate amount as
per the following scale:
On first Rs. 500 Cr On balance consideration after initial Rs. 500 Cr
An additional amount equal to ten
An amount equal to 25% of the
per cent of the balance
consideration
consideration.
Requirement for Conditional Offer

However, where an open offer is made conditional upon minimum level
of acceptance, hundred percent of the consideration payable in respect of
minimum level of acceptance or fifty per cent of the consideration payable
under the open offer, whichever is higher, shall be deposited in cash in the
escrow account.
100% payable
under minimum
acceptance
Higher shall be condition
deposited in case in
escrow account
50% payable under
open offer
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Requirement for Indirect Acquisition

In case of indirect acquisitions where public announcement has been made in
terms of clause (e) of sub-regulation (2) of regulation 13 of these regulations,
i.e., indirect acquisition where none of the parameters of Regulation 5 (2) are
met, an amount equivalent to hundred per cent of the consideration payable
in the open offer shall be deposited in the escrow account.
The escrow account may be kept in following form –
l Bank guarantee in favour of manager
l Cash deposited in bank
l Deposit of tradeable securities
Forfeiture of Escrow Account

In the event of non-fulfilment of obligations under these regulations by the
acquirer the Board may direct the manager to the open offer to forfeit the
escrow account or any amounts lying in the special escrow account, either
in full or in part.
MODE OF PAYMENT
Payment Mode
Cash Issue, exchange or issue, exchange or

Issue, exchange or transfer of listed transfer of
transfer of listed convertible debt Combination
secured debt of above
shares in the equity instruments issued by securities of
shares of acquirer acquirer acquirer
Certain case requires only cash mode payment

However, where any shares have been acquired or agreed to be acquired
by the acquirer and persons acting in concert with him during the fifty-two
weeks immediately preceding the date of public announcement constitute
more than ten per cent of the voting rights in the target company and has
been paid for in cash, the open offer shall entail an option to the shareholders
to require payment of the offer price in cash, and a shareholder who has
not exercised an option in his acceptance shall be deemed to have opted
for receiving the offer price in cash.
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WITHDRAWAL OF OPEN OFFER

An open offer for acquiring shares once made shall not be withdrawn except
under any of the following circumstances,–
a. statutory approvals required for the open offer or for effecting the
acquisitions attracting the obligation to make an open offer under these
regulations having been finally refused, subject to such requirements
for approval having been specifically disclosed in the detailed public
statement and the letter of offer;
b. the acquirer, being a natural person, has died;
c. any condition stipulated in the agreement for acquisition attracting the
obligation to make the open offer is not met for reasons outside the
reasonable control of the acquirer, then it should be disclosed in the
detailed public statement and the letter of offer; or
However, an acquirer shall not withdraw an open offer pursuant to a
public announcement made under clause (g) of sub-regulation (2) of
regulation 13, i.e., relating to preferential issue, even if the proposed
acquisition through the preferential issue is not successful.
d. such circumstances as in the opinion of the SEBI, merit withdrawal.
SEBI shall pass a reasoned order permitting withdrawal and such order shall
be listed by SEBI on its official website.
Obligations on withdrawal of offer

In the event of withdrawal of the open offer, the acquirer shall through the
manager to the open offer, within two working days, –
(a) make an announcement in the same newspapers in which the public
announcement of the open offer was published, providing the grounds
and reasons for withdrawal of the open offer; and
(b) simultaneously with the announcement, inform in writing to,–
i. SEBI;
ii. all the stock exchanges on which the shares of the target company
are listed, and the stock exchanges shall forthwith disseminate
such information to the public; and
iii. the target company at its registered office. [Regulation 23]
128
OBLIGATIONS OBLIGATIONS OF OBLIGATIONS OF

OF THE TARGET THE ACQUIRER THE MANAGER TO
COMPANY THE OPEN OFFER
1. Upon a public 1. Prior to making the 1. Prior to public
announcement of an public announcement announcement being
open offer for acquiring of an open offer for made, the manager
shares of a target acquiring shares under to the open offer shall
company being made, these regulations, the ensure that,— (a) the
the board of directors acquirer shall ensure acquirer is able to
of such target company that firm financial implement the open
shall ensure that during arrangements have o ff e r ; a n d ( b ) f i r m
the offer period, the been made for fulfilling arrangements for funds
business of the target the payment obligations through verifiable means
company is conducted under the open offer have been made by
in the ordinary course and that the acquirer is the acquirer to meet
consistent with past able to implement the the payment obligations
practice. open offer, subject to under the open offer.
any statutory approvals
2. During the offer period, 2. The manager to the
for the open offer that
unless the approval open offer shall ensure
may be necessary.
of shareholders of the that the contents of the
target company by way 2. In the event the public announcement,
of a special resolution a c q u i r e r h a s n o t the detailed public
b y p o s t a l b a l l o t i s declared an intention statement and the letter
obtained, the board of in the detailed public of offer and the post-
directors of either the statement and the letter offer advertisement are
target company or any of offer to alienate any true, fair and adequate
of its subsidiaries shall material assets of the in all material aspects,
not,– target company or of not misleading in any
any of its subsidiaries m a t e r i a l p a r t i c u l a r,
a. a l i e n a t e a n y
whether by way of sale, are based on reliable
material assets
lease, encumbrance sources, state the source
whether by way
or otherwise outside wherever necessary,
of sale, lease,
the ordinary course of and are in compliance
encumbrance or
business, the acquirer, with the requirements
otherwise or enter
where he has acquired under these regulations.
into any agreement
control over the target
therefore outside 3. The manager to the
c o m p a n y, s h a l l b e
the ordinary course open offer shall furnish
debarred from causing
of business; to the Board a due
such alienation for a
diligence certificate
b. effect any material period of two years after
along with the draft
borrowings outside the offer period.
letter of offer filed under
the ordinary course
regulation 16.
of business;
129
c. issue or allot any However, in the event 4. The manager to

authorised but the target company or the open offer shall
unissued securities any of its subsidiaries is ensure that market
entitling the holder required to so alienate intermediaries engaged
to voting rights. assets despite the for the purposes of the
However, the target intention to alienate not open offer are registered
company or its having been expressed with the Board.
subsidiaries may, – by the acquirer, such
5. The manager to the
alienation shall require
i. issue or allot open offer shall exercise
a special resolution
shares upon diligence, care and
passed by shareholders
conversion of professional judgment
of the target company,
convertible to ensure compliance
by way of a postal ballot
securities issued with these regulations.
and the notice for such
prior to the public
postal ballot shall inter 6. The manager to the
announcement
alia contain reasons as open offer shall not deal
of the open off ,in
to why such alienation is on his own account in
accordance with
necessary. the shares of the target
pre-determined
company during the
terms of such 3 . T h e a c q u i r e r
offer period.
conversion; shall ensure that
the contents of the 7. The manager to the
ii. issue or allot
public announcement, open offer shall file a
shares pursuant
the detailed public report with the Board
to any public
statement, the letter within fifteen working
issue in respect
of off and the post-off days from the expiry of
of which the
advertisement are true, the tendering period, in
red herring
fair and adequate in all such form as may be
prospectus has
material aspects and specified, confirming
been filed with
not misleading in any status of completion
the Registrar of
material particular, and of various open offer
Companies prior
are based on reliable requirements.
to the public
sources, and state
announcement
the source wherever
of the open offer;
necessary.
or
4. The acquirer and
iii. issue or allot
persons acting in
shares pursuant
concert with him shall
to any rights
not sell shares of the
issue in respect
target company held by
of which the
them, during the offer
record date has
period.
been announced
130
prior to the public 5. The acquirer and

announcement p e r s o n s a c t i n g i n
of the open offer; concert with him shall
be jointly and severally
3. In any general
responsible for fulfilment
meeting of a subsidiary
of applicable obligations
of the target company
under these regulations.
in respect of the
matters referred to in
sub-regulation (2), the
target company and
its subsidiaries, if any,
shall vote in a manner
consistent with the
special resolution passed
by the shareholders of
the target company.
4. The target company
shall be prohibited from
fixing any record date
for a corporate action
on or after the third
working day prior to the
commencement of the
tendering period and
until the expiry of the
tendering period.
5. The target company
shall furnish to the
acquirer within two
working days from the
identified date, a list of
shareholders as per the
register of members
containing names,
addresses, shareholding
and folio number, in
electronic form,
wherever available, and
a list of persons whose
applications, if any, for
registration of transfer of
131
shares are pending with

the target company.
6. Upon receipt of
the detailed public
statement, the board
of directors of the
target company shall
constitute a committee
of independent directors
to provide reasoned
recommendations on
such open offer, and
the target company
shall publish such
recommendations.
However, such
committee shall
be entitled to seek
external professional
advice at the expense
of the target company.
Provided further that
while providing reasoned
recommendations on the
open offer proposal, the
committee shall disclose
the voting pattern of the
meeting in which the
open offer proposal was
discussed.
7. The committee of
shall provide its
written reasoned
recommendations on
the open offer to the
shareholders of the
target company and
such recommendations
shall be published in
such form as may be
specified, at least two
working days before
132
the commencement
of the tendering
period, in the same
newspapers where the
public announcement
of the open offer was
published
8. The board of directors
shall facilitate the
acquirer in verification
of shares tendered in
acceptance of the open
offer.
9. The board of directors
shall make available
to all acquirers making
competing offers, any
information and co-
operation provided to
any acquirer who has
made a competing
offer.
10. Upon fulfilment by
the acquirer, of the
conditions required
under these regulations,
the board of directors
shall without any delay
register the transfer
of shares acquired by
the acquirer in physical
form, whether under
the agreement or from
open market purchases,
or pursuant to the open
offer.
133
DISCLOSURES
In the SEBI Takeover Regulations, 2011, the obligation to give the disclosures
on the acquisition of certain limits, is only on the acquirer and not on the
Target Company. Further as against the Open Offer obligations where the
individual shareholding is also to be considered, the disclosure shall be of
the aggregated shareholding and voting rights of the acquirer or promoter of
the target company or every person acting in concert with him.
EVENT BASED DISCLOSURES
Regulation Made By Trigger Time Period Made to

Regulation Acquirer Acquirer + persons Within two Every Stock
29(1) acting in concert (PAC) working days Exchange
acquiring 5% or more of of the receipt where the
the shares or voting rights of intimation shares of
of the target company of allotment of the target
shall disclose to their shares, or the company are
aggregate shareholding acquisition or listed and
and voting rights in such the disposal the target
target company. of shares or company at
This disclosure is like an voting rights its registered
initial disclosure which is in the target office.
required to be given on company.
acquiring 5% or more
shares or voting rights of
Target Company.
Further in case of listed
entity which has listed
its specified securities
on Innovators Growth
Platform, any reference
to “five per cent” shall be
read as “ten per cent”.
Regulation Acquirer Any person + persons Within two Every Stock
29(2) acting in concert (PAC), working days E x c h a n
holds shares or voting of the receipt g e where
rights entitling them to of intimation the shares
five per cent or more of of allotment of of the target
the shares or voting rights shares or the company are
in a target company, shall acquisition or listed and
disclose the number of the disposal the target
shares or voting rights of shares or company at
held and change in voting rights its registered
shareholding or voting in the target office.
rights, even if such change company.
134
results in shareholding
falling below five percent,
if there has been change
in such holdings from
the last disclosure made
under sub-regulation (1) or
under this subregulation;
and such change
exceeds two per cent
of total shareholding or
voting rights in the target
company.
Further in case of listed
entity which has listed
its specified securities
on Innovators Growth
Platform, any reference
to “five per cent” shall
be read as “ten per cent”
and any reference to “two
per cent” shall be read as
“five per cent”.
CONTINUAL DISCLOSURES / YEARLY DISCLOSURES
Regulation Trigger Time Period Made to

R e g u l a t i o n Every Person + PAC Within 7 working days Every Stock Exchange
30(1) holding more than from the financial year where the shares of
25% shares or voting ending 31st March the target company
rights in a target every year. are listed and the
company to disclose target company at its
their aggregate registered office.
shareholding and
voting rights as on
31st March.
Regulation P r o m o t e r P A C Within 7 working days Every stock exchange
30(2) disclose their from the financial year where the shares of
a g g r e g a t e ending 31st March the target company
shareholding and every year. are listed and the
voting rights as of target company at its
the 31st March, in registered office.
such target company.
This disclosure is to
be made irrespective
of the holding of
Promoters + PAC.
135
DISCLOSURES OF ENCUMBERED SHARES
Regulation Who will Trigger Time Period Made to

make
Regulation Promoter Promoter + Within 7 working Every Stock

31(1) PA C c r e a t i n g days from exchange where
encumbrance on the creation the shares are
the shares of the or invocation listed
target company. or release of
encumbrance as
the case may be.
Regulation Promoter Invocation of such Within 7 working Every Stock

31(2) encumbrance or days from exchange where
release of such the creation the shares are
encumbrances of or invocation listed
the shares of the or release of
target company. encumbrance as
the case may be.
Regulation Promoter Promoter + PAC Within 7 working Every Stock

31(4) shall declare on days from the exchange where
a yearly basis that financial year the shares are
he, along with ending 31st listed and the
persons acting March every year. Audit Committee
in concert, has o f t h e Ta r g e t
not made any Company.
encumbrance,
directly or
indirectly, other
than those already
disclosed during
the financial year.
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Chapter 5
SEBI (Delisting of Equity Shares)
Regulations, 2021
INTRODUCTION
Listing means admission of a Company’s securities to the trading platform of
a Stock Exchange, so as to provide marketability and liquidity to the security
holders.
“Delisting” which is totally the reverse of listing denotes removal of the

securities of a listed company from the platform of Stock Exchange.
Delisting is different from suspension or withdrawal of admission to dealings
of listed securities, which is for a limited period.
The Companies choose to list themselves to grab the advantages of listing

viz, lower cost of capital, greater shareholder base, liquidity in trading of
shares, prestige etc. But the companies need to be contended that the
benefits of listing outweigh the listing costs, the compliance requirements
do not overburden the companies and do not expose them to disciplinary
actions.
Whereas, ‘Suspension’ of trading in securities means that no trade can take
place in the securities of the company suspended for a temporary period.
Suspension is not done at the instance of company but it is action taken by the
Stock Exchanges against the company, generally for non-compliance of listing
conditions as stipulated under the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 (LODR Regulations) for which the Stock
exchanges may impose fines or freeze promoter/promoter group holding of
designated securities, as may be applicable in coordination with depositories.
Once, the company makes good the compliance of the listing conditions under
the LODR Regulations, stock exchange withdraws the suspension and permits
trading. On the other hand, ‘delisting’ of securities means removal of the name
of the company from the stock exchange and no trade can take place in the
securities of the company delisted.
137
Delisting of securities can be done either by company voluntarily or by the

stock exchange, compulsorily. Generally, stock exchange, in order to impose
severe punishment on companies compulsorily delists securities of a company,
as a last resort. Compulsory delisting affects reputation of company and the
extent of liquidity in trading those shares.
APPLICABILITY (REGULATION 3)
These regulations shall be applicable to delisting of equity shares of a company
including equity shares having superior voting rights from all or any of the
recognized stock exchanges where such shares are listed.
NON-APPLICABILITY
These regulations shall not be applicable to :–
l securities
listed and traded on the innovators growth platform of a
recognised stock exchange, without making a public issue;
l anydelisting of equity shares of a listed entity made pursuant to a

resolution plan approved under section 31 of the Insolvency Code, if
such plan, –
(a) provides for delisting of such share; or
(b) provides an exit opportunity to the existing public shareholders

at a specified price.
138
However, the existing public shareholders shall be provided an exit opportunity

at a price which shall not be less than the price, by whatever name called, at
which a promoter or any entity belonging to the promoter group or any other
shareholder, directly or indirectly, is provided an exit opportunity:
Provided also that, the details of delisting of such shares along with the
justification for exit price in respect of delisting proposed shall be disclosed
to the recognized stock exchanges within one day of resolution plan being
approved under section 31 of the Insolvency Code.
CONDITIONS FOR DELISTING
Regulation 4 provides that neither any company shall apply for nor any
recognised stock exchange shall permit delisting of equity shares of a
company.
Pursuant to Buy-back of equity shares by the company (Unless a period of 6 months has lapsed from
the date of completion of such buyback)
Pursuant to Preferential allotment made by the company (Unless a period of 6 months

has lapsed from the date of completion of such allotment)
Unless a period of three years has elapsed since the listing of that class of equity
shares
Instruments which are convertible into the same class of equity shares that are sought to be
delisted are outstanding
No acquirer shall directly or indirectly employ the funds of the company to finance an exit
opportunity or an acquisition of shares made pursuant to delisting provided under these
regulation
An acquirer shall not propose delisting of equity shares of a company, if the acquirer had sold
equity shares of the company during the a period of six months prior to the date of the initial
public announcement
No acquirer shall, directly or indirectly-

• Employ any device, scheme or artifice to defraud any shareholder or other person; or
• Engage in any transaction or practice that operates as a fraud or deceit
• Engage in any act or practice that is fraudulent, deceptive or manipulative in connection with
shareholder or other person; or any delisting of equity shares.
139
VOLUNTARY DELISTING
“Voluntary Delisting” means the delisting of equity shares of a company
voluntarily on an application made by the company under Chapter III of these
regulations. In voluntary delisting, the promoters of the listed company decides
on their own to permanently remove its securities from a stock exchange.
Conditions and procedure for delisting where exit opportunity is not

required
Regulation 5 of SEBI (Delisting of Equity Shares) Regulations, 2021 provides
that a company may delist its equity shares from one or more of the recognised
stock exchanges on which it is listed without providing an exit opportunity
to the public shareholders, if after the proposed delisting, the equity shares
remain listed on any recognised stock exchange that has nationwide trading
terminals. Any company desirous of delisting its equity shares where no exit
opportunity is required shall:
l obtain the prior approval of its Board of Directors
l make an application to the relevant recognised stock exchange for
delisting its equity shares
l issue a public notice of the proposed delisting in at least one English
national newspaper, one Hindi national newspaper with wide circulation
in their all India editions and one vernacular newspaper of the region
where the relevant stock exchange is located
l disclose the fact of delisting in its first annual report post delisting
l an application for delisting shall be disposed of by the recognised stock
exchange within a period not exceeding thirty working days from the
date of receipt of such application that is complete in all respects
Conditions and procedure for delisting where exit opportunity is required

Regulation 7 provides that the equity shares of a company may be delisted
from all the recognised stock exchanges having nationwide trading terminals
on which they are listed, after an exit opportunity has been provided by the
acquirer to all the public shareholders holding the equity shares sought to be
delisted, in accordance with Chapter IV of these regulations.
Initial public announcement (Regulation 8)

On the date when the acquirer decides to voluntarily delist the equity shares
of the company, it shall make an initial public announcement to all the stock
140
exchanges on which the shares of the company are listed and the stock
exchanges shall forthwith disseminate the same to the public. A copy of
the initial public announcement shall also be sent to the company at its
registered office not later than one working day from the date of the initial
public announcement.
The initial public announcement shall contain:—
(a) the reasons for delisting;
(b) an undertaking with respect to compliance with regulations 4(2) and
4(5) of these regulations;
(c) the initial public announcement shall not omit any relevant information
or contain any misleading information.
Appointment of the manager to the offer (Regulation 9)

Prior to making an initial public announcement, the acquirer shall appoint a
merchant banker registered with the SEBI as the Manager to the offer. The
Manager to the offer shall not be an associate of the acquirer.
The initial public announcement and the subsequent activities as required
under these regulations shall be undertaken by the acquirer through the
Manager to the offer.
Obligation of the manager to the offer (Regulation 29)

Before making the detailed public announcement, the Manager to the offer
for delisting of equity shares shall ensure that, —
l the acquirer is able to implement the delisting offer.
l firm arrangements for funds through verifiable means have been made
by the acquirer to meet the payment obligations under the delisting
offer.
l the contents of the initial public announcement, the detailed public
announcement, the letter of offer and the post-bidding advertisement(s)
are complete, true, fair and adequate in all material market
intermediaries engaged for the purpose of the delisting of equity shares
are registered with the SEBI.
l the Manager to the offer shall exercise due diligence, care and
professional judgment to ensure compliance with these regulations.
l the Manager to the offer shall not, either directly or indirectly through
141
its associates, deal in its own account in the shares of the company
after its appointment as Manager to the offer till the conclusion of the
delisting offer.
l the Manager to the offer to ensure that the acquirer complies with the
provisions of these regulations. aspects, based on reliable sources
and are in compliance with the requirements under these regulations
and other applicable securities laws.
Approval by the Board of Directors (Regulation 10)

The company shall obtain the approval of its Board of Directors in respect of
the proposal, not later than twenty one days from the date of the initial public
announcement.
The Board of Directors of the company, while considering the proposal for
delisting, shall certify that—
a. the company is in compliance with the applicable provisions of
securities laws;
b. the acquirer and its related entities are in compliance with the applicable
provisions of securities laws in terms of the Company Secretary
including compliance with sub-regulation (5) of regulation 4 of these
regulations;
c. the delisting, in their opinion, is in the interest of the shareholders of
the company.
While communicating the decision of the Board of Directors on the proposal
for delisting of equity shares, the company shall also submit to the recognized
stock exchanges on which the equity shares of the company are listed, the
due - diligence report of the Company Secretary and the audit report as per
regulation 76 of the SEBI (Depositories and Participants) Regulations, 2018.
Upon receipt of the above mentioned communication from the company, the
stock exchanges shall forthwith disseminate the same to the public.
Appointment of peer reviewer Company Secretary to carry out the Due-

Diligence
The Board of Directors of the company, before considering the proposal of
delisting, shall appoint a Peer Reviewer Company Secretary and provide
the following information to such Company Secretary for carrying out due
diligence: -
142
a. the details of buying, selling and dealing in the equity shares of the
company by the acquirer or its related entities during the period of two
years prior to the date of board meeting held to consider the proposal
for delisting, including the details of the top twenty five shareholders,
for the said period;
b. the details of off-market transactions of all the shareholders mentioned
in clause (a) for a period of two years;
c. any additional information if the Company Secretary is of the opinion
that the information provided under clauses (a) and (b) is not sufficient
for providing the certification.
After obtaining the information from the Board of Directors of the company,
the Company Secretary shall carry out the due-diligence and submit a report
to the Board of Directors of the company certifying that the buying, selling
and dealing in the equity shares of the company carried out by the acquirer
or its related entities and the top twenty five shareholders is in compliance
with the applicable provisions of securities laws including these regulations.
Approval by shareholders (Regulation 11)

The company shall obtain the approval of the shareholders through a special
resolution, not later than forty five days from the date of obtaining the approval
of Board of Directors. The special resolution shall be passed through postal
ballot and / or e-voting as per the applicable provisions of the Companies Act,
2013 and the rules made thereunder. The company shall disclose all material
facts in the explanatory statement sent to the shareholders in relation to such
a resolution.
Note: The special resolution shall be acted upon only if the votes cast by
the public shareholders in favour of the proposal are at least two times the
number of votes cast by the public shareholders against it.
In-principle approval of the stock exchange (Regulation 12)

The company shall make an application to the relevant recognised stock
exchange for in-principle approval of the proposed delisting of its equity
shares in the Form specified, not later than fifteen working days from the
date of passing of the special resolution or receipt of any other statutory or
regulatory approval, whichever is later. The application seeking in-principle
approval for the delisting of equity shares shall be accompanied by an
audit report as required under regulation 76 of the SEBI (Depositories and
Participants) Regulations, 2018 in respect of the equity shares sought to be
143
delisted, covering a period of six months prior to the date of the application.
Such application seeking in-principle approval for the delisting of the equity
shares shall be disposed of by the recognised stock exchange within a period
not exceeding, fifteen working days from the date of receipt of such application
that is complete in all respects.
Escrow account (Regulation 14)

The acquirer shall open an interest bearing escrow account with a Scheduled
Commercial Bank, not later than seven working days from the date of obtaining
the shareholders’ approval, and deposit therein an amount equivalent to twenty
five percent of the total consideration, calculated on the basis of the number
of equity shares outstanding with the public shareholders multiplied with the
floor price or the indicative price, if any given by the acquirer in terms of these
regulations, whichever is higher.
The acquirer shall enter into a tripartite agreement with the Manager to
the offer and the Bank for the purpose of opening the escrow account and
shall authorize the Manager to the offer to operate such account as per the
provisions of these regulations.
Before making the detailed public announcement, the acquirer shall deposit
in the escrow account, the remaining consideration amount being seventy five
percent calculated on the basis of the number of equity shares outstanding
with the public shareholders multiplied with the floor price or the indicative
price, if any given by the acquirer in terms of these regulations, whichever
is higher. On determination of the discovered price and making of the public
announcement accepting the discovered price, the acquirer shall forthwith
deposit in the escrow account such additional sum as may be sufficient to
make up the entire sum due and payable as consideration in respect of equity
shares outstanding with the public shareholders.
In case of failure of the delisting offer, ninety nine percent of the amount lying
in the escrow account shall be released to the acquirer within one working
day from the date of public announcement of such failure. The remaining one
percent amount lying in the escrow account shall be released post return of the
shares to the public shareholders or confirmation of revocation of lien marked
on their shares by the Manager to the offer as per the timelines provided in
these regulations
Detailed public announcement (Regulation 15)

The acquirer shall, within one working day from the date of receipt of in-
principle approval for delisting of equity shares from the recognised stock
144
exchange, make a detailed public announcement in at least one English

national newspaper with wide circulation, one Hindi national newspaper with
wide circulation in their all India editions and one vernacular newspaper of the
region where the relevant recognised stock exchange is located.
The detailed public announcement shall contain all material information
including the information specified in Schedule I of these regulations and shall
not contain any false or misleading statement.
The detailed public announcement shall also specify a date, being a day not
later than one working day from the date of the detailed public announcement,
which shall be the ‘specified date’ for determining the names of the
shareholders to whom the letter of offer shall be sent. The detailed public
announcement shall be dated and signed by the acquirer.
Letter of offer (Regulation 16)

The acquirer shall dispatch the letter of offer to the public shareholders not
later than two working days from the date of the detailed public announcement
made. The letter of offer shall be sent to all public shareholders, holding
equity shares of the class sought to be delisted, whose names appear on the
register of the company or depository as on the date specified in the detailed
public announcement.
A copy of the letter of offer shall also be made available on the websites
of the company and the Manager to the offer for the benefit of the public
shareholders. The letter of offer shall contain all the disclosures made in the
detailed public announcement and such other disclosures as may be necessary
for the shareholders to take an informed decision.
Bidding mechanism (Regulation 17)

The bidding period shall start not later than seven working days from the date
of the detailed public announcement and shall remain open for five working
days. The acquirer shall facilitate tendering of shares by the shareholders and
settlement of the same, through the stock exchange mechanism as specified
by the SEBI.
The Manager to the offer shall ensure that the outcome of the reverse book
building process is announced within two hours of the closure of the bidding
period. Within two working days from the closure of the bidding period, the
acquirer shall, through the Manager to the offer, make a public announcement
in the same newspapers in which the detailed public announcement was made,
disclosing the success or failure of the reverse book building process, along
145
with the discovered price accepted by the acquirer in the event of success
of the said process.
Manner of tendering shares (Regulation 18)

The equity shares shall be tendered/offered by the public shareholders,
including by way of marking a lien through the stock exchange mechanism,
in the manner specified by the SEBI.
Right of shareholders to participate in the reverse book building process

(Regulation 19)
Public shareholders holding the equity shares of the company, which are
sought to be delisted, shall be entitled to participate in the reverse book
building process in the manner specified in Schedule II of these regulations.
The Manager to the issue shall take necessary steps to ensure compliance
with the same.
Any holder of depository receipts issued on the basis of underlying equity
shares and a custodian keeping custody of such equity shares shall not be
entitled to participate in the reverse book building process.
However, any holder of depository receipts may participate in the reverse book
building process after converting such depository receipts into equity shares
of the company that are proposed to be delisted.
Discovered price (Regulation 20)

The floor price shall be determined in terms of regulation 8 of Takeover
Regulations as may be applicable. After fixation of the floor price, the
discovered price shall be determined through the reverse book building process
in the manner specified in Schedule II of these regulations, and the Manager
to the offer shall disclose the same in the detailed public announcement and
the letter of offer.
The acquirer shall have the option to provide an indicative price in respect of
the delisting offer, which shall be higher than the floor price. The acquirer shall
also have the option to revise the indicative price upwards before the start of
the bidding period and the same shall be duly disclosed to the shareholders.
The acquirer may, if it deems fit, pay a price higher than the discovered price.
Minimum number of equity shares to be acquired (Regulation 21)

An offer made or a counter offer made by the acquirer, as the case may be,
shall be deemed to be successful if,-
146
(a) the post offer promoter shareholding (along with the persons acting
in concert with the promoter) taken together with the shares accepted
through eligible bids at the final price determined, reaches 90% of the
total issued shares of that class excluding the following:
i. shares which are held by a custodian and against which depository
receipts have been issued overseas; and
ii. shares held by a Trust set up for implementing an Employee
Benefit scheme under the Securities and Exchange Board of
India (Share Based Employee Benefits) Regulations, 2014;
iii. shares held by inactive shareholders such as vanishing companies
and struck off companies, shares transferred to the Investor
Education and Protection Fund’s account and shares held in
terms of sub-regulation (4) of regulation 39 read with Schedule VI
of the Securities and Exchange Board of India (Listing Obligations
and Disclosure Requirements) Regulations 2015.
However, such shareholders shall be certified by the Peer Review Company
Secretary appointed by the Board of Directors of the company for due-
diligence.
Explanation,— The cut-off date for determination of inactive shareholders
shall be the date on which the in-principle approval of the Stock Exchange is
received, which shall be adequately disclosed in the public announcement.
Failure of offer (Regulation 23)

1) Where the delisting offer fails the equity shares tendered / offered as
the case may be, shall be released-
i. on the date of disclosure of the outcome of the reverse book
building process if the minimum number of shares are not
tendered / offered;
ii. on the date of making public announcement for the failure of the
delisting offer if the price discovered through the reverse book
building process is rejected by the acquirer;
iii. in accordance with Schedule IV of these regulations if a counter
offer has been made by the acquirer.
However, the acquirer shall not be required to return the shares if
the offer is made pursuant to regulation 5A of the SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011)
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2) Where the delisting offer fails

i. The expenses relating to the offer for delisting shall be borne by
the acquirer
ii. The acquirer, whose delisting offer has failed, shall not make
another delisting offer until the expiry of six months
Payment upon success of the offer (Regulation 24)

All the public shareholders, whose bids are accepted, shall be paid the
discovered price or a higher price, if any, offered by the acquirer, as stated
in the public announcement in the following manner –
I. In case the discovered price is equal to the floor price or the indicative
price or in case the acquirer is bound to accept the equity shares in
the delisting offer, the payment shall be made through the secondary
market settlement mechanism;
II. In case the discovered price or the price, if any, offered by the acquirer,
is higher than the floor price or the indicative price, as the case may
be, the payment shall be made within five working days from the date
of the public announcement.
The acquirer shall be liable to pay interest at the rate of ten percent per
annum to all the shareholders, whose bids have been accepted in the delisting
offer, if the price payable is not paid to all the shareholders within the time
specified thereunder.
However, in case the delay was not attributable to any act or omission of
the acquirer or was caused due to the circumstances beyond the control of
the acquirer, the SEBI may grant waiver from the payment of such interest.
Right of the remaining public shareholders to tender equity shares

(Regulation 26)
The remaining public shareholders, whose shares were either not accepted or
were not tendered at all during the bidding period, shall have a right to tender
their equity shares for a minimum period of 1 year from the date of delisting.
The acquirer shall be under an obligation during such period to accept the
shares of the remaining public shareholders, at the same price at which the
equity shares had been delisted.
The payment of consideration for equity shares accepted shall be made out
of the balance amount lying in the escrow account. The Manager to the offer
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shall ensure that the amount lying in the escrow account or the bank guarantee
shall not be released to the acquirer for a minimum period of one year or
till the time payment has been made to the remaining public shareholders,
whichever is earlier.
Cancellation of outstanding depository receipts (Regulation 31)

After delisting of equity shares from all the recognized stock exchanges having
nationwide trading terminals, the company shall be required to compulsorily
cancel all the outstanding depository receipts issued overseas and change
them into the underlying equity shares in the home jurisdiction after termination
of the depository receipts program(s), within 1 year of such delisting.
Upon receipt of the detailed public announcement,

the Board of Directors of the company shall constitute
a Committee of independent directors to provide
reasoned recommendations on the delisting offer.
The Committee of independent directors shall provide
its written reasoned recommendations on the proposal
for delisting of equity shares to the Board of Directors
of the company and in relation thereto, the Committee
may also seek external professional advice at the
OBLIGATIONS expense of the company.
OF THE The Committee of independent directors, while
COMPANY providing reasoned recommendations on the delisting
(REGULATION proposal, shall disclose the voting pattern of the
28) meeting in which the said proposal was discussed.
The company shall publish such recommendations of
the Committee of independent directors, along with the
details of the voting pattern, at least 2 working days
before the commencement of the bidding period, in
the same newspapers in which the detailed public
announcement of the offer for delisting of equity
shares was published, and simultaneously, a copy of
the same shall be sent to the stock exchange(s) and
the Manager to the offer.
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Prior to making the initial public announcement of the

offer for the delisting of equity shares, the acquirer
shall ensure that firm financial arrangements have
been made for fulfilling the payment obligations
under the delisting offer and that the acquirer is
able to implement the delisting offer, subject to any
statutory approvals for the delisting offer that may
be necessary.
The acquirer shall ensure that the contents of the

initial public announcement, the detailed public
announcement, the letter of offer and announcement
OBLIGATIONS about success or failure of the offer for delisting are
OF THE true, fair and adequate in all material aspects, not
ACQUIRER misleading and based on reliable sources that shall
(REGULATION be mentioned wherever necessary.
30)
The acquirer and the persons acting in concert with
it shall be jointly and severally responsible for the
fulfilment of the applicable obligations under these
regulations.
The acquirer shall ensure to acquire the shares offered

by the remaining public shareholders at the same price
at which the equity shares had been delisted for a
minimum period of one year.
No acquirer or persons acting in concert with it shall

sell shares of the company during the delisting period.
Procedure for voluntary delisting from all the stock exchanges
Initial Public Announcement [IPA] by the acquirer [Reg. 8]

Appointment of Manager prior to announcement [Reg. 9]
Approval by Board of Director [Reg. 10]
[Not later than 21 days from the date of IPA]
Approval by Shareholders [Reg. 11]
[Not later than 45 days of Board Resolution]
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Application to relevant recognised stock exchange for in-principle

approval of proposed delisting [Reg. 12]
[Not later than 15 days from the date of special Resolution OR receipt of
other regulatory approval whichever is later]
Opening of Escrow Account [Reg.14]
[Not later than 7 working days from the date of Special Resolution]
Detailed Public Announcement [Reg. 15]
[Within 1 working day of receipt of in-principle approval from recognised
stock exchange]
Dispatch of letter of offer [Reg. 16]
[Not later than 2 working days from the date of detailed public
announcement, to the public shareholders]
Commencement of Bidding Mechanism[Reg. 17]
[Not later than 7 working days from the date of detailed public
announcement-which shall remain open for 5 working days]
Discovered price shall be determined through Reverse book Building
[Reg. 20]
Counter offer by the acquirer [Reg.22]
[Within 2 working days of closure of bidding period]
Release of shares in case failure of offer[Reg. 23]
Payment to shareholders upon success of offer [Reg. 24]
Final Delisting Application to the stock exchange [Reg. 25]

[within in 5 working days from the date of making the payment to the
public shareholders]
Delisting by the stock exchange
COMPULSORY DELISTING
Compulsory delisting refers to permanent removal of securities of a listed
company from a stock exchange as a penalizing measure at the behest of the
stock exchange for not making submissions/comply with various requirements
set out in the Listing agreement within the time frames prescribed.
As per Regulation 32(1) a recognized stock exchange may, by a reasoned
order, delist any equity shares of a company on any ground prescribed in the
rules made under the Securities Contracts (Regulation) Act, 1956 .
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However, no order of compulsory delisting shall be issued unless the company

has been given a reasonable opportunity of being heard.
Constitution of Panel [Regulation 32(2)]
The decision regarding compulsory delisting shall be taken by a panel to be

constituted by the recognized stock exchange consisting of –
a. Two Directors of the recognized stock exchange (one of whom shall

be a public representative);
b. One representative of an investor association recognised by the SEBI;
c. One representative of the Ministry of Corporate Affairs or Registrar of

Companies; and
d. The Executive Director or Secretary of the recognized stock exchange.
Public notice before delisting order [Regulation 32(3)]
Before passing an order, the recognised stock exchange shall give a notice
in at least one English national newspaper with wide circulation, one Hindi
national newspaper with wide circulation in their all India editions and one
vernacular newspaper of the region where the relevant recognised stock
exchange is located, of the proposed delisting, giving a time period of not
less than fifteen working days from the date of such notice, within which
representations, if any, may be made to the recognised stock exchange by
any person aggrieved by the proposed delisting and shall also display such
notice on its trading systems and website.
Time period of making representation [Regulation 32(3)]
Time period of not less than fifteen working days from the date of such notice,
within which representations, if any, may be made to the recognised stock
exchange by any person aggrieved by the proposed delisting and shall also
display such notice on its trading systems and website.
Delisting Order by the Recognised Stock Exchange [Regulation 32 (4)]
The recognised stock exchange shall, while passing any order of compulsory
delisting, consider the representation, if any, made by the company and also
any representation received in response to the notice, and shall comply with
the guidelines provided in these regulations.
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GUIDELINES FOR COMPULSORY DELISTING

l The recognised stock exchange shall take into account the grounds
prescribed in the rules made under the Securities Contracts
(Regulation) Act, 1956 while compulsorily delisting the equity shares
of the company.
l The recognised stock exchange shall take all reasonable steps to trace
the promoters of a company whose equity shares are proposed to be
delisted.
l The recognised stock exchange shall consider the nature and extent
of the alleged non-compliance by the company and the number and
percentage of public shareholders who may be affected by such non-
compliance.
l The recognised stock exchange shall take reasonable efforts to verify
the status of compliance with the provisions of the Companies Act,
2013 and the rules and regulations made thereunder, by the company
with the office of the concerned Registrar of Companies.
l The names of the companies whose equity shares are proposed to be
delisted and their promoters shall be displayed in a separate section on
the website of the recognised stock exchange. If delisted, the names
shall be shifted to another separate section on the website.
l The recognised stock exchange shall in appropriate cases file
prosecutions under relevant provisions of the Securities Contracts
(Regulation) Act, 1956 or any other law for the time being in force
against identifiable promoters and directors of the company for the
alleged non-compliances.
l The recognised stock exchange shall, in appropriate cases, under
the applicable provisions of the Companies Act, 2013, file a petition
for winding up the company or make a request to the Registrar of
Companies to strike off the name of the company from the register.
Public notice after Delisting Order [Regulation 32 (5)]

Where the recognized stock exchange passes the delisting order, it shall, -
a. forthwith publish a notice in one English national newspaper with wide
circulation, one Hindi national newspaper with wide circulation in their
all India editions and one vernacular newspaper of the region where
the relevant recognised stock exchange is located. The following
disclosures are to be made in the notice –
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l The fact of such delisting;
l The name and address of the company;
l The fair value of the delisted equity shares; and
l The names and addresses of the promoters of the company who

would be liable under sub-regulation (4) of regulation 33 of these
regulations.
b. inform all other stock exchanges where the equity shares of the
company are listed, about such delisting; and
c. upload a copy of the said order on its website.
Rights of public shareholders in case of compulsory delisting (Regulation

33)
Where the equity shares of a company are compulsorily delisted by a

recognised stock exchange, the recognised stock exchange shall appoint an
independent valuer who shall determine the fair value of the delisted equity
shares.
The recognised stock exchange shall form a Panel of expert valuers and from
the said Panel, the valuer shall be appointed. The value of the delisted equity
shares shall be determined by the valuer as prescribed.
The promoter of the company shall acquire the delisted equity shares from the
public shareholders by paying them the value determined by the valuer, within
three months of the date of delisting from the recognised stock exchange,
subject to the option of the public shareholders to retain their shares.
The promoter shall be liable to pay interest at the rate of ten percent per
annum to all the shareholders, who offer their shares under the compulsory
delisting offer, if the price payable is not paid to all the shareholders within
the time specified.
Procedure for Compulsory Delisting
1. Constitution of Panel by Recognised stock exchange to take decision

regarding the compulsory delisting by the exchange.
2. Public notice of compulsory delisting by recognized stock exchange in

one English national, one Hindi national and one vernacular newspaper
of the region where the relevant recognized stock exchange is located.
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3. The recognised stock exchange shall give above mentioned notice

giving a time period of not less than 15 working days from the date
of such notice, within which representations may be made to the
recognised stock exchange by any person aggrieved by the proposed
delisting.
4. Delisting order by the recognized stock exchange.
5. Public notice after delisting order by recognized stock exchange in one

English national, one Hindi national and one vernacular newspaper of
the region where the relevant recognized stock exchanges is located,
of the fact of such delisting and information to all the stock exchanges
where the equity shares of the company listed and also on its website.
6. Appointment of independent Valuer.
7. Determination of the fair value of the delisted equity shares by the

Independent valuers appointed by the recognized stock exchange.
8. Acquisition of shares by the promoters from the public shareholders

at determined fair value.
9. Company/ whole-time directors/ persons responsible for ensuring

compliance with the securities laws/ Promoters can neither access
securities market nor seek listing for a period of 10 years.
Delisting of equity shares of small Companies (Regulation 35)
Equity shares of a company may be delisted from all the recognised stock
exchanges where they are listed, without following the procedure in Chapter
IV (Exit Opportunity) of these regulations, if,-
1. the company has a paid up capital not exceeding 10 crore rupees

and net worth not exceeding 25 crore rupees as on the last date of
preceding financial year.
2. the company has not been suspended by any of the recognised stock
exchanges having nationwide trading terminals for any noncompliance
in the preceding one year.
3. the number of equity shares of the company traded on each such

recognised stock exchange during the 12 calendar months immediately
receding the date of board meeting held for consideration of the
proposal of delisting, is less than 10% of the total number of shares
of the company.
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Delisting of equity shares may be made if, in addition to fulfilment of

the requirements of regulation 10 (Approval by the Board of Directors)
and regulation 11 (Approval by shareholders), the following conditions
are fulfilled:-
a. acquirer appoints a Manager to the offer and decides an exit price
after consultation;
b. the exit price offered to the public shareholders shall not be less than
the floor price determined in terms of clause (e) of sub-regulation (2)
of regulation 8 of the Takeover Regulations;
c. the acquirer writes individually to all the public shareholders of the
company informing them of its intention to get the equity shares
delisted, the exit price together with the justification therefor and
seeking their consent for the proposal for delisting;
d. the public shareholders, irrespective of their numbers, holding ninety
percent or more of the public shareholding give their consent in writing
to the proposal for delisting, and consent either to sell their equity
shares at the price offered by the acquirer or to continue to hold the
equity shares even if they are delisted;
e. the acquirer completes the process of inviting the positive consent and
finalisation of the proposal for delisting of equity shares within seventy
five working days of the first communication made under clause (c);
f. the acquirer makes payment of consideration in cash within fifteen
working days from the date of expiry of seventy five working days
mentioned in clause (e).
The communication made to the public shareholders under clause (c) shall
contain justification for the offer price and specifically mention that consent for
the proposal would include consent for dispensing with the exit price discovery
through reverse book building method.
The acquirer shall be liable to pay interest at the rate of ten percent per annum
to all the shareholders, whose bids have been accepted in the delisting offer, is
not paid to all the shareholders within the time specified thereunder. However,
in case the delay was not attributable to any act or omission of the acquirer
or was caused due to the circumstances beyond the control of the acquirer,
the SEBI may grant waiver from the payment of such interest.
The relevant recognised stock exchange may delist such equity shares upon
satisfying itself of compliance with this regulation.
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Delisting of Equity Shares of Companies Listed on Innovators Growth

Platform after making an Initial Public Offer (Regulation 36)
A company whose equity shares are listed and traded on the innovators
growth platform pursuant to an initial public offer may be delisted from the
innovators growth platform, if –
a. such delisting is approved by the Board of Directors of the company;
b. such delisting is approved by the shareholders of the company by
a special resolution passed through postal ballot or e-voting, after
disclosure of all material facts in the explanatory statement sent to
the shareholders in relation to such resolution. However, the special
resolution shall be acted upon only if the votes cast by the majority of
public shareholders are in favour of such exit proposal;
c. delisting price is based on a floor price determined in terms of regulation
8 of Takeover Regulations, as may be applicable, and an additional
delisting premium justified by the acquirer;
d. the post offer shareholding of the acquirer along with the persons acting
in concert with it, taken together with the shares tendered reaches
seventy five per cent of the total issued shares of that class and at
least fifty per cent shares of the public shareholders as on date of the
board meeting are tendered and accepted; and
e. the recognised stock exchange, on which its shares are listed, approves
of such delisting.
Delisting in case of winding up of a company and de-recognition of

a stock exchange
In case of winding up proceedings of a company whose equity shares
are listed on a recognised stock exchange, the rights, if any, of the
shareholders of such company shall be in accordance with the laws
applicable to those proceedings. Where the SEBI withdraws recognition
granted to a stock exchange or refuses renewal of recognition to it,
the SEBI may, in the interest of investors pass appropriate order in
respect of the status of equity shares of the companies listed on that
stock exchange.
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ROLE OF COMPANY SECRETARY IN DELISTING

The Board of Directors of the company, before considering the proposal of
delisting, shall appoint a Peer Review Company Secretary, who shall carry
out the due-diligence and submit a report to the Board of Directors of the
company certifying that the buying, selling and dealing in the equity shares
of the company carried out by the acquirer or its related entities and the top
twenty five shareholders is in compliance with the applicable provisions of
securities laws including compliance with these regulations.
The SEBI has wided the area of responsibilities of a Company Secretary
by mandating a listed company to appoint Company Secretary to act as
compliance officer under the SEBI (LODR) Regulations. Being a compliance
officer, it is the responsibility of a Company Secretary to look after and ensure
timely compliances of various SEBI regulations. In case of non-compliance with
the listing regulation a stock exchange may delist the securities of a company.
Apart from this, a Company Secretary has to appoint and co-ordinate with
various intermediaries, regulators, etc. and advise the Board of Directors, the
various requirements of Delisting.
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Chapter 6
Issuance of Debt Instruments and SEBI Laws
Important Definitions
“book means a process undertaken prior to filing of prospectus

building” with the Registrar of Companies by means of circulation of
a notice, circular, advertisement or other document by which
the demand for the debt securities proposed to be issued
by an issuer is elicited and the price and quantity of such
securities is assessed.
“debt means non-convertible debt securities which create or
securities” acknowledge indebtedness and includes debentures, bonds
and such other securities of a body corporate or a Trust
registered with the Board as a Real Estate Investment Trust
or an Infrastructure Investment Trust, or any statutory body
constituted by virtue of a legislation, whether constituting
a charge on the assets of the body corporate or not, but
excludes bonds issued by Government or such other bodies
as may be specified by the Board, security receipts and
securitized debt instruments.
“issuer” means any company, public sector undertaking or statutory
corporation which makes or proposes to make an issue of
debt securities in accordance with these regulations or which
has its securities listed on a recognized stock exchange
or which seeks to list its debt securities on a recognized
stock exchange 2 [and includes a Trust registered with the
Board as a Real Estate Investment Trust or an Infrastructure
Investment Trust and whose units are listed in recognized
stock exchange(s).
“offer means [a prospectus or a shelf prospectus] and includes any
document” such document or advertisement whereby the subscription
to debt securities are invited by the issuer from public.
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“wilful means an issuer who is categorized as a wilful defaulter

defaulter” by any bank or financial institution or consortium thereof, in
accordance with the guidelines on wilful defaulters issued
by the Reserve Bank of India and includes an issuer whose
director or promoter is categorized as such.
Applicability
These regulations shall apply to-
a. public issue of debt securities; and
b. listing of debt securities issued through public issue or on private
placement basis on a recognized stock exchange.
ISSUE REQUIREMENTS FOR PUBLIC ISSUES
General Conditions
1) No issuer shall make any public issue of debt securities if as on the
date of filing of draft offer document or final offer document as provided
in these regulations:
(a) the issuer or the person in control of the issuer or its promoter or
its director is restrained or prohibited or debarred by the Board
from accessing the securities market or dealing in securities; or
(b) the issuer or any of its promoters or directors is a wilful defaulter
or it is in default of payment of interest or repayment of principal
amount in respect of debt securities issued by it to the public, if
any, for a period of more than six months.
2) No issuer shall make a public issue of debt securities unless following
conditions are satisfied, as on the date of filing of draft offer document
and final offer document as provided in these regulations
a) it has made an application to one or more recognized stock
exchanges for listing of such securities therein:
Provided that where the application is made to more than one
recognized stock exchanges, the issuer shall choose one of them
as the designated stock exchange:
Provided further that where any of such stock exchanges have
nationwide trading terminals, the issuer shall choose one of them
as the designated stock exchange;

Explanation: For any subsequent public issue, the issuer may
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choose a different stock exchange as a designated stock

exchange subject to the requirements of this regulation
b) it has obtained in-principle approval for listing of its debt securities
on the recognized stock exchanges where the application for
listing has been made;
c) credit rating has been obtained from at least one credit rating
agency registered with the Board and is disclosed in the offer
document:
Provided that where credit ratings are obtained from more
than one credit rating agencies, all the ratings, including the
unaccepted ratings, shall be disclosed in the offer document
d) it has entered into an arrangement with a depository registered
with the Board for dematerialization of the debt securities that
are proposed to be issued to the public, in accordance with the
Depositories Act,1996 and regulations made thereunder
3) The issuer shall appoint one or more merchant bankers registered with
the Board at least one of whom shall be a lead merchant banker.
4) The issuer shall appoint one or more debenture trustees in accordance
with the provisions of 11[Section 71 of the Companies Act, 2013 (18
of 2013)] and Securities and Exchange Board of India (Debenture
Trustees) Regulations, 1993.
5) The issuer shall not issue debt securities for providing loan to or
acquisition of shares of any person who is part of the same group or
who is under the same management.
Disclosures in the offer document [Regulation 5]
Without prejudice to the generality of sub-regulation (1), the issuer and the
The offer document shall lead merchant banker shall ensure that the offer document contains the
contain all material following:
disclosures which are (a) disclosures specified in Companies Act, 2013 and Rules prescribed
necessary for the thereunder;
subscribers of the debt
(b) disclosure specified in Schedule I of these regulations;
securities to take an
informed investment (c) additional disclosures as may be specified by the Board.
decision Explanation: For the purpose of this regulation, “material” means anything
which is likely to impact an investors’ investment decision.
Filing of draft offer document [Regulation 6].

1) No issuer shall make a public issue of debt securities unless a draft
161
offer document has been filed with the designated stock exchange
through the lead merchant banker.
2) The draft offer document filed with the designated stock exchange shall
be made public by posting the same on the website of the designated
stock exchange for seeking public comments for a period of seven working
days from the date of filing the draft offer document with such exchange.
3) The draft offer document may also be displayed on the website of the
issuer, merchant bankers and the stock exchanges where the debt
securities are proposed to be listed.
4) The lead merchant banker shall ensure that the draft offer document
clearly specifies the names and contact particulars of the compliance
officer of the lead merchant banker and the issuer including the postal
and email address, telephone and fax numbers.
5) The Lead Merchant Banker shall ensure that all comments received
on the draft offer document are suitably addressed prior to the filing
of the offer document with the Registrar of Companies.
6) A copy of draft and final offer document shall also be forwarded to
the Board for its records, along with regulatory fees as specified
in Schedule V simultaneously with filing of these documents with
designated stock exchange.
7) The lead merchant banker shall, prior to filing of the offer document
with the Registrar of Companies, furnish to the Board a due diligence
certificate as per Schedule II of these regulations.
8) The debenture trustee shall, prior to the opening of the public issue,
furnish to the Board a due diligence certificate as per Schedule III of
these regulations.
Mode of Disclosure of Offer Document
The draft and final offer document shall be displayed on the websites of
stock exchanges and shall be available for download in PDF / HTML
formats
The offer document shall be filed with the designated stock exchange,
[Reg.7]
simultaneously with filing thereof with the Registrar of Companies, for

dissemination on its website prior to the opening of the issue
Where any person makes a request for a physical copy of the offer
document, the same shall be provided to him by the issuer or lead
merchant banker
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Advertisements for Public issues [Reg.8]
1) The issuer shall make a advertisement in an national daily with wide

circulation, on or before the issue opening date and such advertisement
shall, amongst other things, contain the disclosures as per Schedule
IV.
2) No issuer shall issue an advertisement which is misleading in material

particular or which contains any information in a distorted manner or
which is manipulative or deceptive.
3) The advertisement shall be truthful, fair and clear and shall not contain
a statement, promise or forecast which is untrue or misleading.
4) Any advertisement issued by the issuer shall not contain any matters
which are extraneous to the contents of the offer document.
5) The advertisement shall urge the investors to invest only on the basis
of information contained in the offer document.
6) Any corporate or product advertisement issued by the issuer during

the subscription period shall not make any reference to the issue of
debt securities or be used for solicitation.
Abridged Prospectus and application forms [Reg.9]
1) The issuer and lead merchant banker shall ensure that:
a. every application form issued by the issuer is accompanied by a

copy of the abridged prospectus;
b. the abridged prospectus shall not contain matters which are

extraneous to the contents of the prospectus;
c. adequate space shall be provided in the application form to enable

the investors to fill in various details like name, address, etc.
2) The issuer may provide the facility for subscription of application in

electronic mode.
Price Discovery through Book Building [Reg.11]
The issuer may determine the price of debt securities in consultation with the
lead merchant banker and the issue may be at fixed price or the price may be
determined through book building process in accordance with the procedure
as may be specified by the Board.
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Minimum subscription [Reg.12]

l The issuer may decide the amount of minimum subscription which it
seeks to raise by issue of debt securities and disclose the same in
the offer document.
l Inthe event of non receipt of minimum subscription all application
moneys received in the public issue shall be refunded forthwith to the
applicants.
Trust Deed [Reg. 15]

1) A trust deed for securing the issue of debt securities shall be executed
by the issuer in favour of the debenture trustee within three months
of the closure of the issue.
1A) Where an issuer fails to execute the trust deed within the period
specified in the sub-regulation (1), without prejudice to any liability
arising on account of violation of the provisions of the Act and these
Regulations, the issuer shall also pay interest of at least two percent
per annum to the debenture holder, over and above the agreed coupon
rate, till the execution of the trust deed.
1B) A clause stipulating the requirement under sub-regulation (1A)
shall form part of the Trust Deed and also be disclosed in the Offer
Document.
2) Every debenture trustee shall amongst other matters, accept the trust
deeds which shall contain the matters as prescribed under section 71
of Companies Act, 2013 and Form No. SH.12 of the Companies (Share
Capital and Debentures) Rules, 2014. Such trust deed shall consist of
two parts:
a. Part A containing statutory/standard information pertaining to the
debt issue.
b. Part B containing details specific to the particular debt issue.
3) The trust deed shall not contain a clause which has the effect of –
i. limiting or extinguishing the obligations and liabilities of the
debenture trustees or the issuer in relation to any rights or
interests of the investors;
ii. limiting or restricting or waiving the provisions of the Act, these
regulations and circulars or guidelines issued by the Board;
164
iii. Indemnifying the debenture trustees or the issuer for loss or

damage caused by their act of negligence or commission or
omission.
Debenture Redemption Reserve [Reg.16]
1) For the redemption of the debt securities issued by a company, the

issuer shall create debenture redemption reserve in accordance with
the provisions of the Companies Act, 2013 and circulars issued by
Central Government in this regard.
2) Where the issuer has defaulted in payment of interest on debt securities

or redemption thereof or in creation of security as per the terms of
the issue of debt securities, any distribution of dividend shall require
approval of the debenture trustees.
LISTING OF DEBT SECURITIES
Mandatory listing. [Reg.19]
a) An issuer desirous of making an offer of debt securities to the public

shall make an application for listing to one or more recognized stock
exchanges in terms of [ sub-section (1) and sub-section (2) of section
40 of the Companies Act, 2013 (18 of 2013)].
b) The issuer shall comply with conditions of listing of such debt securities
as specified in the Listing Agreement with the stock exchange where
such debt securities are sought to be listed.
c) Where the issuer has disclosed the intention to seek listing of debt
securities issued on private placement basis, the issuer shall forward
the listing application along with the disclosures specified in Schedule
I to the recognized stock exchange within fifteen days from the date
of allotment of such debt securities.
Conditions for listing of debt securities issued on private placement

basis [Reg.20]
1) An issuer may list its debt securities issued on private placement

basis on a recognized stock exchange subject to the following
conditions:
a. the issuer has issued such debt securities in compliance with
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the provisions of the [Companies Act, 2013], rules prescribed

thereunder and other applicable laws;
b. credit rating has been obtained in respect of such debt securities

from at least one credit rating agency registered with the Board;
c. the debt securities proposed to be listed are in dematerialized
form ;
d. the disclosures as provided in regulation 21 have been made.
e. where the application is made to more than one recognized stock
exchange, the issuer shall choose one of them as the designated
stock exchange.
2) The issuer shall comply with conditions of listing of such debt securities
as specified in the Listing Agreement with the stock exchange where
such debt securities are sought to be listed.
3) The designated stock exchange shall collect a regulatory fee as
specified in Schedule V from the issuer at the time of listing of debt
securities issued on private placement basis.
Disclosures in respect of Private Placements of Debt Securities [Reg.21]

a) The issuer making a private placement of debt securities and seeking
listing thereof on a recognized stock exchange shall make disclosures
in a disclosure document as specified in Schedule I of these regulations
accompanied by the latest Annual Report of the issuer.
b) The disclosures as provided in sub-regulation (1) shall be made on the
web sites of stock exchanges where such securities are proposed to
be listed and shall be available for download in PDF / HTML formats.
CONDITIONS FOR CONTINUOUS LISTING AND TRADING OF DEBT

SECURITIES
Continuous Listing Conditions [Reg.23]

1) All the issuers making public issues of debt securities or seeking listing
of debt securities issued on private placement basis shall comply with
the conditions of listing specified in the respective listing agreement
for debt securities.
2) Every rating obtained by an issuer shall be periodically reviewed by
the registered credit rating agency and any revision in the rating shall
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be promptly disclosed by the issuer to the stock exchange(s) where

the debt securities are listed.
3) Any change in rating shall be promptly disseminated to investors and
prospective investors in such manner as the stock exchange where
such securities are listed may determine from time to time.
4) The issuer, the respective debenture trustees and stock exchanges
shall disseminate all information and reports on debt securities including
compliance reports filed by the issuers and the debenture trustees
regarding the debt securities to the investors and the general public
by placing them on their websites.
5) Debenture trustee shall disclose the information to the investors and
the general public by issuing a press release in any of the following
events:
a. default by issuer to pay interest on debt securities or redemption
amount;
b. failure to create a charge on the assets;
c. revision of rating assigned to the debt securities.
6) The information referred to in sub-regulation (5) shall also be placed
on the websites, if any, of the debenture trustee, the issuer and the
stock exchanges.
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OBLIGATIONS OF
INTERMEDIARIES
AND ISSUERS
Obligations The debenture trustees shall supervise the

implementation of the conditions regarding creation
of Debenture of security for the debt securities and debenture
Trustee redemption reserve.
[Reg.25]
The debenture trustee shall ensure disclosure of all
material events on an ongoing basis
The debenture trustee shall carry out its duties and

perform its functions under these regulations, the
Securities and Exchange Board of India (Debenture
Trustees) Regulations, 1993, the trust deed and
offer document, with due care, diligence and loyalty
The debenture trustee shall be vested with the
requisite powers for protecting the interest of
holders of debt securities including a right to
appoint a nominee director on the Board of the
issuer in consultation with institutional holders of
such securities
The issuer shall disclose all the material facts in
the offer documents issued or distributed to the
Obligations public and shall ensure that all the disclosures
of the Issuer, made in the offer document are true, fair and
Lead adequate and there is no mis-leading or untrue
Merchant statements or mis-statement in the offer document
Banker, etc The issuer shall treat the applicants in a public
issue of debt securities in a fair and equitable
[Reg.26] manner as per the procedures as may be
specified by the Board
The intermediaries shall be responsible for the
due diligence in respect of assignments
undertaken by them in respect of issue, offer
and distribution of securities to the public.
The issuer and the merchant banker shall
ensure that the security created to secure the
debt securities is adequate to ensure 100%
asset cover for the debt securities
DISCLOSURES
1) The issuer seeking listing of its debt securities on a recognized stock
exchange shall file the following disclosures along with the listing
application to the stock exchange:
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A. Memorandum and Articles of Association and necessary

resolution(s) for the allotment of the debt securities;
B. Copy of last three years audited Annual Reports;
C. Statement containing particulars of, dates of, and parties to all

material contracts and agreements;
D. Copy of the Board / Committee Resolution authorizing the

borrowing and list of authorized signatories;
E. An undertaking from the issuer stating that the necessary

documents for the creation of the charge, where applicable,
including the Trust Deed would be executed within the time
frame prescribed in the relevant regulations/act/rules etc and the
same would be uploaded on the website of the Designated Stock
exchange, where the debt securities have been listed, within five
working days of execution of the same;
F. Any other particulars or documents that the recognized stock

exchange may call for as it deems fit;
G. An undertaking that permission / consent from the prior creditor

for a second or pari passu charge being created, where
applicable, in favor of the trustees to the proposed issue has
been obtained.
2) Issuer shall submit the following disclosures to the Debenture Trustee in

electronic form (soft copy) at the time of allotment of the debt securities
a. Memorandum and Articles of Association and necessary

resolution(s) for the allotment of the debt securities;
b. Copy of last three years’ audited Annual Reports;
c. Statement containing particulars of, dates of, and parties to all

material contracts and agreements;
d. Latest Audited / Limited Review Half Yearly Consolidated

(wherever available) and Standalone Financial Information (Profit
& Loss statement, Balance Sheet and Cash Flow statement) and
auditor qualifications , if any;
e. An undertaking to the effect that the Issuer would, till the

redemption of the debt securities, submit the details mentioned in
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point (D) above to the Trustee within the timelines as mentioned

in Simplified Listing Agreement issued by SEBI vide circular No.
SEBI/IMD/BOND/1/2009/11/05 dated May 11, 2009 as amended
from time to time, for furnishing / publishing its half yearly/ annual
result. Further, the Issuer shall within 180 days from the end of
the financial year, submit a copy of the latest annual report to
the Trustee and the Trustee shall be obliged to share the details
submitted under this clause with all ‘Qualified Institutional Buyers’
(QIBs) and other existing debenture holders within two working
days of their specific request;
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Chapter 7
SEBI (Prohibition of Insider Trading) Regulations,
2015
INTRODUCTION
Insider trading essentially denotes dealing in a company’s securities on the
basis of confidential information, relating to the company, which is not published
or not known to the public (known as ‘unpublished price- sensitive information’),
used to make personal profits or avoid loss. The practice of Insider Trading
came into existence ever since the very concept of trading of securities of
a company became prevalent among the investors worldwide and has now
become a formidable challenge for investors all over the world. The growing
magnitude of the world’s securities markets in the past decades has further
raised the concerns of the securities market regulators across the globe.
Key definitions
Compliance “Compliance Officer” means: any senior officer, designated

officer so and reporting to the board of directors or head of the
organization in case board is not there, who is financially
literate and is capable of appreciating requirements for
legal and regulatory compliance under these regulations,
and who shall be responsible for
a. compliance of policies, procedures, maintenance
of records, monitoring adherence to the rules for
the preservation of unpublished price sensitive
information;
b. monitoring of trades and the implementation of the
codes specified in these regulations under the overall
supervision of the board of directors of the listed
company or the head of an organization, as the case
may be.
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Connected “Connected person” means:

person
l any person who is or has during six months prior
to the concerned Act has been associated with a
company, directly or indirectly;
l in any capacity (including by reason of frequent
communication with its officers or by being in any
contractual, fiduciary or employment relation); or
l is a director, officer or an employee of the company
or holds any position including a professional or
business relationship between himself and the
company, whether temporary or permanent; or
that allows such person, directly or indirectly, access to
unpublished price-sensitive information or reasonably
expected to allow such access.
It is important to note here that SEBI has in its recent
judgments considered nexus and relationship of various
persons through social media networking websites to
identify the Connected Persons.
Insider “Insider” means any person who is:
(i) a connected person; or
(j) in possession of or having access to unpublished
price sensitive information.
Person “Person is deemed to be a connected person” unless the
deemed contrary is established, if such person is –
to be a) an immediate relative of connected person(s); or
connected
person b) a holding company or associate company or
subsidiary company; or
c) an intermediary as specified in Section 12 of the SEBI
Act or an employee or director thereof; or
d) an investment company, trustee company, asset
management company or an employee or director
thereof; or
e) an official of a stock exchange or of clearing house
or corporation; or
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f) a member of board of trustees of a mutual fund

or a member of the board of directors of the asset
management company of a mutual fund or is an
employee thereof; or
g) a member of the board of directors or an employee,

of a public financial institution as defined in Section
2(72) of the Companies Act, 2013; or
h) an official or an employee of a self-regulatory

organization recognised or authorized by the SEBI;
or
i) a banker of the company; or
j) a concern, firm, trust, Hindu undivided family,

company or association of persons wherein a director
of a company or his immediate relative or banker
of the company, has more than ten percent of the
holding or interest
It is to be noted that the above definition intends to bring

into its ambit persons who may not seemingly occupy any
position in a company but are in regular touch with the
company and its officers and are involved in the know of
the company’s operations.
Immediate “Immediate Relative” means

Relative
 spouse of a person,
 parents,
 sibling, and
 child of such person or of the spouse,
 any of whom is either dependent financially on such

person,
 or consults such person in taking decisions relating

to trading in securities.
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Unpublished “Unpublished price sensitive information” means any

price information, relating to a company or its securities, directly
sensitive or indirectly, that is not generally available which upon
information becoming generally available, is likely to materially affect
the price of the securities and shall, ordinarily including
but not restricted to, information relating to the following–
i. Financial results;
ii. Dividends;
iii. Change in capital structure;
iv. Mergers, de-mergers, acquisitions, delisting,
disposals and expansion of business and such other
transactions;
v. Changes in key managerial personnel.
RESTRICTION ON COMMUNICATION OR PROCUREMENT OF

UNPUBLISHED PRICE SENSITIVE INFORMATION (UPSI) (REGULATIONS 3)
Restriction on Communication
No insider to communicate UPSI (Regulation 3)(1) No insider
1)
shall communicate, provide, or allow access to any unpublished price
sensitive information, relating to a company or securities listed or
proposed to be listed, to any person including other insiders except
where such communication is in furtherance of legitimate purposes,
performance of duties or discharge of legal obligations.
Policy for determination of Legitimate Purposes [Regulation 3(2A)]

The board of directors of a listed company shall make a policy for
determination of “legitimate purposes” as a part of “Codes of Fair
Disclosure and Conduct” formulated under regulation 8.
Explanation – For the purpose of illustration, the term “legitimate
purpose” shall include sharing of unpublished price sensitive
information in the ordinary course of business by an insider with
partners, collaborators, lenders, customers, suppliers, merchant
bankers, legal advisors, auditors, insolvency professionals or other
advisors or consultants, provided that such sharing has not been
carried out to evade or circumvent the prohibitions of these regulations.
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Recipient of UPSI received on legitimate purpose is also an insider

(Regulation 32B)
2B) Any person in receipt of unpublished price sensitive information

pursuant to a “legitimate purpose” shall be considered an “insider” for
purposes of these regulations and due notice shall be given to such
persons to maintain confidentiality of such unpublished price sensitive
information in compliance with these regulations.
No person shall procure from or cause the communication by any insider

of unpublished price sensitive information (Regulation 3(2))
2) No person shall procure from or cause the communication by any

insider of unpublished price sensitive information, relating to a company
or securities listed or proposed to be listed, except in furtherance
of legitimate purposes, performance of duties or discharge of legal
obligations. Note: This provision is intended to impose a prohibition
on unlawfully procuring possession of unpublished price sensitive
information. Inducement and procurement of unpublished price
sensitive information not in furtherance of one’s legitimate duties and
discharge of obligations would be illegal under this provision.
Exceptions:
3) Notwithstanding anything contained in this regulation, an unpublished

price sensitive information may be communicated, provided, allowed
access to or procured, in connection with a transaction that would:–
a. entail an obligation to make an open offer under the takeover

regulations where the board of directors of the listed company
is of informed opinion that sharing of such information is in the
best interests of the company;
b. not attract the obligation to make an open offer under the takeover
regulations but where the board of directors of the listed company
is of informed opinion that sharing of such information is in the
best interests of the company and the information that constitute
unpublished price sensitive information is disseminated to be
made generally available at least two trading days prior to the
proposed transaction being effected in such form as the board
of directors may determine to be adequate and fair to cover all
relevant and material facts.
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Note: It is intended to permit communicating, providing, allowing access

to or procuring UPSI also in transactions that do not entail an open
offer obligation under the takeover regulations when authorised by the
board of directors if sharing of such information is in the best interests
of the company. The board of directors, however, would cause public
disclosures of such unpublished price sensitive information well before
the proposed transaction to rule out any information asymmetry in the
market.
Execution of confidentiality agreement - A mandate
4) For purposes of sub-regulation (3), the board of directors shall require

the parties to execute agreements to contract confidentiality and non-
disclosure obligations on the part of such parties and such parties
shall keep information so received confidential, except for the purpose
of sub-regulation (3), and shall not otherwise trade in securities of
the company when in possession of unpublished price sensitive
information.
5) The Board of Directors or head(s) of the organisation of every person

required to handle unpublished price sensitive information shall ensure
that a structured digital database is maintained containing the nature
of unpublished price sensitive information and the names of such
persons who have shared the information and also the names of such
persons with whom information is shared under this regulation along
with the Permanent Account Number or any other identifier authorized
by law where Permanent Account Number is not available. Such
database shall not be outsourced and shall be maintained internally
with adequate internal controls and checks such as time stamping and
audit trails to ensure non-tampering of the database.
6) The board of directors or head(s) of the organisation of every person

required to handle unpublished price sensitive information shall ensure
that the structured digital database is preserved for a period of not less
than eight years after completion of the relevant transactions and in
the event of receipt of any information from the Board regarding any
investigation or enforcement proceedings, the relevant information in
the structured digital database shall be preserved till the completion
of such proceedings
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Insider not to trade in securities while in possession of unpublished

price sensitive information
 Regulation 4 prescribes that an insider shall not trade in securities,

which are listed or proposed to be listed on stock exchange, when in
possession of unpublished price sensitive information, except in the
following situations:
 where there is an off-market inter-se transfer between insiders

who were in possession of the same UPSI, or
 the transaction was carried through the block deal window

mechanism between persons who were in the possession of the
UPSI
 the transaction in question, was carried out pursuant to a statutory or

regulatory obligation to carry out a bona-fide transaction,
 the transaction in question, was undertaken pursuant to the exercise of

stock options in respect of which the exercise price was pre-determined
in compliance of with applicable regulations,
 in case of non-individual insiders, individuals taking the trade decision

& individuals possessing the UPSI are different from each other
and while taking the trade decision the individuals were not in
possession of such UPSI and appropriate & adequate precautionary
arrangements were made to ensure that these regulations are not
violated and there are no evidence also of such arrangements
having been breached,
 the trades were in accordance to trading plan set up in accordance

with Regulation 5.
TRADING PLANS
As per Regulation 5, an insider shall be entitled to formulate a trading plan

in advance and present it to the compliance officer for approval and public
disclosure pursuant to which trades may be carried out on his behalf in
accordance with such plan.
The compliance officer shall review the trading plan to assess whether the
plan would have any potential for violation of these regulations and shall be
entitled to seek such express undertakings as may be necessary to enable
such assessment and to approve and monitor the implementation of the plan.
177
However, pre-clearance of trades shall not be required for a trade executed as

per an approved trading plan. Further, trading window norms and restrictions
on contra trade shall not be applicable for trades carried out in accordance
with an approved trading plan.

The trading plan once approved shall be irrevocable and the insider shall
mandatorily have to implement the plan, without being entitled to either
deviate from it or to execute any trade in the securities outside the scope of
the trading plan.
However, the implementation of the trading plan shall not be commenced
if any unpublished price sensitive information in possession of the insider
at the time of formulation of the plan has not become generally available
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at the time of the commencement of implementation and in such event the

compliance officer shall confirm that the commencement ought to be deferred
until such unpublished price sensitive information becomes generally available
information so as to avoid a violation of sub-regulation (1) of Regulation 4.
Upon approval of the trading plan, the compliance officer shall notify the plan
to the stock exchanges on which the securities are listed.
DISCLOSURE REQUIREMENTS
A pictorial representation of disclosure requirements under Regulation 7,
covering initial, continual disclosures and disclosures by connected persons
are given below.
INITIAL CONTINUED DISCLOSURES BY

DISCLOSURES DISCLOSURES OTHER CONNECTED
PERSONS
Promoter / Member Every promoter/ Any other connected
of Promoter Group Member of Promoter person or class of
/ Director / Key Group/Designated connected persons to
Managerial personnel Person / director to make disclosures of
to disclose holding of disclose to the company holdings and trading
their securities to the the number of such in listed securities as
company securities acquired prescribed.
or disposed of within
Within 7 days from
two trading days of
the date of their
such transaction if the
appointment/ becoming
value of the securities
promoter or member of
traded, whether in one
promoter group.
transaction or a series
of transactions over
any calendar quarter,
aggregates to a traded
value in excess of ten
lakh rupees or such
other value as may be
specified.
Company to notify to
the exchange within 2
trading days of receipt
of intimation.
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a. Every promoter, a. Every promoter, Any company whose

member of the m e m b e r o f t h e securities are listed on
promoter group, promoter group, a stock exchange may,
key managerial designated person at its discretion require
personnel and a n d d i r e c t o r o f any other connected
director of every every company person or class of
company whose shall disclose to connected persons to
securities are listed the company the make disclosures of
on any recognised number of such holdings and trading
stock exchange securities acquired in securities of the
shall disclose his or disposed of within company in such form
holding of securities two trading days of and at such frequency
of the company such transaction as may be determined
as on the date of i f t h e v a l u e o f by the company in order
these regulations t h e s e c u r i t i e s to monitor compliance
taking effect, to the traded, whether with these regulations.
company within in one transaction
This is an enabling
thirty days of these or a series of
provision for listed
regulations taking transactions over
companies to seek
effect; any calendar
information from those
quarter, aggregates
b. Every person on to whom it has to provide
to a traded value
appointment as unpublished price
in excess of ten
a key managerial sensitive information.
lakh rupees or such
personnel or a This provision confers
other value as may
director of the discretion on any
be specified;
company or company to seek
upon becoming a b. E v e r y c o m p a n y s u c h i n f o r m a t i o n .
promoter or member s h a l l n o t i f y t h e For example, a listed
of the promoter particulars of such company may ask that a
group shall disclose trading to the stock management consultant
his holding of exchange on which who would advise it on
securities of the the securities are corporate strategy and
company as on the listed within two would need to review
date of appointment trading days of u n p u b l i s h e d p r i c e
or becoming a r e c e i p t o f t h e sensitive information,
promoter, to the disclosure or from should make disclosures
company within becoming aware of of his trades to the
seven days of such information. company.
such appointment
Explanation. — It
or becoming a
is clarified for the
promoter.
avoidance of doubts
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that the disclosure

of the incremental
transactions after any
disclosure under this
sub-regulation, shall
be made when the
transactions effected
after the prior disclosure
cross the threshold
specified in clause (a)
of sub-regulation (2).
Disclosures - Who, what and when?
Who What When

Promoter/ Initial Within 7 days from the date of their
member of disclosure appointment/becoming promoter or member
Promoter of promoter Group
Group Continual the number of such securities acquired or
Disclosure disposed of within two trading days of such
transaction if the value of the securities
traded, whether in one transaction or a series
of transactions over any calendar quarter,
aggregates to a traded value in excess of
ten lakh rupees or such other value as may
be specified
Director Initial Within 7 days from the date of their
disclosure appointment
Continual the number of such securities acquired or
be specified
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Key Initial Within 7 days from the date of their

Managerial disclosure appointment
personnel Continual the number of such securities acquired or
(as
Designated
Person)
be specified.
Designated Continual the number of such securities acquired or
Person Disclosure disposed of within two trading days of such
be specified.
Other Any company whose securities are listed on a stock exchange
Connected may, at its discretion require any other connected person or
persons class of connected persons to make disclosures of holdings
and trading in securities of the company in such form and at
such frequency as may be determined by the company in
order to monitor compliance with these regulations.
Company Company to notify to the exchange within 2 trading days of
receipt of disclosure.
Brief process flow of submission to the SEBI [Regulation 7 (B)]
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Minimum Standards for Code of Conduct

Schedule B of these regulations lays down the following minimum standards
for Code of Conduct for listed companies to regulate, monitor and report
trading by designated persons:-
1. The Compliance Officer shall report to the board of directors and in
particular, shall provide reports to the Chairman of the Audit Committee,
if any, or to the Chairman of the board of directors at such frequency
as may be stipulated by the board of directors but not less than once
in a year.
2. All information shall be handled within the organisation on a need-
to-know basis and no unpublished price sensitive information shall
be communicated to any person except in furtherance of legitimate
purposes, performance of duties or discharge of legal obligations.
3. The code of conduct shall contain norms for appropriate Chinese Walls
procedures, and processes for permitting any designated person to
“cross the wall”.
4. Designated persons and immediate relatives of designated persons
in the organisation shall be governed by an internal code of conduct
governing dealing in securities.
5. Designated persons may execute trades subject to compliance with
these regulations. Towards this end, a notional trading window shall
be used as an instrument of monitoring trading by the designated
persons.
6. The trading window shall be closed when the compliance officer
determines that a designated person or class of designated persons
can reasonably be expected to have possession of unpublished price
sensitive information. Such closure shall be imposed in relation to
such securities to which such unpublished price sensitive information
relates.
7. Designated persons and their immediate relatives shall not trade in
securities when the trading window is closed.
8. Trading restriction period shall be made applicable from the end of
every quarter till 48 hours after the declaration of financial results. The
gap between clearance of accounts by audit committee and board
meeting should be as narrow as possible and preferably on the same
day to avoid leakage of material information.
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9. The trading window restrictions mentioned above shall not apply in

respect of –
a. transactions specified in clauses (i) to (iv) and (vi) of the proviso
to sub-regulation (1) of regulation 4 and in respect of a pledge of
shares for a bona-fide purpose such as raising of funds, subject
to preclearance by the compliance officer and compliance with
the respective regulations made by the Board;
b. transactions which are undertaken in accordance with respective
regulations made by the SEBI such as acquisition by conversion
of warrants or debentures, subscribing to rights issue, further
public issue, preferential allotment or tendering of shares in a
buy-back offer, open offer, delisting offer or transactions which are
undertaken through such other mechanism as may be specified
by the SEBI from time to time.
10. The timing for re-opening of the trading window shall be determined by
the compliance officer taking into account various factors including the
unpublished price sensitive information in question becoming generally
available and being capable of assimilation by the market, which in any
event shall not be earlier than forty eight hours after the information
becomes generally available.
11. When the trading window is open, trading by designated persons shall
be subject to pre-clearance by the compliance officer, if the value of
the proposed trades is above such thresholds as the board of directors
may stipulate.
12. Prior to approving any trades, the compliance officer shall be entitled
to seek declarations to the effect that the applicant for pre-clearance
is not in possession of any unpublished price sensitive information.
13. He shall also have regard to whether any such declaration is reasonably
capable of being rendered inaccurate.
14. The code of conduct shall specify any reasonable timeframe, which
in any event shall not be more than seven trading days, within
which trades that have been pre-cleared have to be executed by the
designated person, failing which fresh pre-clearance would be needed
for the trades to be executed.
15. The code of conduct shall specify the period, which in any event shall
not be less than six months, within which a designated person who is
permitted to trade shall not execute a contra trade. The compliance
184
officer may be empowered to grant relaxation from strict application

of such restriction for reasons to be recorded in writing provided that
such relaxation does not violate these regulations. Should a contra
trade be executed, inadvertently or otherwise, in violation of such a
restriction, the profits from such trade shall be liable to be disgorged for
remittance to SEBI for credit to the Investor Protection and Education
Fund administered by the SEBI under the Act. However, this shall not
be applicable for trades pursuant to exercise of stock options.
16. The code of conduct shall stipulate such formats as the board of
directors deems necessary for making applications for pre-clearance,
reporting of trades executed, reporting of decisions not to trade after
securing pre-clearance, and for reporting level of holdings in securities
at such intervals as may be determined as being necessary to monitor
compliance with these regulations.
17. Without prejudice to the power of the SEBI under the Act, the code of
conduct shall stipulate the sanctions and disciplinary actions, including
wage freeze, suspension, recovery, etc., that may be imposed, by
the listed company required to formulate a code of conduct under
sub-regulation (1) of regulation 9, for the contravention of the code
of conduct. Any amount collected under this clause shall be remitted
to the Board for credit to the Investor Protection and Education Fund
administered by the SEBI under the Act.
18. The code of conduct shall specify that in case it is observed by the
listed company required to formulate a code of conduct, that there has
been a violation of these regulations, it shall inform the SEBI promptly.
19. Designated persons shall be required to disclose names and
Permanent Account Number or any other identifier authorized by law
of the following persons to the company on an annual basis and as
and when the information changes:
a. immediate relatives,
b. persons with whom such designated person(s) shares a material
financial relationship,
c. phone, mobile and cell numbers which are used by them.
In addition, the names of educational institutions from which designated
persons have graduated and names of their past employers shall also
be disclosed on a one time basis. Explanation – The term “material
financial relationship” shall mean a relationship in which one person is
185
a recipient of any kind of payment such as by way of a loan or gift from

a designated person during the immediately preceding twelve months,
equivalent to at least 25% of the annual income of such designated
person but shall exclude relationships in which the payment is based
on arm’s length transactions.
20. Listed entities shall have a process for how and when people are
brought ‘inside’ on sensitive transactions. Individuals should be made
aware of the duties and responsibilities attached to the receipt of Inside
Information, and the liability that attaches to misuse or unwarranted
use of such information.
a. When trading window should be closed? How long it should be
closed?
b. What is the time limit to execute the trade once that have been
pre-cleared?
Institutional Mechanism for Prevention of Insider trading [Regulation 9A]

 The Chief Executive Officer, Managing Director or such other analogous
person of a listed company, intermediary or fiduciary shall put in place
adequate and effective system of internal controls to ensure compliance
with the requirements given in these regulations to prevent insider
trading. The internal controls shall include the following:
o all employees who have access to unpublished price sensitive
information are identified as designated person;
o all the unpublished price sensitive information shall be identified
and its confidentiality shall be maintained as per the requirements
of these regulations;
o adequate restrictions shall be placed on communication or
procurement of unpublished price sensitive information as
required by these regulations;
o lists of all employees and other persons with whom unpublished
price sensitive information is shared shall be maintained and
confidentiality agreements shall be signed or notice shall be
served to all such employees and persons;
o all other relevant requirements specified under these regulations
shall be complied with;
o periodic process review to evaluate effectiveness of such internal
controls.
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 The board of directors of every listed company and the board of

directors or head(s) of the organisation of intermediaries and fiduciaries
shall ensure that the Chief Executive Officer or the Managing Director
or such other analogous person ensures compliance with these
regulations.
 The Audit Committee of a listed company or other analogous body for
intermediary or fiduciary shall review compliance with the provisions of
these regulations at least once in a financial year and shall verify that the
systems for internal control are adequate and are operating effectively.
 Every listed company shall formulate written policies and procedures
for inquiry in case of leak of unpublished price sensitive information or
suspected leak of unpublished price sensitive information, which shall
be approved by board of directors of the company and accordingly
initiate appropriate inquiries on becoming aware of leak of unpublished
price sensitive information or suspected leak of unpublished price
sensitive information and inform the Board promptly of such leaks,
inquiries and results of such inquiries.
 The listed company shall have a whistle-blower policy and make
employees aware of such policy to enable employees to report
instances of leak of unpublished price sensitive information.
 If an inquiry has been initiated by a listed company in case of leak
of unpublished price sensitive information or suspected leak of
unpublished price sensitive information, the relevant intermediaries
and fiduciaries shall co-operate with the listed company in connection
with such inquiry conducted by listed company.
ROLE OF COMPANY SECRETARY AS COMPLIANCE OFFICER

The obligations cast upon the Company Secretary in relation to insider trading
regulations can be summarized as under. The Company Secretary shall:
1. Ensure compliance with SEBI (Prohibition of insider Trading)
Regulations, 2015 including maintenance of various documents.
2. Frame a Code of Fair Disclosure in line with the model code specified
in the Schedule A of the regulations, get the same approved by the
board of directors of the company and submit to the stock exchanges.
3. Frame Code of Conduct for the listed company to regulate, monitor and
report trading by designated persons in accordance with the minimum
standards as enumerated in the Schedule B to these regulations.
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4. Receive initial disclosure from every Promoter, KMP and director

or every person on appointment as KMP or director or becoming a
Promoter shall disclose its shareholding in the prescribed form within
: – 30 days from these regulations taking effect, or – 7 days of such
appointment or becoming a promoter.
5. Receive from every Promoter, designated persons and director,
continual disclosures of the number of securities acquired or disposed
of and changes therein, even if the value of the securities traded,
exceeds Rs. 10 lakh with single or series of transaction in any calendar
quarter in prescribed form within two trading days of : – receipt of the
disclosure, or – from becoming aware of such information Submit the
disclosures received as above to the stock exchanges as applicable.
6. Pre Clear the trade pursuant to the requests received from the
designated persons and also monitor trading in accordance with the
regulations.
7. Ensure that no trading shall between 20th day prior to closure of
financial period and 2nd trading day after disclosure of financial results.
8. Approve the trading plan and after the approval of the trading plan,
as compliance officer shall notify the plan to the stock exchanges on
which the securities are listed.
9. Maintain records, as a Compliance Officer, of all the declarations given
by the directors/designated employees/ partners in the appropriate
form for a minimum period of three years.
10. Take additional undertakings, as a compliance officer, from the insiders
for approval of the trading plan. Such trading plan on approval will
also be disclosed to the Stock Exchanges, where the securities of the
company are listed.
11. Monitor trades and the implementation of the code of conduct under
the overall supervision of the Board of Directors of the listed company.
12. Frame and then monitor adherence to the rules for the preservation
of “Price sensitive information”.
13. Ensure that proper internal control system is in place and continuously
monitor and review of its functioning.
14. Suggest any improvements required in the policies, procedures, etc.
to ensure effective implementation of the code.
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15. Assist in addressing any clarifications regarding the SEBI (Prohibition

of Insider Trading) Regulations, 2015 and the company’s code of
conduct.
16. Maintain a list of all information termed as ‘price sensitive information’.
17. Maintain a record of names of files containing confidential information
deemed to be price sensitive information and persons in charge of the
same.
18. Ensure that files containing confidential information are kept secured.
19. Keep records of periods specified as ‘Close period’ and the ‘Trading
window’.
20. Ensure that the trading restrictions are strictly observed and all
directors/officers/designated employees conduct all their dealings in
the securities of the company only in a valid trading window and do
not deal in the company’s securities during the period when the trading
window is closed.
21. Receive and maintain records of periodic and annual statement of
holdings from directors/officers/ designated employees and their
dependent family members.
22. Maintain a structured digital database of name(s) of persons and
entities with whom unpublished price sensitive information are shared
along with their PAN and other details.
23. Serve due notices to maintain confidentiality for every such person(s)
with whom information are shared for legitimate purposes.
24. Educate the employees, board of directors regarding the provisions
of the regulations and amendments from time to time for their better
understanding and compliances.
25. Assist the board of directors to undertake enquiry or investigation in
case of any suspected violation of the regulation and advising on taking
appropriate disciplinary actions including transfer of all unlawful gain
to the SEBI Investor Protection and Education Fund.
26. Place before the Chief Executive Officer/Partner or a committee notified
by the organization/firm, as a Compliance Officer, on a monthly basis
all the details of the dealing in the securities by designated employees/
directors/partners of the organization/firm.
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CHECKLISTS UNDER SEBI (PROHIBITION OF INSIDER TRADING)

REGULATIONS 2015
l Checklists for KMP and other employees (including Company
Secretary)
l Checklists for Board of Directors
l Checklists for PCS firms, advocates, auditors and practicing
professionals.
A. CHECKLIST FOR COMPLAINCE OFFICER
As per Regulation 2(c) “compliance officer” means any senior officer, designated
so and reporting to the board of directors or head of the organization in case
board is not there, who is financially literate and is capable of appreciating
requirements for legal and regulatory compliance under these regulations and
who shall be responsible for-
l compliance of policies, procedures,
l maintenance of records,
l monitoring adherence to the rules for the preservation of unpublished
price sensitive information,
l monitoring of trades, and
l the implementation of the codes specified in these regulations.
under the overall supervision of the board of directors of the listed company
or the head of an organization, as the case may be.
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Chapter 8
SEBI (Buy-Back of Securities) Regulations,
2018
INTRODUCTION
Meaning of Buy-back
The term buy-back implies the act of purchasing its own shares/securities by
a company. This facility enables the Company to go back to the holders of its
own shares/securities and make an offer to purchase such shares/ securities
from them.
The corporates adopts various tools, viz., mergers, amalgamations and
takeovers for restructuring the business. All these activities, in turn, impacts
the functioning of the capital market, more particularly the movement of share
prices. As the shares of companies are held by different segments of society,
viz., entrepreneurs, Body Corporates, institutional investors and individual
shareholders including small investors, it is reasonable that there should
be equality of treatment and opportunities to all shareholders, transparency,
proper disclosure and above all protection of interests of small and minority
shareholders.
The buy-back of securities is governed by Section 68, 69 and 70 of the
Companies Act, 2013 and Rule 17 of the Companies (Share Capital and
Debentures) Rules, 2014. For Listed Companies, the SEBI Regulations for
Buy Back will also be applicable.
Recent Trends of Industry

A rise in buy-backs in the FY 2021 was seen as a global phenomenon with
companies such as Apple and Berkshire doubling their share buy-backs.
Another reason for the jump in buy-backs is dividend distribution taxation
(DDT) being in the hands of shareholders, who are mandated to pay tax on
dividends received at the applicable tax rate compared to a low (capital gains)
tax rate in case of buy-backs. The FY 2020 budget put dividend taxation in the
hands of shareholders while keeping buy-back taxation in hands of companies.
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This led to buy-backs being a favoured option to reward shareholders

while managing the recapitalization of companies and improving promoter
shareholding and return on capital employed (ROCE) through reduction in
overall capital, Khetan and Sonchhatra said.
Important Definitions:
Associate It includes a person, –

l who directly or indirectly by himself or in combination
with relatives, exercise control over the company; or
l whose employee, officer or director is also a director,
officer or employee of company.
Buy-back The period between the date of board of directors

Period resolution; or date of declaration of results of the postal
ballot for special resolution, as the case may be, to
authorize buy-back of shares of the company and the date
on which the payment of consideration to shareholders
who have accepted the buy-back offer is made.
Control It has the same meaning as defined in clause (e) of

sub-regulation (1) of regulation (2) of the Securities
and Exchange Board of India (Substantial Acquisition of
Shares and Takeovers) Regulations, 2011.
Odd Lots ‘Odd Lots’ mean the lots of shares or other specified
securities of a company, whose shares are listed on
a recognised stock exchange, which are smaller than
such marketable lots, as may be specified by the stock
exchange.
Small A shareholder of a company, who holds shares or other

Shareholder specified securities whose market value, on the basis of
closing price of shares or other specified securities, on
the recognised stock exchange in which highest trading
volume in respect of such securities, as on record date
is not more than two lakh rupee.
Specified It includes employees’ stock option or other securities

Securities as may be notified by the Central Government from time
to time.
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Tender offer An offer by a company to buy-back its own shares or

other specified securities through a letter of offer from
the holders of the shares or other specified securities of
the company.
CONDITIONS FOR BUYBACK OF SHARES OR OTHER SECURITIES

The maximum limit of any buy-back shall be 25% or less of the aggregate of
paid-up capital and free reserves of the company, based on both standalone
and consolidated financial statements of the company All shares or other
specified securities for buy-back shall be fully paid-up.
Note:
l In respect of the buy-back of equity shares in any financial year, the
reference to 25% in this regulation shall be construed with respect to
its total paid-up equity capital in that financial year.
l The ratio of the aggregate of secured and unsecured debts owed by
the company to the paid-up capital and free reserves after buy-back
shall,-
(a) be less than or equal to 2:1, based on both standalone and
consolidated financial statements of the company. However if
a higher ratio of the debt to capital and free reserves for the
company has been notified under the Companies Act, 2013, the
same shall prevail; or
(b) be less than or equal to 2:1, based on both standalone and
consolidated financial statements of the company, after excluding
financial statements of all subsidiaries that are non-banking
financial companies and housing finance companies regulated
by Reserve Bank of India or National Housing Bank, as the case
may be. However buy-back of securities shall be permitted only
if all such excluded subsidiaries have their ratio of aggregate
of secured and unsecured debts to the paid-up capital and free
reserves of not more than 6:1 on standalone basis.
Additional Conditions for Buy-back of Shares or Other Securities

l A company shall not buy-back its shares or other specified securities :
(a) so as to delist its shares or other specified securities from the
stock exchange.
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(b) from any person through negotiated deals, whether on or off

the stock exchange or through spot transactions or through any
private arrangement.
l A company shall not make any offer of buy-back within a period of
one year reckoned from the date of expiry of buy-back period of the
preceding offer of buy-back, if any.
l A company shall not allow buy-back of its shares unless the consequent
reduction of its share capital is effected.
METHODS OF BUY-BACK
A company may buy-back its shares or other specified securities by any one
of the following methods:
from the existing

shareholders or other
specified securities
holders on a
proportionate basis
through the tender offer
Book-building Process
Methods of Buy-Back
from the open market
through
Stock Exchange
from odd-lot holders
Sources of Buy-Back
• Its Free Resereves

A Company may • the securities premuium
buy-back shares or account
other securities out • the proceeds of the issue of
of-
any shares or other specified
securities
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PROHIBITIONS FOR BUY-BACK
The Company shall not directly or indirectly purchase its own shares or other
specified securities:
l through any subsidiary company including its own subsidiary

companies;
l through any investment company or group of investment companies;

or
l if a default is made by the company in the repayment of deposits

accepted either before or after the commencement of the Companies
Act, interest payment thereon, redemption of debentures or preference
shares or payment of dividend to any shareholder, or repayment of
any term loan or interest payable thereon to any financial institution
or banking company.
AUTHORISATION FOR BUY-BACK
The company shall not authorise for any buy-back whether by way of tender
offer or from open market or odd lot unless:
1. Authorisation for Buyback in the Articles of the Company.
2. A special resolution is required to passed at a general meeting of the

company for such authorisation.
3. No special resolution is required where the buy-back is 10% or less

of the total paid-up equity capital and free reserves of the company
and such buy-back has been authorised by the board of directors by
means of a resolution passed at its meeting.
Note:
l In case of Special Resolution, a copy of the resolution passed at the

general meeting shall be filed with SEBI and the stock exchanges
where the shares or other specified securities of the company are
listed, within seven days from the date of passing of the resolution.
l In case of only Board Resolution, a copy of Board Resolution passed

in the meeting of the Board of Directors, shall file with SEBI and the
stock exchanges, where the shares or other specified securities of the
company are listed, within two working days of the date of the passing
of the resolution.
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Every buy-back shall be completed within a period of one year from the date of
passing of the special resolution at general meeting, or the resolution passed
by the board of directors of the company, as the case may be.
The company shall, after expiry of the buy-back period, file with the Registrar
of Companies and SEBI, a return containing such particulars relating to the
buy-back within thirty days of such expiry, in the format as specified in the
Companies (Share Capital and Debentures) Rules, 2014.
Where the buy-back is from open market either through the stock exchange
or through book building, the resolution of board of directors shall specify
the maximum price at which the buy-back shall be made. However where
there is a requirement for the Special Resolution as specified in clause (b) of
sub-regulation 1 of regulation 5 of these Regulations, the special resolution
shall also specify the maximum price at which the buy-back shall be
made.
No insider shall deal in shares or other specified securities of the company

on the basis of unpublished price sensitive information relating to buy-back
of shares or other specified securities of the company.
EXPLANATORY STATEMENT
The notice of the meeting at which the special resolution is proposed to be

passed shall be accompanied by an explanatory statement pursuant to section
102 of the Companies Act containing mandatory disclosures as specified under
sub-section 3 of section 68 of the Companies Act –
l a full and complete disclosure of all material facts;
l the necessity for the buy-back;
l the class of shares or securities intended to be purchased under the

buy-back;
l the amount to be invested under the buy-back; and
l the time-limit for completion of buy-back.
ADDITIONAL DISCLOSURES
The company is required to provide an additional disclosure as per Schedule

I to these regulations, in addition to disclosures mentioned above under sub
section 3 of section 68 of the Companies Act, 2013 as discussed below:
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(i) Date of the Board meeting at which the proposal for buy-back was
approved by the Board of Directors of the company;
(ii) Necessity for the buy-back;
(iii) Maximum amount required under the buy-back and its percentage of
the total paid up capital and free reserves;
(iv) Maximum price at which the shares or other specified securities are
proposed be bought back and the basis of arriving at the buy-back
price;
(v) Maximum number of securities that the company proposes to buy-b

ack;
(vi) Method to be adopted for buy-back as referred to in sub-regulation

(iv) of regulation 4;
(vii) a) he aggregate shareholding of the promoter and of the directors of

the promoters, where the promoter is a company and of persons who
are in control of the company as on the date of the notice convening
the General Meeting or the Meeting of the Board of Directors;
b) aggregate number of shares or other specified securities purchased

or sold by persons including persons mentioned in (a) above from a
period of six months preceding the date of the Board Meeting at which
the buy-back was approved till the date of notice convening the general
meeting;
b) the maximum and minimum price at which purchases and sales

referred to in (b) above were made along with the relevant dates;
(viii) Intention of the promoters and persons in control of the company to

tender shares or other specified securities for buy-back indicating the
number of shares or other specified securities, details of acquisition
with dates and price;
(ix) A confirmation that there are no defaults subsisting in repayment of

deposits, redemption of debentures or preference shares or repayment
of term loans to any financial institutions or banks;
(x) A confirmation that the Board of Directors has made a full enquiry into
the affairs and prospects of the company and that they have formed
the opinion:
197
a. that immediately following the date on which the General Meeting

or the meeting of the Board of Directors is convened there will
be no grounds on which the company could be found unable to
pay its debts;
b. as regards its prospects for the year immediately following that

date that, having regard to their intentions with respect to the
management of the company’s business during that year and to
the amount and character of the financial resources which will
in their view be available to the company during that year, the
company will be able to meet its liabilities as and when they fall
due and will not be rendered insolvent within a period of one
year from that date; and
c. in forming their opinion for the above purposes, the directors shall
take into account the liabilities as if the company were being
wound up under the provisions of the Companies Act, 1956 or
Companies Act, 2013 or the Insolvency and Bankruptcy Code
2016 (including prospective and contingent liabilities);
(i) A report addressed to the Board of Directors by the

company’s auditors stating that-
1. they have inquired into the company’s state of affairs;
2. the amount of the permissible capital payment for the

securities in question is in their view properly determined;
and
3. the Board of Directors have formed the opinion as specified

in clause
(ii) on reasonable grounds and that the company will not, having
regard to its state of affairs, will not be rendered insolvent
within a period of one year from that date.
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BUY-BACK PROCESS
1 • Appointment of Merchant Banker(s)/ registrar
• filing the resolution with SEBI/ Stock

2
Exchanges(s)
• Public Announcement to be released in

3 newspapers and simultaneous filing with
SEBI/Stock Exchange
• Determination of Offer Price, Opening and

4
Closure of the Buyback Offer
5 • Acceptance and Payment to Security Holders
• Extinguishment of Certificates and intimation

6
to Stock Exchange
7 • File the return with ROC and SEBI
8 • Merchant Banker to file Final Report with SEBI
• Issue of Public advertisement in National daily

9
on Completion of Buy-back process
BUY-BACK THROUGH TENDER OFFER

A company may buy-back its shares or other specified securities from its
existing securities holders on a proportionate basis in accordance with the
provisions of these Regulations. However fifteen percent of the number of
securities which the company proposes to buy-back or number of securities
entitled as per their shareholding, whichever is higher, shall be reserved for
small shareholders.
Additional Disclosures
In addition to the disclosures provided in Schedule I to these regulations, the
following disclosure are required to be made in the explanatory statement:
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l the maximum price at which the buy-back of shares or other specified

securities shall be made and whether the board of directors of the
company is being authorised at the general meeting to determine
subsequently the specific price at which the buy-back may be made
at the appropriate time;
l if the promoter intends to offer his shares or other specified securities,
the quantum of shares or other specified securities proposed to be
tendered and the details of their transactions and their holdings for
the last six months prior to the passing of the special resolution for
buy-back including information of number of shares or other specified
securities acquired, the price and the date of acquisition.
Disclosures, filing requirements and timelines for public announcement

and draft letter of offer
1. Public  The company shall make a public announcement

Announcement within two working days from the date of
declaration of results of the postal ballot for
special resolution/ board of directors resolution
in at least one English National Daily, one Hindi
National Daily and one Regional language
daily, all with wide circulation at the place
where the Registered Office of the company
is situated.
 A copy of the public announcement along with
the soft copy, shall also be submitted to SEBI,
simultaneously, through a merchant banker.
2. Filing with The company shall within five working days of the
SEBI public announcement file the following:
 A draft letter of offer, along with a soft copy,
containing disclosures as specified in these
regulations through a merchant banker who
is not associated with the company.
 A declaration of solvency in specified form
and in a manner provided in Section 68(6)
of the Companies Act, 2013.
 Prescribed fees as specified in these
regulations.
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SEBI may provide its comments on the draft letter

of offer within seven working days of the receipt
of the draft letter of offer. Letter of Offer shall be
dispatch to the shareholders after making changes
suggested by SEBI, if any.
Offer Procedure
l While making buy-back offer, the company shall announce a record
date in the public announcement for the purpose of determining the
entitlement and the names of the security holders, who are eligible to
participate in the proposed buy-back offer.
l The company shall dispatch the letter of offer along with the tender
form to all securities holders which are eligible to participate in the
buy-back offer not later than five working days from the receipt of
communication of comments from SEBI.

Note:
l Letter of Offer may also be dispatched through electronic
mode in accordance with the provisions of the Companies Act,
2013.
l On receipt of a request from any shareholder to receive a copy
of the letter of offer in physical form, the same shall be provided.
l If case an eligible public shareholder does not receive the tender offer/
off form, even though he can participate in the buy-back off and tender
shares in the manner as provided by the SEBI.
l The date of the opening of the offer shall be not later than five working
days from the date of dispatch of the letter of offer. It shall be remain
open for a period of ten working days.
l The company shall provide the facilities for tendering of shares by the
shareholders and settlement of the same, through the stock exchange
mechanism in the manner as provided by the SEBI. • The company
shall accept shares or other specified securities from the securities
holders on the basis of their entitlement as on record date.
l The shares proposed to be bought back shall be divided into two
categories:
a. Reserved category for small shareholders; and
b. General category for other shareholders, and the entitlement of
a shareholder in each category shall be calculated accordingly.
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Escrow Account
The company shall as and by way of security for performance of its obligations
under the regulations, on or before the opening of the offer, deposit in an
escrow account such sum as specified under SEBI Regulations.
The amount in the escrow shall be deposited in the following manner:
Amount of Consideration % of amount to be deposited

Consideration not more than Rs. 25 per cent of the consideration
100 crores payable;
Consideration exceeds Rs. 100 25 percent upto Rupees 100 crores
crores and 10 percent thereafter.
The escrow account referred to above shall consist of
Cash
deposited • The company shall, while opening the account empower
with a the merchant banker to instruct the bank to make
scheduled payment the amount lying to the credit of the escrow
commercial account, as provided in the regulations
bank, OR
Bank
Gurantee in
• Such bank guarantee shall be in favour of the merchant
favour of
banker and shall be valid until thirty days after the expiry
merchant
of buyback period
banker
OR
Deposit of
acceptable
• The Company shall empower the merchant banker to
securities
realise the value of such escrow account by sale or
with
otherwise and if there is any deficit on realisation of the
appropriate
value of the securities, the merchant banker shall be liable
margin, with
to make good any such deficit
the merchant
banker
• In case the escrow account consists of bank guarantee or

approved securities, these shall not be returned by the
merchant banker till completion of all obligations under the
regulations.
A
Combination • Where the escrow account consists of bank guarantee or
of Above deposit of approved securities, the company shall also
deposit with the bank in cash a sum of at least one per
cent of the total consideration payable, as and by way of
security for fulfillment of the obligations under the
regulations by the company.
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Closure and Payment to Securities Holders
l The company shall open a special account with a banker to an issue,

registered with the SEBI immediately after the date of closure of the
offer, and deposit therein, such sum as would, together with ninety
percent of the amount lying in the escrow account, make-up the entire
sum due and payable as consideration for buy-back in terms of these
regulations and for this purpose, may transfer the funds from the
escrow account.
l The company shall complete the verification of offers received and

make payment of consideration to those holders of securities whose
offer has been accepted and return the remaining shares or other
specified securities to the securities holders within seven working days
of the closure of the offer.
BUY-BACK FROM THE OPEN MARKET
The company may buy-back of shares or other specified securities from the
Open Market may be in any of the following methods:
1) Through Stock Exchange
2) Book-building Process
Buy-back of Shares through Stock Exchange
1. Pre-conditions l The company may buy-back only on

stock exchanges having nationwide trading
terminals.
l The buy-back of the shares or other specified
securities through the stock exchange shall
not be made from the promoters or persons
in control of the company.
l The buy-back of shares or other specified
securities shall be made only through the
order matching mechanism except ‘all or
none’ order matching system.
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2. Disclosures, filing l The company shall appoint a merchant

requirements banker and make a public announcement in
and timelines manner as specified in buy-back of shares
of public through tender offer.
announcement
l The public announcement shall be made
within two working days from the date of
passing the board of director’s resolution or
date of declaration of results of the postal
ballot for special resolution, as relevant and
shall contain disclosures as specified in
these regulations.
l Simultaneously with the issue of such public
announcement, the company shall file a copy
of the public announcement with SEBI along
with the prescribed fees.
l The public announcement shall also contain
disclosures regarding details of the brokers
and stock exchanges through which the buy-
back of shares or other specified securities
would be made.
Note: In case of the buy-back from open market,
no draft letter of offer/ letter of offer is required to
be filed with SEBI.
3. Opening of the l The identity of the company as a purchaser
offer on stock shall be appeared on the electronic screen
exchange when the order is placed.
l The buy-back offer shall be opened not later
than seven working days from the date of
public announcement and shall be closed
within six months from the date of opening
of the offer.
4. Subsequent l The company shall submit the information
compliances regarding the shares or other specified
securities bought-back, to the stock exchange
on a daily basis in such form as may be
specified by SEBI and the same shall be
uploaded immediately on the official website
stock exchange and on Company’s website.
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5. Procedure for l Aseparate window shall be created by the

buy-back shares stock exchange, which shall remain open
or other specified during the period of buy-back, for buy-back
securities in of shares or other specified securities in
Physical form physical form.
l The Company shall buyback shares or
other securities holding physical shares
only through this separate window after
verification of identity and address of eligible
shareholders by broker.
l The price at which the shares or other
specified securities are bought back shall
be the volume weighted average price of the
shares or other specified securities bought-
back, other than in the physical form, during
the calendar week in which such shares or
other specified securities were received by
the broker.
l However, the price of shares or other
specified securities tendered during the first
calendar week of the buy-back shall be the
volume weighted average market price of
the shares or other specified securities of
the company during the preceding calendar
week.
Note: In case no shares or other specified
securities were bought back in the normal
market during calendar week, the preceding
week when the company has last bought back
the shares or other specified securities may
be considered.
205
6. Escrow Account l The company shall, before opening of the

offer, create an escrow account towards
security for performance of its obligations
under these regulations, and deposit in
escrow account 25 per cent of the amount
earmarked for the buy-back as specified in
the resolution of the board of directors or the
special resolution, as the case may be.
l The escrow account may be in the form of:
 cash deposited with any scheduled
commercial bank; or
 bank guarantee issued in favour of the
merchant banker by any scheduled
commercial bank.
l For such part of the escrow account as is in
the form of a cash deposit with a scheduled
commercial bank, the company shall while
opening the account, empower the merchant
banker to instruct the bank to make payment
of the amounts lying to the credit of the
escrow account, to meet the obligations
arising out of the buy-back.
l For such part of the escrow account as is in
the form of a bank guarantee;
o the same shall be in favour of the
merchant banker and shall be kept valid
for a period of thirty days after the expiry
of buy-back period of the offer or till the
completion of all obligations under these
regulations, whichever is later.
o the same shall not be returned by the
merchant banker till completion of all
obligations under the regulations.
l Where part of the escrow account is in the
form of a bank guarantee, the company shall
deposit with a scheduled commercial bank,
in cash, a sum of at least 2.5 per cent of
206
the total amount earmarked for buy-back

as specified in the resolution of the board
of directors or the special resolution, as the
case may be, as and by way of security
for fulfillment of the obligations under the
regulations by the company.
l The amount may be released from escrow
account for making of payment to the
shareholders subject to at least 2.5 per
cent of the amount earmarked for buy-back
as specified in the resolution of the board
of directors or the special resolution, as
the case may be, remaining in the escrow
account at all points of time.
l After utilisation of at least 50 % of the amount
earmarked for buy-back as specified in
the resolution of the Board of Directors or
Special Resolution, as case may be, the
amount and the guarantee remaining in the
escrow account, if any, shall be released to
the company.
l In the event of non-compliance as specified
above, SEBI may direct the merchant banker
to forfeit the escrow account, subject to
a maximum of 2.5 percent of the amount
earmarked for buy-back as specified in the
resolution of the board of directors or the
special resolution, as the case may be,
except in cases where,-
i. volume weighted average market price
(VWAMP) of the shares or other specified
securities of the company during the buy-
back period was higher than the buy-back
price as certified by the merchant banker
based on the inputs provided by the Stock
exchanges.
207
ii. sell orders were inadequate despite the

buy orders placed by the company as
certified by the merchant banker based
on the inputs provided by the stock
exchanges.
iii. such circumstances existed which were
beyond the control of the company and
in the opinion of SEBI merit consideration.
In the event of forfeiture for non-fulfilment of
obligations as specified in these regulation, the
amount forfeited shall be deposited in the Investor
Protection and Education Fund of Securities and
Exchange Board of India.
7. Extinguishment l T h e provisions pertaining to the
of certificates extinguishment of certificates for tender
offers specified above shall apply for
extinguishment of certificates for buy-back
from open market.
l The verification of acceptances shall be
completed by the company within fifteen
days of the payout.
l The company shall extinguish and physically
destroy the securities certificates so bought
back during the month in the presence
of a Merchant Banker and the Statutory
Auditor, on or before the fifteenth day of the
succeeding month.
However, the company shall ensure that all the
securities bought-back are extinguished within
seven days of expiry of buy-back period.
208
Buy-back through Book Building
1. Pre-conditions l Special resolution or Board Resolution, as the

case may be, shall be passed for authorisation
of Buy-back of shares or other specified
securities in the manner as specified under
these regulations.
2. Disclosures, filing l The company shall appoint a merchant banker

requirements and make a public announcement and made
and timelines disclosures in public announcement under
for public these regulations.
announcement
l The public announcement shall be made at
least 7 days prior to the commencement of
buy-back.
l The public announcement shall also contain
the detailed methodology of the book-building
process, the manner of acceptance, the format
of acceptance to be sent by the securities
holders pursuant to the public announcement
and the details of bidding centres.
3. Escrow Account l The provisions with respect to deposit of

amount in escrow account as specified in buy-
back through tenders offers shall also apply to
buy back of shares or other specified securities
through book building process.
l The deposit in the escrow account shall
be made before the date of the public
announcement.
l The amount to be deposited in the escrow
account shall be determined with reference to
the maximum price as specified in the public
announcement.
The cash component of the escrow account may
be maintained in an interest bearing account.
However, the merchant banker shall ensures that
the funds should be available at the time of making
payment to shareholders.
209
4. Filing with SEBI l A copy of the public announcement shall

be filed with SEBI within two days of such
announcement along with the prescribed fees.
5. Offer Procedure l The book-building process shall be made

through an electronically linked transparent
facility.
l The number of bidding centres shall not be
less than thirty and there shall be at least one
electronically linked computer terminal at all
the bidding centres.
l The offer for buy-back shall remain open to the
securities holders for a period not less than
fifteen days and not exceeding thirty days.
l The merchant banker and the company shall
determine the buy-back price based on the
acceptances received.
l The final buy-back price, which shall be the
highest price accepted shall be paid to all
holders whose shares or other specified
securities have been accepted for buy-back.
l The provisions pertaining to verification of
acceptances and the provisions pertaining
to opening of special account and payment
of consideration for tender offer shall be
applicable mutatis mutandis to the buy-back
through book building.
6. Extinguishment • The provisions pertaining to extinguishment of

of certificates certificates for tender offer shall be applicable
mutatis mutandis to the buy-back through book
building.
210
OBLIGATIONS FOR ALL BUY-BACK OF SHARES OR OTHER SPECIFIED

SECURITIES
Obligations of the Company Obligations of the Merchant Banker

l The company shall ensure that, l The merchant banker shall
– ensure that –
 the letter of offer, the public o the company is able to
announcement of the offer implement the offer;
or any other advertisement,
o the provision relating to
circular, brochure, publicity
escrow account has been
material shall contain
complied with;
true, factual and material
information and shall not o firm arrangements for monies
contain any misleading for payment to fulfill the
information and must state that obligations under the offer
the directors of the company are in place;
accept the responsibility for
o the public announcement of
the information contained in
buy-back is made in terms of
such documents;
the regulations;
 the company shall not issue
o the letter of offer has been filed
any shares or other specified
in terms of the regulations;
securities including by way of
bonus till the date of expiry o a due diligence certificate
of buy-back period for the along with the draft letter of
offer made under these offer has been furnished to
regulations; SEBI;
 the company shall pay the o the contents of the public

consideration only by way of announcement of offer as
cash; well as the letter of offer are
true, fair and adequate and
 t h e c o m p a n y s h a l l n o t
quoting the source wherever
withdraw the offer to buy-back
necessary;
after the draft letter of offer
is filed with SEBI or public o due compliance of sections 68,
announcement of the offer to 69 and 70 of the Companies
buy-back is made; Act and any other laws or
rules as may be applicable in
 the promoter(s) or his/their
this regard has been made;
associates shall not deal in
the shares or other specified o the bank with whom the
securities of the company escrow or special amount
211
in the stock exchange or has been deposited releases

off-market, including inter-se the balance amount to
transfer of shares among the the company only upon
promoters during the period fulfilment of all obligations
from the date of passing by the company under the
the resolution of the board regulations;
of directors or the special
o a final report is submitted to
resolution, as the case may
SEBI in the form specified
be, till the closing of the offer.
within fifteen days from the
 the company shall not raise date of expiry of buy-back
further capital for a period period.
of one year from the expiry
of buy-back period, except
in discharge of its subsisting
obligations.
l No public announcement of
buy-back shall be made during
the pendency of any scheme of
amalgamation or compromise
or arrangement pursuant to the
provisions of the Companies Act,
2013.
l The company shall nominate a
compliance officer and investors
service centre for compliance
with the buy-back regulations
and to redress the grievances
of the investors.
l particulars of the security
certificate extinguished and
destroyed shall be furnished
by the company to the stock
exchanges where the shares or
other specified securities of the
company are listed within seven
days of extinguishment and
destruction of the certificates.
212
l The company shall not buy-

back the locked-in shares or
other specified securities and
non-transferable shares or
other specified securities till the
pendency of the lock-in or till
the shares or other specified
securities become transferable.
l The company shall within two
days of expiry of buy-back period
issue a public advertisement
in a national daily, inter alia,
disclosing:
a) number of shares or other
specified securities bought;
b) price at which the shares
or other specified securities
bought;
c) total amount invested in the
buy-back;
d) details of the securities
holders from whom shares
or other specified securities
exceeding one percent of
total shares or other specified
securities are bought back;
and
e) the consequent changes in
the capital structure and the
shareholding pattern after and
before the buy-back.
l The company in addition to these
regulations shall comply with
the provisions of buy-back as
contained in the Companies Act
and other applicable laws.
213
PROVISIONS OF THE COMPANIES ACT, 2013

Buy back of securities are governed by Section 68, 69 and 70 of the Companies
Act, 2013 and Rule 17 of Companies (Share Capital and Debentures) Rules,
2014. Listed companies have to comply with the regulations laid down by
SEBI also in this behalf. Pursuant to Section 68(1) of the Companies Act,
2013, a company may purchase its own shares or other specified securities
(hereinafter referred to as buy-back) out of
(a) its free reserves;
(b) the securities premium account; or
(c) the proceeds of the issue of any shares or other specified securities:
However no buy-back of any kind of shares or other specified securities shall
be made out of the proceeds of an earlier issue of the same kind of shares
or same kind of other specified securities.
Conditions for Buy-Back pursuant to section 68(2) of the Companies

Act, 2013
a. the buy-back is authorised by its articles.
b. Buy back must be authorized by a Special Resolution. But if the buy-
back amounts to 10% or less of the total paid-up equity capital and
free reserves of the company then the Board resolution is enough and
the company is not required to pass any special resolution.
c. the buy-back is twenty-five per cent or less of the aggregate of paid-up
capital and free reserves of the company.
However in respect of the buy-back of equity shares in any financial
year, the reference to twenty-five per cent in this clause shall be
construed with respect to its total paid-up equity capital in that financial
year.
d. the ratio of the aggregate of secured and unsecured debts owed by
the company after buy-back is not more than twice the paid-up capital
and its free reserves. However the Central Government may, by order,
notify a higher ratio of the debt to capital and free reserves for a class
or classes of companies.
e. all the shares or other specified securities for buy-back are fully paid-
up.
f. the buy-back of the shares or other specified securities listed on any
214
recognised stock exchange is in accordance with the regulations made

by the Securities and Exchange Board in this behalf.
g. the buy-back in respect of shares or other specified securities other
than those specified in clause (f) is in accordance with such rules as
may be prescribed. However no offer of buy-back mentioned above
shall be made within a period of one year reckoned from the date of
the closure of the preceding offer of buy-back, if any.
The notice of the meeting at which the special resolution is proposed to be
passed shall be accompanied by an explanatory statement.
Every buy-back shall be completed within a period of one year from the date
of passing of the special resolution or Board Resolution as the case may be.

Being a Company Secretary of a company it is very important to know about
the various procedural requirements of Buy-back by a Company because a
Company Secretary can only then be able to make the directors understand
the real effects of buy back when deciding to return cash to shareholders
or to pursue other investment options. A buy-back’s impact on share price
comes from changes in a company’s capital structure and, more critically, from
the signals a buy-back sends. Investors are generally relieved to learn that
companies don’t intend to do something wasteful such as make an unwise
acquisition or a poor capital expenditure with the excess cash.
215
Chapter 9
Case Laws, Case Studies &
Practical Aspects
Chapter: Securities and Exchange Board of India Act, 1992
CASE LAWS
18.03.2021 Mr. Neeleshkumar Radheshyam Lahoti Adjudicating

(Noticee) (In the matter of Supreme Officer, SEBI
Tex Mart Limited) vs. Securities and
Exchange Board of India (SEBI)
Every person from whom information is sought should fully co-operate
with the investigating officer and promptly produce all documents,
records, information as may be necessary for the investigations.
Facts of the Case:
SEBI conducted an investigation into the affairs of Supreme Tex Mart Limited
(STML/ Company) for the period June 01, 2016 to October 31, 2016. During
the course of investigation, the Investigating Authority (IA) of SEBI issued
summons under Section 11C(2) read with Section 11C(3) of the SEBI Act,
1992 to Mr. Neeleshkumar Radheshyam Lahoti (Noticee) seeking certain
documents/ information. The Noticee replied to the summons and submitted
certain information. However, it was alleged that the Noticee submitted
incorrect information. In view of the same, SEBI initiated adjudication
proceedings under Section 15HB of the SEBI Act against the Noticee.
SEBI Order:
SEBI imposed a penalty of 8 lakh on the Noticee under the provisions of
Section 15HB of the SEBI Act. It was established that the Noticee provided
incorrect information to the Investigating Authority (IA) of SEBI and hampered
the process of investigation thus violating the provisions of Section 11C(2)
read with Section 11C(3) of the SEBI Act, 1992. It was a deliberate attempt of
Noticee to misguide investigation. Section 11C(3) of the SEBI Act empowers
the IA to obtain records, documents, information etc., as considered relevant
216
or necessary for the purpose of investigation. Section 11C(2) of SEBI Act

casts an obligation on every person associated with the securities market
to preserve and to produce to the Investigating Authority or any person
authorised by it in this behalf, such records, documents, information which
are in their custody or power.
Chapter: SEBI (Listing Obligations and Disclosure Requirements)

Regulations, 2015
04.03.2020 Picturehouse Media Ltd. vs. Securities

Bombay Stock Exchange Ltd Appellate
Tribunal
Penalty imposed for non-compliance of SEBI LODR Regulations on
delay appointment of women director
The provisions of the LODR regulations require that every listed company
should have a women director. The appellant hereby is a public listed
company and one women director resigned and consequently the post
became vacant which was require to be filled up by another woman under
the LODR Regulations. Since there was a delay in appointing a woman
director of the company, the penalty was imposed by BSE under LODR
Regulations. The appellant has filed the appeal against the order passed
by BSE imposing a penalty of Rs.7,59,920/- for violation of Regulations
17(1) and Reg. 19(1) and 19(2) of SEBI LODR Regulations, 2015. In the
light of default committed by the appellant SAT did not find any error in the
impugned order and dismissed the appeal.
Chapter: SEBI (Substantial Acquisition of Shares and Takeovers)

Regulations, 2011
Judicial Pronouncement: Supreme Court in the case of M/S Daiichi Sankyo

Company vs. Jayaram Chigurupati & Ors.
[2010] INSC 470 (8 July 2010) held that what does the deeming provision
do? The deeming provision simply says that in case of specified kinds of
relationships, in each category, the person paired with the other would be
deemed to be acting in concert with him/it. What it means is that if one
partner in the pair makes or agrees to make substantial acquisition of
shares etc. in a company it would be presumed that he/it was acting in
pursuance of a common objective or purpose shared with the other partner
of the pair. For example, if a company or its holding company makes or
217
agrees to make a move for substantial acquisition of shares etc. of a certain

target company then it would be presumed that the move is in pursuance
of a common objective and purpose jointly shared by the holding company
and the subsidiary company. But the mere fact that two companies are in
the relationship of a holding company and a subsidiary company, without
anything else, is not sufficient to comprise “persons acting in concert”.
Something more is required to comprise “persons acting in concert” than
the mere relationship of a holding company and a subsidiary company.
There may be hundreds of instances of a company having a subsidiary
company but to dub them as “persons acting in concert” would be quite
ridiculous unless another company is identified as the target company and
either the holding company or the subsidiary make some positive move or
show some definite inclination for substantial acquisition of shares etc. of
the target company
07.07.2020 M/s Sungold Whole Time Member, Securities
Capital Limited vs. and Exchange Board of India
SEBI
One of the principles underlying under SAST Regulations is exit
opportunity to the public shareholders of the Target Company at the
best price and accordingly, the provisions of SAST Regulations deals
with offer price, that offer price in an open offer highest of the prices
of shares of the Target Company derived through various methods.
Facts of the case:
The respective acquirers/PAC’s after acquiring shares/voting rights of
Sungold Capital Limited (“Target Company”) beyond the threshold of initial/
creeping acquisition have failed to make an open offer in terms of Regulation
10 and 11(1) of SAST Regulations, 1997, on, April 1, 2007 and September
14, 2007, respectively. As per Regulation 21(19) of SAST Regulations, 1997,
the acquirer and the PAC’s were jointly and severally liable for discharge of
obligations under SAST Regulations, 1997. SAST Regulations, 1997 has
been repealed by Regulation 35(1) of SAST Regulations, 2011 and has
been replaced by SAST Regulations, 2011. Regulation 35(2)(b) of SAST
Regulations, 2011, provides that all obligations incurred under the SAST
Regulations, 1997, including the obligation to make an open offer, shall
remain unaffected as if the repealed regulations has never been repealed.
Therefore, the obligations to make open offer, incurred by the acquirers/
PAC under SAST Regulations, 1997, are saved and can be enforced against
them by virtue of Regulation 35 of SAST Regulations, 2011.
218
Order:
SEBI directed acquirers/PAC’s of the target company to make a public
announcement of a combined open offer for acquiring shares of Sungold
Capital Ltd., under Regulation 10 and 11(1) of the SAST Regulations, 1997,
within a period of 45 days from the date when this order comes into force, in
accordance with SAST Regulations, 1997. The acquirers/PAC’s shall along
with the offer price, pay interest at the rate of 10% per annum for delay in
making of open offer, for the period starting from the date when the Noticees
incurred the liability to make the public announcement and till the date of
payment of consideration, to the shareholders who were holding shares in
the Target Company on the date of violation and whose shares are accepted
in the open offer, after adjustment of dividend paid, if any.
Some Questions & Answers
Topic: Buy- back
Why do Companies Buy-back Securities?

Buyback is a fast route to raise money to meet divestment targets of
the government. Hence, buyback is often used by PSUs whenever the
government wants to raise money without undergoing the tedious process
of initial public offering (IPOs), follow-on public offer (FPOs), offer for share
(OFS). While deciding the mode of raising money, the government has
also to consider the extent to which its stake in the company can go down.
Buy backs are an efficient way to raise money as it involves reduction in
the equity capital, increase in earnings per share (EPS), and increase in
return ratios of the company, all of which can help in improving valuations
of the company. The biggest buyback offers in FY21 were Tata Consultancy
Services ( ₹16,000 crore) and Wipro (₹9,500 crore). Six out of 10 biggest
buyback offers in FY21 were by PSUs.
219
Topic: SEBI (Substantial Acquisition of Shares and Takeovers)

Regulations, 2011
Question: Mr. X is Promoter of ABC (India) Limited (Target Company).

Mr. X is presently holding 53,073 shares constituting 0.52% of the paid up
equity capital of the Target Company. Further, Mr. X has been allotted 75,000
convertible warrants, convertible in to equity. After conversion of warrant in
to equity the shareholding of Mr. X will increase from 0.52% to 1.26% of the
paid up equity capital. Further, Ms. Z who is Mr. X’s elder sister’s daughter
and holding 7,80,000 equity shares constituting 7.76% of the paid up equity
share capital of the Company. Ms. Z is a foreign shareholder and she wanted
to gift(Off Market Transaction) her entire shareholding to her mother Mrs.
Y and in turn Mrs. Y wanted to gift the entire shareholding to Mr. X. If the
entire transaction as contemplated, if concluded, then the shareholding of Mr.
X will increase from 0.52% to 9.02% and the shareholding of the promoter
group will increase from 34.28% to 43.30%. You have been engaged as
Practising Company Secretary by Mr. X to advise on the following:
a) Is this increase in the promoter group shareholding would trigger
open offer requirements in terms of Regulation 3(2) of the SEBI
(SAST) Regulation, 2011.
b) Further, Whether such transaction would be exempted under
Regulation 10 of the SEBI (SAST) Regulations, 2011.
Answer: The set of facts as disclosed in the question contains three
transactions. First, conversion of convertible warrants in to equity. Secondly,
transfer of shares through off market transaction from Ms. Z to Mrs. Y and
thirdly, transfer of shares through off market transaction from Mrs. Y to Mr.
X. Regarding the first transaction, the trigger and open offer requirements, if
any has to be considered at the time of conversion of warrants in to equity
as the same would depends on the shareholding pattern of the promoter and
promoter’s group prevailing at the time of conversion of warrants in to equity
shares. Regarding the second and third transaction, considering that Ms.
Z, Mrs. Y and Mr. X are immediate relative thus they would be considered
as PAC in terms of Regulation 2(1)(q) of the SEBI (SAST) Regulations,
2011. Therefore, the shareholding of the promoters along with PACs would
increase more than 5% limit and would trigger open offer requirements
under Regulation 3(2) of the SEBI (SAST), 2011. However, the transaction
is between immediate relatives, the transaction would be exempt from the
obligation to make an open offer as per Regulation 10(1)(a)(i) of the SEBI
(SAST), Regulations, 2011
220
Question: What is the basis of computation of the creeping acquisitions

limit under Regulation 3(2) of Takeover Regulations 2011?
Answer: For computing acquisitions limits for creeping acquisition specified
under regulation 3(2), gross acquisitions/ purchases shall be taken in to
account thereby ignoring any intermittent fall in shareholding or voting rights
whether owing to disposal of shares or dilution of voting rights on account of
fresh issue of shares by the target company. SEBI in the interpretative letter
dated 18th September, 2015 issued under the SEBI (Informal Guidance)
Scheme, 2003 as requested by M/s Adani Properties Private Limited has
held that an exempt acquisition would not be counted towards computing
acquisitions on a gross basis.
Topic: SEBI (Listing Obligations and Disclosure Requirements)

Regulations, 2015
Question: A company ABC Limited, listed entity, entered into a transaction

with related party namely XYZ Limited for an amount of Rs. 26 Crore.
The turnover of ABC Limited is Rs. 240 Cr on standalone basis and after
considering consolidation of subsidiaries & associates is Rs. 290 Cr. Please
advise whether the transaction is related party transaction or not.
Answer: A material related party transaction is transaction which either
individually or taken together with previous transactions during a financial
year, exceeds 10% of the annual consolidated turnover of the listed entity
as per the last audited financial statements of the listed entity. In the above
case, ABC Limited has a consolidated turnover of Rs. 290 Cr and therefore,
threshold for materiality would be Rs. 29 Cr for a transaction with related
party. In case ABC Limited has not entered into any transaction during
the financial year 2019-20, which crosses the overall limit of Rs. 29 Cr
including the existing Rs. 26 Cr transaction then it is not material related
party transaction.
221
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.
222

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CERTIFICATE

© THE INSTITUTE OF COMPANY SECRETARIES OF INDIA

All rights reserved. No part of this publication shall be translated or copied in

Laser typesetting at: AArushi Graphics

Place : Bengaluru CS Nagendra D. Rao

1 SEBI Act, 1992 and the Securities Contracts (Regulation) 1

2 An Overview of SEBI (Issue of Capital and Disclosure 18

3 An Overview of SEBI (Listing Obligations and Disclosure 58

4 An Overview of SEBI (Substantial Acquisition of Shares 98

5 SEBI (Delisting of Equity Shares) Regulations, 2021 137

6 Issuance of Debt Instruments and SEBI Laws 159

7 SEBI (Prohibition of Insider Trading) Regulations, 2015 171

8 SEBI (Buy-Back of Securities) Regulations, 2018 191

9 Case Laws, Case Studies & Practical Aspects 216

SECURITIES CONTRACTS (REGULATION) ACT, 1956

The Government promulgated the Securities Contracts (Regulations) Rules,

(a) Stock exchanges through a process of recognition and continued

(b) contracts in securities, and

(c) listing of securities on stock exchanges.

Securities Securities include

Contract “Contract” means a contract for or relating to the purchase

Stock Stock Exchange means –

Recognised Recognised Stock Exchange means a stock exchange which

Government Government security means a security created and issued

Additional Means a trading ring or trading facility offered by a

the Government, the Reserve Bank of India,

any convertible bond or share warrant or any

the Central Government, in the interest of trade

PUNISHMENT FOR CONTRAVENTION

Any bye-laws shall be subject to such conditions in regard to previous

POWERS OF THE SEBI

The SEBI may, by notification in the Official Gazette, make regulations

d) any other matter which is required to be, or may be, specified by

Every regulation made under this

PUBLIC ISSUE AND LISTING OF SECURITIES

Section 2(h)(ie) provides that any certificate or instrument (by whatever

l No securities of the nature referred to in sub-clause (ie) of clause (h) of

l All the provisions of this Act relating to listing of securities of a public

Right of appeal to Central Government against refusal of stock exchanges

Right of appeal to Securities Appellate Tribunal (SAT) against refusal to

Procedure and Powers of Securities Appellate Tribunal

II. requiring the discovery and production of documents;

Right to Legal Representation

“Company Secretary” means a company secretary as defined in clause

Civil Court not to have jurisdiction

Appeal to Supreme Court

PENALTIES AND PROCEDURES

Section Contravention Penalty

Section Contravention Penalty

Section Contravention Penalty

Factors to be taken into account while adjudging the quantum of penalty

Appeal to Securities Appellate Tribunal

However, the Securities Appellate Tribunal may entertain an appeal after

ROLE OF COMPANY SECRETARY

Chapter as per ICDR Particulars

X Innovators Growth Platform (IGP)

Further Public Offer (FPO): It is an offer of specified securities by a

APPLICABILITY OF THE SEBI (ISSUE OF CAPITAL AND DISCLOSURE

MEANING OF DRAFT OFFER DOCUMENT, LETTER OF OFFER AND

INITIAL PUBLIC OFFER / FURTHER PUBLIC OFFER

ELIGIBILITY REQUIREMENTS TO BE COMPLIED WITH FOR IPO

b) If any of the promoters or directors of the issuer is a promoter or a director of any

c) If the issuer or any of its promoters or directors is a willful defaulter

d) If any of the promoters or directors of the issuer is a fugitive offender