CONTENTS

CHAPTERWISE WEIGHTAGE............................................................................................................................... 2
IMPORTANT LIMITS .......................................................................................................................................... 3
SHORT NOTES ................................................................................................................................................ 12
CASE STUDY QUESTIONS ................................................................................................................................. 73
NUMERICAL QUESTIONS ............................................................................................................................... 122
LODR COMPLIANCE CALENDER FOR COMPANIES LISTED ON MAIN BOARD ...................................................... 138
IMPORTANT DEFINITIONS ............................................................................................................................. 143
ELIGIBILITY CRITERIA..................................................................................................................................... 148
PROCEDURES ............................................................................................................................................... 157
ROLE OF COMPANY SECRETARY UNDER DIFFERENT REGULATIONS.................................................................. 165
GENERAL ROLE & RESPONSIBILITY OF INTERMEDIARIES .................................................................................. 168
PENALTIES.................................................................................................................................................... 172
OBLIGATIONS UNDER VARIOUS LAWS ........................................................................................................... 177
DISTINGUISH BETWEEN ................................................................................................................................ 184
RECENT AMENDMENTS & CIRCULARS FROM ICSI SUPPLEMENT ...................................................................... 187

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 CHAPTERWISE WEIGHTAGE
Chapter DEC JUNE Dec June Dec Aug Dec Dec June Dec
Name 23 23 2022 2022 2021 2021 2020 2019 2019 2018
Unit 1 SCRA 4 4 - 4 4 - - 9 5 4
Unit 2 SEBI 4 4 - - 4 4 8 4 4 4
Unit 3 5 5 4 - 10 4 4 - - 4
Depository
Unit 4 ICDR 8 5 8 9 13 12 14 9 11 18
Unit 5 LODR 8 16 26 22 9 22 9 8 4 17
Unit 6 SAST 10 9 4 8 - 10 14 13 17 -
Unit 7 Buy 7 15 - 9 5 4 5 12 9 -
Back
Unit 8 9 4 4 - 4 4 11 4 4 4
Delisting
Unit 9 & 10 12 4 9 8 4 4 10 5 10
SBEBSE 12 4 7 8 - - 9 -
Unit 11 5 10 5 5 4 8 4 4 8 11
Insider
Trading
Unit 12 5 10 10 5 9 5 5 9 9 10
Mutual
Funds
Unit 13 9 0 4 11 4 - 4 - - -
Collective
Investment
Scheme
Unit 14 4 4 13 4 9 5 8 8 5 8
Resolution of
Complaints
Unit 15 26 32 35 35 37 42 26 39 27 32
Structure of
Capital
Markets
Unit 16 19 13 10 10 8 3 19 6 18 13
Intermediary
135 135 135 135 135 135 135 135 135 135

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 IMPORTANT LIMITS
ICDR REGULATIONS 2018
ELIGIBILITY Condition 1: (Fixed Price or Book Building)
REQUIREMENTS OF a) NTA >= 3 Crores in each of preceding 3 full years
AN IPO b) AOP >= 15 crores during three preceding years
(REGULATION 6) c) NW >= 1 Crore in each of preceding 3 full years
d) If name changed within last 1 year, then at least 50% of revenue
of preceding one full year should be earned from activity indicated
by new name.

Condition 2: (if Condition 1 not fulfilled) (Book Building Only)

Book Building route only and allot at least 75% of net offer to public
to QIB and refund if it fails.

ELIGIBILITY If name changed within last 1 year, then at least 50% of revenue of
REQUIREMENTS IN preceding 1 full year should be earned from activity indicated by new
CASE OF CHANGE OF name;
NAME
Else:
Book Building route only and allot at least 75% of net offer to public
to QIB and refund if it fails.

ALLOCATION OF NET CATEGORY CONDITIONS FULLFILLED CONDITIONS

OFFER OF IPO REG 6(1) NOT
FULFILLED
REG 6(2)
FIXED BOOK BOOK
PRICE BUILDING BUILDING
QIB Remaining Not more than Not less than
portion 50% to QIB 75% (5% Mutual
(5% Mutual Funds)
Funds)
RII Minimum Not less than Not more than
50% 35% 10%
Non- Remaining Not less than Not more than
Institutional portion 15% 15%
Investors

Under QIB Portion, Issuer may allocate upto 60% of QIB portion to
Anchor Investors.

SECURITY DEPOSIT 1% of the Issue Size

MINIMUM at least 90% of the offer through the offer document, except in case
SUBSCRIPTION of an offer for sale of specified securities;

In the event of non-receipt of minimum subscription referred to in

sub-regulation (1), all application monies received shall be refunded
to the applicants forthwith, but not later than 4 days from the
closure of the issue.

PRICE & PRICE BAND The cap on the price band shall be less than or equal to 120% of the
floor price.

Provided that the cap of the price band shall be at least 105% of the
floor price.
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 The floor price or the final price shall not be less than the face value
of the specified securities;

DIFFERENTIAL Who are Entitled:

PRICING retail individual investors or retail individual shareholders or
employees entitled for reservation

Differential Pricing:
Price not lower than by more than 10% of the price at which net offer
is made to other categories of applicants, excluding anchor
investors;

In case of a book-built issue, the price of the specified securities

offered to the anchor investors shall not be lower than the price
offered to other applicants;

MONITORING AGENCY issue size, excluding the size of offer for sale by selling shareholders,
exceeds ` 100 Crores;

Not Applicable to bank or public financial institution or an

insurance company;

PERIOD OF at least 3 working days and not more than 10 working days;
SUBSCRIPTION
In case of a revision in the price band, for a minimum period of 3
working days, subject to above;

APPLICATION & The issuer shall stipulate in the offer document the minimum
MINIMUM application size in terms of number of specified securities which
APPLICATION VALUE shall fall within the range of minimum application value of ` 10,000
to ` 15,000;

The minimum sum payable on application per specified security

shall be at least 25% of the issue price;

MINIMUM NUMBER OF
ALLOTTEES IPO on Main Board Not less than 1,000
FPO on Main Board Not less than 1,000
IPO of SME At least 50
Innovators Growth At least 50
Platform
QIP 2: issue size is upto 250 Crore
5: issue greater than 250 Crore

MINIMUM
APPLICATION SIZE IPO Main Board ` 10,000 to ` 15,000
Innovators Growth Platform ` 2 Lakhs & Multiples
IPO of SME ` 1 Lakh & Multiples

TRADING LOT SIZE OF

VARIOUS REIT 1 Unit
SECURITIES/ IIT 1 Unit
UNITS/FUNDS
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 Security Receipts ` 10 Lakhs
IGP ` 2 Lakhs

RESERVATION ON Reservation for How Much?

COMPETITIVE BASIS Whom
Employees shall not exceed 5% of the post-issue
capital of the issuer & Max Amount `
2,00,000.
In case of Undersubscription, Amount
exceeding ` 2,00,000 but not exceeding `
5,00,000.

Shareholders shall not exceed 10% of the issue size

GREEN SHOE OPTION • Maximum Overallotment: 15% of the Issue

• Time Limit: Maximum 30 days after Listing
• Who can Lend Securities: IPO: Promoters & Pre Issue
Shareholders & FPO: Promoters & Pre Issue Shareholders
holding at least 5%.

FAST TRACK ISSUE • Average Market Capitalization:

Right Issue: ` 250 crores;
FPO: ` 1,000 Crores

• Annual Trading Turnover:

at least 2% of the weighted average number of the shares listed
during the said six months’ period

• Shareholders Grievances:
redressed at least 95% of total shareholder grievances complaints
received till the end of the quarter immediately preceding the month
of the reference date.

• Auditor’s Qualification:
does not exceed 5% of net profit/loss after tax

MINIMUM OFFER TO POST ISSUE CAPITAL MINIMUM OFFER TO

PUBLIC IN CASE OF PUBLIC
IPO Less or Equal to 1,600 Crores 25%
More than 1,600 but Less than or 400 Crores
equal to 4,000 Crores % = 400/issue Size
More than 4,000 Crores but less 10%
than or equal to 1,00,000 Crores
More than 1,00,000 Crores 5,000 Crores and at least 5%

MINIMUM OFFER SIZE SECURITY LIMIT

(OTHERS) Innovator’s Growth Platform Rs. 10 Crores
Indian Depository Receipts Rs. 50 Crores

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 LOCK IN FOR The promoter’s minimum contribution (i. e. 20%) shall be locked –
PROMOTERS in for a period of 18 Months from the date of allotment in the Initial
CONTRIBUTION public offer.

Provided that in case the majority of the issue proceeds excluding the
portion of offer for sale is proposed to be utilized for capital
expenditure, then the lock-in period shall be 3 years from the date of
allotment in the initial public offer.

The excess promoters’ contribution over the required minimum

contribution shall be locked – in for a period of 6 months from the
date of allotment in the Initial public offer.

Provided that in case the majority of the issue proceeds excluding the
portion of offer for sale is proposed to be utilized for capital
expenditure, then the lock-in period shall be 1 year from the date of
allotment in the initial public offer.

IPO BY COMPANIES IMPORTANT LIMITS:

WHO HAVE ISSUED SR • the SR equity shares have been issued prior to the filing of draft
EQUITY SHARES red herring prospectus and held for a period of at least 3 months
prior to the filing of the red herring prospectus;
REGULATION 6(3) • The SR equity shares shall have voting rights in the ratio of a
minimum of 2:1 upto a maximum of 10:1 compared to ordinary
shares and such ratio shall be in whole numbers only;
• the net worth of the SR shareholder, as determined by a
Registered Valuer, shall not be more than ` 1,000 crore.

ALTERNATIVE INVESTMENT FUNDS

INVESTMENT IN AN • Each scheme of the AIF shall have corpus of atleast ` 25 Crores
AIF and the AIF shall not accept from an investor, an investment of
value less than ` 1 Crore. In case the investors are employees or
directors of the AIF Fund or employees or directors of the Manager,
the minimum value of investment shall be ` 25 lakhs.

• The Manager or Sponsor shall have a continuing interest in the

AIF Fund of not less than 2.5% of the corpus or ` 5 Crores,
whichever is lower, in the form of investment in the Alternative
Investment Fund and such interest shall not be through the
waiver of management fees in Category I and Category II AIFs.

• In the case of Category III AIF, the continuing interest shall be

not less than 5% of the corpus or ` 10 Crores, whichever is lower.
The Manager or Sponsor shall disclose their investment in the
AIF to the investors of the AIF.

• No scheme of the AIF shall have more than 1,000 investors.

Provided that the provisions of the Companies Act, 2013 shall
apply to the AIF, if it is formed as a company.

GENERAL • Category I and II of AIF shall invest not more than 25% of the
INVESTMENT investable funds in an Investee Company directly or through
CONDITIONS investment in the units of other AIF;

• Category III AIF shall invest not more than 10% of the net
asset value in listed equity of an Investee Company and shall

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 invest not more than 10% of the investable funds in securities
other than listed equity of an Investee Company, directly
or through investment in units of other Alternative Investment
Funds;
INVESTMENT IN AN ✓ An angel fund shall have a corpus of at least ` 5 crore.
ANGEL FUND
✓ Angel funds shall accept, up to a maximum period of five years,
an investment of not less than ` 25 lakhs from an angel investor;
INVESTMENT BY • Investment by an angel fund in any venture capital undertaking
ANGEL FUNDS shall not be less than ` 25 lakh and shall not exceed ` 10 crores.

• Angel funds shall not invest more than 25% of the total
investments under all its schemes in one venture capital
undertaking, the compliance of which shall be ensured by the
Angel Fund at the end of its tenure.

• No scheme of the angel fund shall have more than 200 angel
investors.

SHARE BASED EMPLOYEE BENEFITS & SWEAT EQUITY

SWEAT EQUITY It should be noted that the company cannot issue sweat equity
SHARES shares for more than 15% of the existing paid-up share capital in a
(COMPANIES ACT year or shares of the issue value of Rs 5 crores, whichever is higher,
2013)
Provided that the issuance of sweat equity shares in the Company
shall not exceed 25% of the paid-up equity capital of the Company at
any time.

IMPLEMENTATION OF Limit for a FY:

THE SCHEME Secondary acquisition in a financial year by the trust shall not
THROUGH A TRUST exceed 2% of the paid-up equity capital as at the end of the previous
financial year.

Cumulative Limit:
The total number of shares under secondary acquisition held by the
trust shall at no time exceed the limits prescribed in the Regulations,
as a percentage of the paid-up equity capital as at the end of the
financial year immediately prior to the year in which the shareholder
approval is obtained for such secondary acquisition.

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 LODR 2015
SHARE TRANSFER In the case of in-house share transfer facility, as and when the total
AGENT number of holders of securities of the listed entity exceeds
1,00,000, the listed entity shall either register with the Board as a
Category II share transfer agent or appoint Registrar to an issue and
share transfer agent registered with the Board.

MATERIAL “Material Subsidiary” shall mean a subsidiary, whose income or net

SUBSIDIARY worth exceeds 10% of the consolidated income or net worth
respectively, of the listed entity and its subsidiaries in the
immediately preceding accounting year.

SR Equity Shares The total voting rights of SR shareholders (including ordinary

shares) in the issuer upon listing, pursuant to an initial public
offer, shall not at any point of time exceed 74%.

SAST REGULATIONS
MANDATORY OPEN (1) No acquirer shall acquire shares or voting rights in a target
OFFER company which taken together with shares or voting rights, if any,
held by him and by persons acting in concert with him in such
target company, entitle them to exercise 25% or more of the voting
rights in such target company unless the acquirer makes a public
announcement of an open offer for acquiring shares of such target
company in accordance with these regulations.

(2) No acquirer, who together with persons acting in concert with

him, has acquired and holds in accordance with these regulations
shares or voting rights in a target company entitling them to exercise
25% or more of the voting rights in the target company but less
than the maximum permissible non-public shareholding, shall
acquire within any financial year additional shares or voting rights
in such target company entitling them to exercise more than 5% of
the voting rights, unless the acquirer makes a public
announcement of an open offer for acquiring shares of such target
company in accordance with these regulations.

For the purpose of this regulation, any reference to “25%” in case of

listed entity which has listed its specified securities on Innovators
Growth Platform shall be read as “49%”.

VOLUNTARY OPEN An acquirer, who together with persons acting in concert with him,
OFFER holds shares or voting rights in a target company entitling them to
exercise 25% 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.

For the purpose of this regulation, any reference to “25%” in case of

listed entity which has listed its specified securities on Innovators
Growth Platform shall be read as “49%”.

DELISTING REGULATIONS

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 MINIMUM NUMBER OF the post offer shareholding of the acquirer, along with the shares
EQUITY SHARES TO tendered / offered by public shareholders accepted as eligible bids
BE ACQUIRED at the discovered price or the counter offer price, as the case may
be, reaches 90% of the total issued shares of that class excluding
the following:
(i) shares held by custodian(s) against which depository
receipts have been issued overseas;

(ii) shares held by a Trust set up for implementing an

Employee Benefit scheme under the SEBI (SBEBSE)
Regulations, 2021;

(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 SEBI (LODR) Regulations 2015.

BUY BACK REGULATIONS

MAXIMUM BUY BACK BY BOARD RESOLUTION:
LIMIT 10% or less of the total paid-up equity capital and free reserves of
the company

BY SPECIAL RESOLUTION:
25% 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 25% in this clause shall be construed with
respect to its total paid-up equity capital in that financial year.

SPECIAL LIMIT FOR OPEN MARKET METHOD:

No offer of buy-back for 15% or more of the paid up capital and free
reserves of the company shall be made from the open market.

Please Note the amendment in this regard:

Provided that the buy-back from the open market through stock
exchanges, based on the standalone or consolidated financial
statements of the company, whichever sets out a lower amount,
shall be less than:—
(i) 15% of the paid up capital and free reserves of the company till
March 31, 2023;
(ii) 10% of the paid up capital and free reserves of the company till
March 31, 2024;
(iii) 5% of the paid up capital and free reserves of the company till
March 31, 2025: Provided further that buy-back from the open
market through the stock exchange shall not be allowed with effect
from April 1, 2025.

So, if the question comes in exam regarding this, you have to

take 10% as the limit and calculate accordingly.

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 MUTUAL FUNDS
CONTRIBUTION OF The sponsor makes an application for registration of the mutual
SPONSOR IN MUTUAL fund and contributes at least 40% of the net worth of the AMC.
FUND
NORMS FOR (1) No sponsor of a mutual fund, its associate or group company
SHAREHOLDING & including the asset management company of the fund, through the
GOVERNANCE IN schemes of the mutual fund or otherwise, individually or
MUTUAL FUND collectively, directly or indirectly, have –
(a) 10% or more of the share-holding or voting rights in the asset
management company or the trustee company of any other mutual
fund; or
(b) representation on the board of the asset management company
or the trustee company of any other mutual fund.

(2) Any shareholder holding 10% or more of the share-holding or

voting rights in the asset management company or the trustee
company of a mutual fund, shall not have, directly or indirectly, –
(a) 10% or more of the share-holding or voting rights in the asset
management company or the trustee company of any other mutual
fund; or
(b) representation on the board of the asset management company
or the trustee company of any other mutual fund.

NET WORTH OF AMC the asset management company has a net worth of not less than `
50 crore;

INVESTMENT BY The sponsor or asset management company shall invest not less
SPONSOR OR AMC IN than 1% of the amount which would be raised in the new fund offer
SCHEMES or fifty lakh rupees, whichever is less, and such investment shall
not be redeemed unless the scheme is wound up.

RESTRICTIONS ON ❖ The schemes shall not invest more than 10% of its NAV in debt
INVESTMENTS BY instruments issued by a single issuer which are rated not below
MUTUAL FUNDS investment grade by a CRA.

However, such limit can be increased to 12% of its NAV with

prior approval of Board of Trustee and Board of Directors of
AMC.

❖ Mutual fund shall not own more than 10% of company’s paid -
up capital carrying voting rights.

❖ A scheme may invest in another scheme under the same asset

management company or any other mutual fund without
charging any fees. However, the aggregate inter-scheme
investments made by all schemes shall not exceed 5% of the NAV
of the mutual fund.

❖ No mutual fund shall invest more than 10% of its NAV in the
equity shares or equity related instruments of any company.

INTERMEDIARIES
SUMMARY OF NET Credit Rating Agency ` 25 Crores
WORTH Investment Adviser Individuals (Net Tangible Assets): `
REQUIREMENTS OF 5 Lakhs

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 VARIOUS Non-Individuals (Net Worth): ` 50
INTERMEDIARIES Lakhs
Merchant Banker ` 5 Crores
Registrar & Share Transfer Category I: ` 50,00,000
Agents Category II: ` 25,00,000
Debenture Trustee ` 10 Crores
Portfolio Managers ` 5 Crores
Custodian ` 50 Crores
Research Analyst ` 25 Lakhs

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 SHORT NOTES

1. MERCHANT BANKER
Merchant Banker means:
 A person who manages;
 the business of issue of securities
 by making arrangements for selling, buying or subscribing to securities.

Role & Responsibilities:

The Merchant banker undertakes the following activities including preparation of prospectus,
advisory on projects, determining financial structure, due diligence, tie – up with financiers,
allotment of shares and refunds:-
(a) Managing of public issue of securities;
(b) Underwriting connected with the aforesaid public issue management business;
(c) Managing/Advising on international offerings of debt/equity i. e. GDR, ADR, EDBs, FCCBs,
FCEBs and bonds;
(d) Private placement of securities;
(e) Primary or satellite dealership of government securities;
(f) Corporate advisory services with regard to takeovers, acquisition and disinvestment.
(g) Stock broking
(h) Advisory Services for Projects
(i) syndication of rupee term loan
(j) International financial advisory services

2. REGISTRAR TO AN ISSUE & SHARE TRANSFER AGENT

Registrar to an issue means the person appointed by a Body Corporate or any person or group
of persons to carry the following activities on its or his or their behalf:
(i) Collecting application from investors in respect of an issue;
(ii) Keeping proper record of applications and monies received from investors or paid to the seller
of securities;
(iii) Assisting body corporate or person or group of persons in:
(a) Determining the basis of allotment in consultation with the stock exchange;
(b) Finalizing the list of allottees;
(c) Processing and dispatching the allotment letters, refund orders or certificates etc.

Share Transfer Agent means:

(i) any person who on behalf of any body corporate, maintains the records of holders of securities
issued by such body corporate and deals with all matters connected with the transfer and
redemption of its securities;
(ii) the department or division, by whatever name called, of a body corporate performing the
activities as share transfer agents if at any time the total number of holders of its securities
issued exceed one lakh;

3. PRE ISSUE & POST ISSUE WORK UNDERTAKEN BY REGISTRAR TO AN ISSUE & SHARE TRANSFER AGENT (Dec 2020)

Pre-issue Activities:
• Sending instructions to banks for reporting of collection figures and collection of
applications.
• Providing practical inputs to the Lead Manager and Printers regarding the design of the Bid
cum application form
• Facilitate and establish information flow system between clients, banks and Managers to the
Issue.
• Liaising with Regulatory Authority such as SEBI & Stock Exchanges.

Post Issue Activities:

• Data capturing & validation
• Reconciliation
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• Provide allotment alternatives in consultation with Client/Merchant banker and Stock
Exchanges
• Facilitating Listing
• Uploading of data to the depositories for crediting of securities electronically.
• Dispatch of Refund orders/share certificates/ credit advise.
• Periodic report submission to regulatory authorities
• Reconciliation of Refund payments
• Attending to post issue investor queries
• Web based investor enquiry system for allotment/ refund details.

4. BANKER TO AN ISSUE (Dec 2020)

‘Banker to an Issue’ means a scheduled bank or such other banking company as may be
specified by the SEBI from time to time, carrying on all or any of the following activities:
(i) Acceptance of application and application monies;
(ii) Acceptance of allotment or call monies;
(iii) Refund of application monies;
(iv) Payment of dividend or interest warrants.

Bankers to the issue, as the name suggests, carries out all the activities of ensuring that the
funds are collected and transferred to the Escrow accounts.

The banks are expected to furnish prompt information and records to the company and to the
lead manager for monitoring and progressing the issue work.

5. DUTIES OF DEBENTURE TRUSTEE (June 2021)

• satisfy itself that the prospectus or letter of offer does not contain any matter which is
inconsistent with the terms of the issue of debentures or with the trust deed.
• satisfy itself that the covenants in the trust deed are not prejudicial to the interest of the
debenture holders.
• call for periodical status/ performance reports from the issuer company within 7 days of the
relevant board meeting or within 45 days of the respective quarter whichever is earlier.
• communicate promptly to the debenture holders defaults, if any, with regard to payment of
interest or redemption of debentures and action taken by the trustee therefor.
• ensure that the company does not commit any breach of the terms of issue of debentures or
covenants of the trust deed and take such reasonable steps as may be necessary to remedy
any such breach.
• inform the debenture holders immediately of any breach of the terms of issue of debentures
or covenants of the trust deed.
• ensure the implementation of the conditions regarding creation of security for the
debentures.
• ensure that the assets of the company issuing debentures and of the guarantors, if any, are
sufficient to discharge the interest and principal amount at all times and that such assets
are free from any other encumbrances except those which are specifically agreed to by the
debenture holders.
• call for reports on the utilization of funds raised by the issue of debentures.
• take steps to convene a meeting of the holders of debentures as and when such meeting is
required to be held.
• ensure that the debentures have been converted or redeemed in accordance with the terms
of the issue of debentures.
• inform the SEBI immediately of any breach of trust deed or provision of any law, which
comes to the knowledge of the trustee.
• exercise due diligence to ensure compliance by the body corporate, with the provisions of the
Companies Act, SEBI (LODR), Regulations, 2015, the listing agreement of the stock exchange
or the trust deed or any other regulations issued by the SEBI pertaining to debt issue.

6. STOCK BROKER
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• "Stock Broker" means a person having trading rights in any recognised stock exchange and
includes a trading member.
• A stock broker plays a very important role in the secondary market helping both the seller
and the buyer of the securities to enter into a transaction.
• When executing an order, the stock broker may on behalf of his client buy or sell securities
from his own account i.e. as principal or act as an agent.
• For each transaction he has to issue necessary contract note indicating whether the
transaction has been entered into by him as a principal or as an agent for another.
• While buying or selling securities as a principal, the stock broker has to obtain the consent
of his client and the prices charged should be fair and justify by the conditions of the market.
• Stock broker may also act as an underwriter.

7. PORTFOLIO MANAGER
• "Portfolio manager” means a body corporate, which pursuant to a contract with a client,
advises or directs or undertakes on behalf of the client (whether as a discretionary portfolio
manager or otherwise) the management or administration of a portfolio of securities or goods
or funds of the client, as the case may be.
• A portfolio manager plays a pivotal role in deciding the best investment plan for an individual
as per his income, age as well as ability to undertake risks.
• A portfolio manager is responsible for making an individual aware of the various investment
tools available in the market and benefits associated with each plan.
• Make an individual realize why he actually needs to invest and which plan would be the best
for him.
• A portfolio manager is responsible for designing customize investment solutions for the
clients according to their financial needs.

8. CUSTODIAN (Dec 2020) (Dec 2023)

"Custodian" is a person who carries on or propose to carry on the business of providing custodial
services to the client. The custodian keeps the custody of the securities of the client. The
custodian also provides incidental services such as maintaining the accounts of securities of
the client, collecting the benefits or rights accruing to the client in respect of securities.

The Custodian: -
• Administrate and protect the assets of the clients.
• Open a separate custody account and deposit account in the name of each client.
• Record assets.
• Conduct registration of securities.

9. INVESTMMENT ADVISOR
• “Investment Adviser” means any person, who for consideration, is engaged in the business
of providing investment advice to clients or other persons or group of persons and includes
any person who holds out himself as an investment adviser, by whatever name called.

• Investment advisers are those, who provide investment advice. “Investment advice” means
advice relating to investing in, purchasing, selling or otherwise dealing in securities or
investment products, and advice on investment portfolio containing securities or investment
products, whether written, oral or through any other means of communication for the benefit
of the client and shall include financial planning.

• However, investment advice given through newspaper, magazines, any electronic or

broadcasting or telecommunications medium, which is widely available to the public shall
not be considered as investment advice for the purpose of these regulations.

10. RESEARCH ANALYST

“Research analyst” means a person who is primarily responsible for,-
i. preparation or publication of the content of the research report; or
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ii. providing research report; or
iii. making ‘buy/sell/hold’ recommendation; or
iv. giving price target; or
v. offering an opinion concerning public offer,
with respect to securities that are listed or to be listed in a stock exchange, whether or not any
such person has the job title of ‘research analyst’ and includes any other entities engaged in
issuance of research report or research analysis.

Research analyst study Companies and industries, analyse raw data, and make forecasts or
recommendations about whether to buy, hold or sell securities.
They analyse information to provide recommendations about investments in securities to their
clients.
Investors often view analysts as experts and important sources of information about the
securities they review and often rely on their advice.
There are basically three broad types of analysts, viz. sell-side analysts, buy-side analysts and
independent analysts.

11. CREDIT RATING AGENCIES

• “Credit rating agency” means a body corporate which is engaged in, or proposes to be
engaged in, the business of rating of securities that are listed or proposed to be listed on a
stock exchange recognized by the SEBI.
• Credit rating is extremely important as it not only plays a role in investor protection but also
benefits industry as a whole in terms of direct mobilization of savings from individuals.
• Rating also provide a marketing tool to the company and its investment bankers in placing
company’s debt obligations with a investor base that is aware of, and comfortable with, the
level of risk.
• Ratings also encourage discipline amongst corporate borrowers to improve their financial
structure and operating risks to obtain a better rating for their debt obligations and thereby
lower the cost of borrowing.

12. FOREIGN PORTFOLIO INVESTORS (June 2021)

“Foreign Portfolio Investor” means a person who has been registered under Chapter II of SEBI
(FPI) Regulations, 2019 and shall be deemed to be an intermediary in terms of the provisions of
the SEBI Act, 1992.
(a) A foreign portfolio investor shall, at all times, abide by the code of conduct:
(b) comply with the provisions of these regulations, as far as they may apply, circulars issued
thereunder and any other terms and conditions specified by the SEBI from time to time;
(c) As soon as possible but not later than seven working days, inform the SEBI and designated
depository participant in writing, if any information or particulars previously submitted to the
SEBI or designated depository participant are found to be false or misleading, in any material
respect;
(d) As soon as possible but not later than seven working days, inform the SEBI and designated
depository participant in writing, if there is any material change in the information including
any direct or indirect change in its structure or ownership or control, previously furnished by
him to the SEBI or designated depository participant;
(e) as and when required by the SEBI or any other Government agency in India, submit any
information, record or documents in relation to its activities as a foreign portfolio investor;

(f) As soon as possible but not later than seven working days, inform the SEBI and the
designated depository participant, in case of any penalty, pending litigation or proceedings,
findings of inspections or investigations for which action may have been taken or is in the
process of being taken by an overseas regulator against it;
(g) obtain a Permanent Account Number from the Income Tax Department;
(h) in relation to its activities as foreign portfolio investor, at all times, subject itself to the extant
Indian laws, rules, regulations, guidelines and circulars issued from time to time;
(i) be a fit and proper person based on the criteria specified in Schedule II of the SEBI
(Intermediaries) Regulations, 2008;
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(j) undertake necessary KYC on its shareholders/ investors in accordance with the rules
applicable to it in the jurisdiction where it is organised; provide any additional information or
documents including beneficiary ownership details of their clients as may be required by the
designated depository participant or the SEBI or any other enforcement agency to ensure
compliance with the Prevention of Money Laundering Act, 2002 and the rules and regulations
specified thereunder, the Financial Action Task Force standards and circulars issued from time
to time by the SEBI; and
(k) ensure that securities held by foreign portfolio investors are free from all encumbrances.
(l) Ensure that accurate details regarding its investor group are maintained with its designated
depository participant at all times.

13. INTERNAL AUDIT OF INTERMEDIARIES BY CS IN PRACTICE (Dec 2021)

• Efficient internal control systems and processes are pre-requisite for good governance. The
governance being a dynamic concept requires constant evaluation and monitoring of the
systems and processes. In the context of Capital Markets, Capital Market intermediaries are
an important constituent of overall governance framework.
• Being an important link between regulators, investors and issuers, they are expected to
ensure that their internal controls are so efficient that ensure effective investor service at all
times and provide regulators comfort as to the compliance of regulatory prescription.
• In this direction, SEBI has authorized PCS to undertake internal audit of various capital
market intermediaries and issue quarterly certificate with respect to reconciliation of share
capital audit.
• Every market intermediary shall appoint a CS as a Compliance officer who shall be
responsible for monitoring the compliance of the Act, rules and regulations, notifications,
guidelines, instructions, etc issued by SEBI or CG and for redressal of investor’s grievances.
• The Compliance officer shall immediately and independently report to SEBI for any non-
compliance observed by him.
• A portfolio manager with professional experience and expertise in the field, studies the
market and adjusts the investment mix for his client on a continuing basis to ensure safety
of investments and reasonable returns therefrom.
• Every portfolio manage is required to appoint a PCS or PCA for conducting the internal audit.

14. APPOINTMENT OF COMPLIANCE OFFICER BY INTERMEDIARIES (June 2023)

An intermediary registered with SEBI shall appoint a compliance officer for monitoring the
compliance by it of the requirements of the Act, rules, regulations, guidelines, circulars and
orders made or issued by the SEBI or the Central Government, or the rules, regulations and
byelaws of the concerned stock exchanges, or the self regulatory organisation. However, the
intermediary may not appoint compliance officer if it is not carrying on the activity of the
intermediary. The compliance officer shall report to the intermediary or its board of directors,
in writing, of any material non-compliance by the intermediary.

15. DEPOSITORY PARTICIPANT (ROLE & FUNCTION)

• A Depository Participant (DP) is the representative of the investor in the depository system
providing link between the Company and investors through depositories.
• An investor opens its Demat Account with a Depository Participants for keeping its securities in
electronic form.
• As per SEBI regulations, DP could be organizations involved in the business of providing financial
services like banks, brokers, custodians and financial institutions.
• In short, it is a market intermediary through whom the depository services can be availed by the
investors is called a Depository Participant (DP).

Functions of the Depository Participant in connection with Dematerialization:

(a) Acts as the agent of Depository;
(b) Customer interface of Depository;
(c) Account Opening;
(d) Facilitates dematerialization;

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(e) Instant transfer on pay-out;
(f) Credits to investor on IPO, rights and bonus;
(g) Settles trades in the electronic segment.

16. PRIVATE EQUITY (Dec 2018)

• Private equity is a type of equity (finance) and one of the asset classes that are not publicly
traded on a stock exchange.
• Private equity is essentially a way to invest in some assets that isn’t publicly traded, or to
invest in a publicly traded asset with the intention of taking it private.

• Unlike stocks, mutual funds, and bonds, private equity funds usually invest in more illiquid
assets, i.e. companies.
• By purchasing companies, the firms gain access to those assets and revenue sources of the
company, which can lead to very high returns on investments.
• Another feature of private equity transactions is their extensive use of debt in the form of
high-yield bonds. By using debt to finance acquisitions, private equity firms can
substantially increase their financial returns.
• Private equity consists of investors and funds that make investments directly into private
companies or conduct buyouts of public companies that result in a delisting of public equity.
• Capital for private equity is raised from retail and institutional investors, and can be used
to fund new technologies, expand working capital within an owned company, make
acquisitions, or to strengthen a balance sheet.
• The major of private equity consists of institutional investors and accredited investors who
can commit large sums of money for long periods of time.
• Private equity investments often demand long holding periods to allow for a turnaround of a
distressed company or a liquidity event such as IPO or sale to a public company.
• Generally, the private equity fund raise money from investors like Angel investors,
Institutions with diversified investment portfolio like – pension funds, insurance companies,
banks, funds of funds etc.

17. TYPES OF PRIVATE EQUITY (Dec 2022)

Private equity investments can be divided into the following categories:
• Leveraged Buyout (LBO) (Dec 2021): This refers to a strategy of making equity investments
as part of a transaction in which a company, business unit or business assets is acquired
from the current shareholders typically with the use of financial leverage. The companies
involved in these type of transactions that are typically more mature and generate operating
cash flows.
• Venture Capital: It is a broad sub-category of private equity that refers to equity investments
made, typically in less mature companies, for the launch, early development, or expansion
of a business.
• Growth Capital: This refers to equity investments, mostly minority investments, in the
companies that are looking for capital to expand or restructure operations, enter new
markets or finance a major acquisition without a change of control of the business.

18. ACCREDITED INVESTOR AND LARGE VALUE ACCREDITED INVESTOR (Dec 2022)
As per SEBI (AIF) Regulations, 2012, "Accredited investor"
means any person who is granted a certificate of accreditation by an accreditation agency
and who –
(i) in case of an individual, Hindu Undivided Family, family trust or sole proprietorship has:
(A) annual income of at least two crore rupees; or
(B) net worth of at least seven crore fifty lakh rupees, out of which not less than three crores
seventy-five lakh rupees is in the form of financial assets; or
(C) annual income of at least one crore rupees and minimum net worth of five crore rupees,
out of which not less than two crore fifty lakh rupees is in the form of financial assets.
(ii) in case of a body corporate, has net worth of at least fifty crore rupees;
(iii) in case of a trust other than family trust, has net worth of at least fifty crore rupees;

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 (iv) in case of a partnership firm set up under the Indian Partnership Act, 1932, each partner
independently meets the eligibility criteria for accreditation.

“Large value fund for accredited investors” means an Alternative Investment Fund or scheme
of an Alternative Investment Fund in which each investor (other than the Manager, Sponsor,
employees or directors of the Alternative Investment Fund or employees or directors of the
Manager) is an accredited investor and invests not less than seventy crore rupees.

19. VENTURE CAPITAL FUNDS (Dec 2018)

“Venture capital fund” means an alternate investment fund which invest primarily in unlisted
securities of startups, emerging or early stage venture capital undertaking mainly involved in new
products, new services, technology or intellectual property right based activities or a new
business model in shall include an Angel fund.

Venture capital is one of the innovative financing resources for a company in which the promoter
have to give up some level of ownership and control of business in exchange for capital for a
limited period say 3 to 5 years.

Venture Capital is generally equity investments made by Venture Capital Funds, at an early
stage in privately held companies, having potential to provide a high rate of return on their
investments. It is a resource for supporting innovation, knowledge based ideas and technology
and human capital intensive enterprises.

Venture capital fund means an Alternative Investment Fund which invests primarily in unlisted
securities of start-ups, emerging or early-stage venture capital undertakings mainly involved
in new products, new services, technology or intellectual property right based activities
or a new business model and shall include an angel fund.

Essentially, a venture capital company is a group of investors who pool investments focused
within certain parameters. The participants in venture capital firms can be institutions investors
like pension funds, insurance companies, foundations or individuals but these are high risk
investments which may give high return or high loss.

20. ALTERNATIVE INVESTMENT FUNDS (June 2022)

Alternative investment funds (AIFs) are defined in Regulation 2(1)(b) of the SEBI ( AIF)
Regulations, 2012.

It refers to any privately pooled investment fund, (whether from Indian or foreign sources), in
the form of a trust or a company or a body corporate or a Limited Liability Partnership (LLP)
which are not presently covered by any Regulation of SEBI governing fund management (like,
Regulations governing Mutual Fund or Collective Investment Scheme) nor coming under the
direct regulation of any other sectoral regulators in India-IRDA, PFRDA, RBI. Hence, in India,
AIFs are private funds which are otherwise not coming under the jurisdiction of any regulatory
agency in India.

According to SEBI (AIF) Regulations, 2012, “Alternative Investment Fund means any fund
established or in operated in India in the form of a trust or a company or a limited liability
partnership or a body corporate which,
(i) is a privately pooled investment vehicle which collects funds from investors, whether Indian
or foreign, for investing it in accordance with a defined investment policy for the benefit of its
investors; and
(ii) is not covered under the SEBI (Mutual Funds) Regulations. 1996, SEBI (Collective Investment
Schemes) Regulations, 1999 or any other regulations of SEBI to regulate fund management
activities.

21. ANGEL FUNDS (June 2023)

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• Angel fund refers to money pool created by high Net worth individuals or companies generally
known as Angel investors for investing in start-up business.
• Angel fund is a sub-category of venture capital fund under category I-AIF that raises
funds from angel investors and invest in accordance with the regulations by SEBI.
• An Angel investor or Angel (also known as a Business Angel, informal investor, Angel funder,
or seed investor) is an affluent individual who provides capital for a business start-up usually
in exchange for convertible debt or ownership equity.
• Angel investments are typically the earliest equity investments made in start-up
companies. They commonly band together in investor networks.
• Angel investors often former entrepreneurs themselves and typically enjoy working with
companies at the earliest stage of business formation.
• The effective angels have entrepreneurs to shape business model, create business plans and
connect to resources but without stepping into a controlling or operating rule.
• Often angels are entrepreneurs who have successfully built companies or have spent a part
of their career in coaching young companies.

22. ANCHOR INVESTORS

“anchor investor" means a qualified institutional buyer who makes an application for a value of
`10 Crores or more in a public issue on a main board made through the book building process or
makes an application for a value of atleast ` 2 Crores for an public issue on the SME Exchange.

 Allocation to Anchor Investors for a public issue on Main board of Stock Exchange,
through book building process, subject to the following
(a) Maximum of 2 such investors shall be permitted for allocation up to 10 crore;
(b) Minimum of 2 and maximum of 15 such investors shall be permitted for allocation above
`10 crore and up to `250 crore, subject to minimum allotment of `5 crore per such investor;
(c) Minimum of 5 and maximum of 25 such investors shall be permitted for allocation above
`250 crore, subject to minimum allotment of `5 crore per such investor.

 In case of public issue on the SME exchange, through the book building process:
(i) Maximum of 2 such investors shall be permitted for allocation up to two crore rupees;
(ii) Minimum of 2 and maximum of 15 such investors shall be permitted for allocation above
2 crore rupees and up to 25 crore rupees, subject to minimum allotment of 1 crore rupees
per such investor;
(iii) In case of allocation above 25 crore rupees; a minimum of 5 such investors and a
maximum of 15 such investors for allocation up to 25 crore rupees and an additional 10
such investors for every additional 25 crore rupees or part thereof, shall be perm itted,
subject to a minimum allotment of 1 crore rupees per such investor.

 Up to 60% of the portion available for allocation to QIB shall be available to anchor
investor(s) for allocation/allotment.

 One – third of the anchor investor portion shall be reserved for domestic mutual funds.

 The bidding for Anchor Investors shall open one day before the issue opening date and
Allocation to Anchor Investors shall be completed on the day of bidding by Anchor Investors.

 There shall be a lock – in of 30 days on the shares allotted to the Anchor Investor from the
date of allotment in the public issue.

23. QUALFIED INSTITUTIONAL BUYERS

• QIBs are investment institutions who buy the shares of a company on a large scale.
• Qualified Institutional Buyers are those Institutional investors who are generally perceived
to possess expertise and the financial proficiency to evaluate and to invest in the Capital
Markets.

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• If the investor is not capable, either by his/her individual financial limit or not permitted, to
invest individually till he invests a specified statutorily fixed amount, then he usually
participates indirectly through certain institutions, through which he can invest limited
sums according to the viability of both, himself and institution.
• The institution is usually a collective group of people in which a large number of investors
repose faith and the institution collects a large investible sum from various investors to
invest in the market.
• When investing through the institution, investors usually have limited control on their
investments in comparison to the individual investment as they hand over the amount for
investment to the institution and they, in turn, engage experts to have a vigil on the market.
• There are various types of institutions defined in the rules and regulations, but to qualify as
QIB certain regulations formulated by SEBI needs to be kept in mind. As the name suggests,
it is in the form of an institution and under the institutionalized mechanism, they invest in
the company.

24. HIGH NETWORTH INDIVIDUAL (June 2019)

• HNIs or high net worth individuals is a class of individuals who are distinguished from other
retail segment based on their net wealth, assets and investible surplus.
• Though there is no specific definition, generally in the Indian context, individuals with
over ` 2 crore investible surplus may be considered to be HNIs while those with investible
wealth in the range of ` 25 lac - ` 2 crore may be deemed as Emerging HNIs.
• If you are applying for an IPO of equity shares in an Indian company, generally, if you apply
for amounts in excess of ` 2 lakhs, you fall under the HNI category.
• On the other hand, if you apply for amounts under ` 2 lakhs, you are considered as a retail
investor.

25. PENSION FUND (Dec 2018)

• Pension Fund means a fund established by an employer to facilitate and organize the
investment of employees’ retirement funds which is contributed by the employer and
employees.
• The pension fund is a common asset pool meant to generate stable growth over the long
term, and provide pensions for employees when they reach the end of their working years
and commence retirement.
• Pension funds are commonly run by some sort of financial intermediary for the company
and its employees like N.P.S. scheme is managed by UTIAMC (Retirement Solutions),
although some larger corporations operate their pension funds in-house. Pension funds
control relatively large amounts of capital and represent the largest institutional investors
in many nations.
• Pension funds play a huge role in development of the economy and it play active role in the
Indian equity market. This pension fund ensures a change in their investment attitudes and
in the regulatory climate, encouraging them to increase their investment levels in equities
and would have a massive impact on capital market and on the economy as a whole.
• Pensions broadly divided into two sector:
A-Formal sector Pensions
B-Informal sector Pensions

26. ATAL PENSION YOJANA (Dec 2022)

• Government of India is concerned about the old age income security of the working poor and
his focus stone encouraging and enabling them to save for the retirement.
• To address the longevity risk among the workers in the unorganised sector and to encourage
the workers in unorganised sector to voluntarily save for the retirement, the Government of
India has announced a new scheme called Atal pension yojana in 2015-16 budget.
• The Atal pension yojana is focused on all citizens in the unorganised sector.
• The scheme is administered by the Pension fund regulatory and development authority
(PFRDA) through in capital NPS architecture.

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• Under the APY, there is guaranteed minimum monthly pension for the subscribers ranging
between 1,000 to 5,000 per month.
• The benefit of minimum pension would be guaranteed by the government of India.

27. GOVERNMENT PENSION

Government pensions in India are referred under the directive principles of state policy and are
therefore not covered under a statute. The government amended the regulations to put in place
the new pension scheme.

Pension for government employees would include employees of the central as well as state
governments.
(a) Central Government pension like civil servants’ pension, defences, Railways, posts.
(b) State Government Pensions, bank pensions like RBI, Public sector banks, NABARD and other
banks pensions.

Superannuation Schemes are also sold in the market. These are typically the retirement plans
sold by Mutual funds and insurance companies (Life Insurance & Postal Life Insurance)

28. SELF CERTIFIED SYNDICATE BANK (SCSB) (Dec 2020)

• Self-Certified Syndicate Bank (SCSB) is a bank which offers the facility of applying through
the ASBA process.
• A bank desirous of offering ASBA facility shall submit a certificate to SEBI as per the
prescribed format for inclusion of its name in SEBI’s list of SCSBs.
• A SCSB shall identify its Designated Branches (DBs) at which an ASBA investor shall submit
ASBA form and shall also identify the Controlling Branch (CB) which shall act as a
coordinating branch for the Registrar to the issue, Stock Exchanges and Merchant Bankers.
• The SCSB, its DBs and CB shall continue to act as such, for all issues to which ASBA process
is applicable.
• The SCSB may identify new DBs for the purpose of ASBA process and intimate details of the
same to SEBI, after which SEBI will add the DB to the list of SCSBs maintained by it.
• The SCSB shall communicate the following details to Stock Exchanges for making it available
on their respective websites; these details shall also be made available by the SCSB on its
website:
(i) Name and address of all the SCSB.
(ii) Addresses of DBs and CB and other details such as telephone number, fax number and
email ids.
(iii) Name and contracts details of a nodal officer at a senior level from the CB.

29. EQUITY SHARES WITH DIFFERENTIAL VOTING RIGHTS (Dec 2020)

• Shares with differential voting rights (“DVR”) refer to equity shares holding differential rights
as to dividend and/or voting.
• Section 43(a) (ii) of the Companies Act, 2013 allows a company limited by shares to issue
DVRs as part of its share capital.
• Introduced for the first time in 2000 and issued by Tata Motors, DVRs are seen as a viable
option for raising investments and retaining control over the company at the same time.
• Section 43(2) of the Companies Act 2013 read with Companies (Share Capital & Debenture)
Rules, 2013 provides that companies can issue equity shares with differential rights subject
to the following conditions including:
o Articles of association of the company must authorize the issue;
o The voting power in respect of shares with differential rights of the Company shall not
exceed 74% of total voting power including voting power in respect of equity shares
with differential rights issued at any point of time;
o Approval of shareholders by passing ordinary resolution in General Meeting;
o The Company should not have defaulted in:
 filing annual returns and financial statements for the last three years;
 repayment of matured deposits or declared dividend;

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  redemption of its preference shares/debentures which are due for redemption;
 repayment of term loan taken from any public financial institution or state level
financial institution or from a scheduled bank that has become due and payable;
 statutory dues of the employees of the company.

30. TYPES OF DEBENTURES: (BASED ON CONVERTIBILITY)

Based on convertibility, debentures can be classified under three categories:
• Fully Convertible Debentures (FCDs) : These are converted into equity shares of the
company with or without premium as per the terms of the issue, on the expiry of specified
period or periods. Maximum tenure of convertible securities can be 18 months as per SEBI
ICDR Regulation, 2018. Interest will be payable on these debentures upto the date of
conversion as per transfer issue.

• Non-Convertible Debentures (NCDs): These debentures do not carry the option of

conversion into equity shares and are therefore redeemed on the expiry of the specified period
or periods. The issuer is required to list its public issue of NCDs on stock exchange as per
SEBI (Issue and Listing of NCS) Regulations, 2021. NCDs can be also issued on private
placement basis.

• Partly Convertible Debentures (PCDs): These may consist of two kinds namely-convertible
and non-convertible. The convertible portion is to be converted into equity shares at the
expiry of specified period. However, the non-convertible portion is redeemed at the expiry of
the stipulated period. Maximum tenure of convertible securities can be 18 months as per
SEBI ICDR Regulation, 2018.

OPTIONALLY FULLY CONVERTIBLE DEBENTURE (OFCD):

• The Optionally Fully Convertible Debenture is a kind of debenture which can be converted
into shares at the expiry of a certain period at a predetermined price, if the debt holder
(investor) wishes to do so.
• The “securities” as defined u/s 2(81) of Companies Act, 2013 means securities as defined in
clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956, and includes
hybrids.
• Hence, after analysing the above definition of “OFCD”, “hybrid” and “securities” it could be
rightly concluded that an OFCD being a hybrid security falls under the definition of
“securities” as defined u/s (2)(h) of securities Contract (Regulation) Act, 1956 and u/s (2)(81)
of Companies Act, 2013 as it inherits the characteristics of debentures initially and also that
of the shares at a later stage if the option to convert the securities into shares being exercised
by the security holder.

31. CHARACTERISITCS OF A BOND (Dec 2021)

• Bond has a Fixed face value, which is the amount to be returned to the investor upon
maturity.
• Fixed maturity date, which can range from a few days to 20-30 years or even more.
• All bonds repay the principal amount after the maturity date.
• Provides regular payment of interest, semi-annually or annually.
• Interest is calculated as a certain percentage of the face value known as a ‘coupon payment’.
• Generally considered as less risky investment as compared to equity.
• It helps to diversify and grow investor’s money

32. TYPES OF BONDS

 Government Bonds: These are the bonds issued either directly by Government of India or
by the Public Sector Undertakings (PSU’s) in India. These bonds are secured as they are
backed up with security from Government. These are generally offered with low rate of
interest compared to other types of bonds.

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 Corporate Bonds: These are the bonds issued by the private corporate companies. Indian
corporates issue secured or non-secured bonds. However, care to be taken to consider the
credit rating given by Credit Rating Agencies before investing in these bonds.
 Banks and other financial institutions bonds: These bonds are issued by banks or any
financial institution. The financial market is well regulated and the majority of the bond
markets are from this segment.
 Tax saving bonds: In India, the tax saving bonds are issued by the Government of India for
providing benefit to investors in the form of tax savings. Along with getting normal interest,
the bond holder would also get tax benefit. In India, all these bonds are listed in National
Stock Exchange and Bombay Stock Exchange in India, hence they can be easily liquidated
and sold in the open market.

33. FOREIGN CURRENCY CONVERTIBLE BONDS (FCCB) (Dec 2020)

❖ ‘Foreign Currency Convertible Bond’ (FCCB) means a bond issued by an Indian company
expressed in foreign currency, and the principal and interest in respect of which is payable
in foreign currency.
❖ The FCCBs are unsecured instruments which carry a fixed rate of interest and an option for
conversion into a fixed number of equity shares of the issuer company.
❖ Interest and redemption price (if conversion option is not exercised) is payable in dollars.
❖ FCCBs shall be denominated in any freely convertible Foreign Currency. However, it must be
kept in mind that FCCB, issue proceeds need to conform to ECB end use requirements.
❖ Foreign investors also prefer FCCBs because of the Dollar denominated servicing, the
conversion option and, the arbitrage opportunities presented by conversion of the FCCBs
into equity shares at a discount on prevailing Indian market price.

34. FOREIGN CURRENCY EXCHANGEABLE BONDS (FCEB)

The FCEB is used to raise funds from the international markets against the security and
exchangeability of shares of another company. Foreign Currency Exchangeable Bond (FCEB)
means –
• A bond expressed in foreign currency.
• The principal and the interest in respect of which is payable in foreign currency.
• Issued by an issuing company, being an Indian company.
• Subscribed by a person resident outside India.
• Exchangeable into equity shares of another company, being offered company which is an
Indian company.
Either wholly or partly or on the basis of any equity related warrants attached to debt
instruments. It may be noted that issuing company to be the part of promoter group of offeror
company and the offeror company is to be listed and is to be eligible to r eceive foreign
investment. Under this option, an issuer company may issue FCEBs in foreign currency, and
these FCEBs are convertible into shares of another company (offeror company) that forms part
of the same promoter group as the issuer company.

35. INDIAN DEPOSITORY RECEIPTS (IDR) (Dec 2020)

• According to Section 2(48) of the Companies Act, 2013 “Indian Depository Receipt” means
any instrument in the form of a depository receipt created by a domestic depository in India
and authorized by a company incorporated outside India making an issue of such depository
receipts.
• An IDR is an instrument denominated in Indian Rupee in the form of a depository receipt
created by a domestic depository (Custodian of securities registered with SEBI) against the
underlying equity of issuing company to enable foreign companies to raise funds from Indian
Securities Markets.
• In an IDR, foreign companies would issue shares, to a domestic (Indian) depository, which
would in turn issue depository receipts to investors in India.
• The actual shares underlying the IDRs would be held by an Overseas Custodian, which shall
authorize the Indian depository to issue the IDRs.

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• To that extent, IDRs are derivative instruments because they derive their value from the
underlying shares.
• Standard Chartered PLC is only company to offer IDR in the Indian market.
• The foreign company issuing IDRs need to comply with the requirements of rules
prescribed under Companies Act, SEBI Regulations and RBI notifications/circulars.

36. CURRENCY DERIVATIVES (June 2023)

• Currency derivatives are financial contracts between the buyer and seller involving the
exchange of two currencies at a future date, and at a stipulated rate.
• Currency Derivative trading is similar to Stock Futures and Options trading. However, the
underlying asset are currency pairs (such as USDINR or EURINR) instead of stocks.
• Currency Options and Currency Futures trading is done in the Foreign Exchange markets.
Forex rates are the value of a foreign currency relative to domestic currency. The major
participants of Currency trading in India are banks, corporations, exporters and importers.

Benefits of Currency derivatives:

• Diversification of investments
• Easy investment in currencies
• Hedging opportunity to importers & exporters
• Trading opportunity due to volatility in currency
• Exchange-traded and hence systematically regulated
• Provided transparent rates

37. COMMODITY DERIVATIVES

• Commodity is a physical good attributable to a natural resource that is tradable and supplied
without substantial differentiation by the general public.
• Commodities trade in physical (spot) markets and in futures and forward markets.
• Spot markets involve the physical transfer of goods between buyers and sellers; prices in
these markets reflect current (or very near term) supply and demand conditions.
• Commodity derivatives are financial instruments whose value is based on underlying
commodities, such as oil, gas, metals, agricultural products and minerals. Other assets such
as emissions trading credits, freight rates and even the weather can also underlie commodity
derivatives.
• Commodity Derivatives markets are a good source of critical information and indicator of
market sentiments. Since, commodities are frequently used as input in the production of
goods or services, uncertainty and volatility in commodity prices and raw materials makes
the business environment erratic, unpredictable and subject to unforeseeable risks.
• Volatility in raw material costs affects businesses and can be significant given that
commodity prices are driven by supply and demand from domestics as well as global
markets. Ability to manage or mitigate risks by using suitable hedging in commodity
derivative products, can positively affect business performance.

38. OPTIONS
Options Contract give its holder the right, but not the obligation, to take or make delivery on or
before a specified date at a stated price. But this option is given to only one party in the
transaction while the other party has an obligation to take or make delivery. Since the other
party has an obligation and a risk associated with making good the obligation, he receives a
payment for that. This payment is called as option premium.

Unlike future contracts which is an obligation, option contract is a general right to buy or sale
wherein the right to buy is referred to as a call option, whereas the right to sell is known as a
put option.

Option contracts are classified into two types on the basis of which party has the option:
• Call option - A call option is with the buyer and gives the holder a right to take delivery.
• Put option - The put option is with the seller and gives the right to take delivery.
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39. SECURITIZED DEBT INSTRUMENTS
• Securitized debt instruments are financial securities that are created by securitizing
individual loans (debt).
• Securitization is a financial process that involves issuing securities that are backed by
assets, most commonly debt. The assets are transformed into securities, and the process is
called securitization.
• The owner of the securities receives an income from the underlying assets; hence, the term
asset-backed securities.
• Securitized debt instruments come with various advantages over conventional forms of
investing and are more valuable to a portfolio.
• One of the most common types of securitized debt is mortgage-backed securities.
• Securitized debts can lower interest rates and free up capital for the bank, but they can also
encourage lending for reasons other than making a profit.
• SEBI had laid down the framework for public offer and listing of securitized debt instruments
vide SEBI (Public Offer and Listing of Securities Debt Instruments) Regulations, 2008 and
had specified listing agreement for Securitized Debt Instruments. A few privately placed SDIs
have already been listed on exchange.

40. MUNICIPAL BONDS (June 2023)

• Municipal bonds are also referred to as ‘Muni bonds’.
• The urban local government and agencies issue these bonds.
• Municipal bonds are issued when a government body wants to raise funds for projects such
as infra-related, road, airports, railway stations, schools, and so on.
• SEBI issued guidelines in 2015 for the urban local bodies to raise funds by issuing municipal
bonds.
• Municipal bonds exist in India since the year 1997.
• Bangalore Municipal Corporation is the first urban local body to issue municipal bonds in
India. Ahmedabad followed Bangalore in the succeeding years.
• The municipal bonds lost the ground after the initial investors’ attraction received and failed
to raise the desired amount of funds.
• To receive the municipal bonds, SEBI came up with guidelines for the issue of municipal
bonds in 2015.

41. EXCHANGE TRADED FUNDS

• An Exchange Traded Fund (ETF) is a security that tracks an index, commodity, bonds, or a
basket of assets like an index fund and is traded in the securities market. In simple words,
ETFs are funds that track indexes such as Sensex, Nifty, etc.
• When you buy shares/units of an ETF, you actually buy shares/units of portfolio that tracks
the performance of the index. ETFs just reflect the performance of the index they track.
• Unlike regular mutual funds, ETFs trade like a common stock on the stock exchange and
the price of an ETF changes as per the trading in the market takes place.
• The trading value of an ETF depends on the net asset value of the underlying stock that it
represents.
• ETFs, generally, have higher daily liquidity and lower fees than mutual fund schemes.

42. How can “UPI as a payment option” be used in the public issue process?
1. UPI as part of bidding:
• Investor will fill in the bid details in the application form as per the existing process along
with his UPI ID.
• As per the existing process, investor may submit the application with any of the intermediary
(Syndicate Member/Registered Stock Brokers/Registrar and Transfer Agents/Depository
Participants), who, on receipt of application will upload the bid details along with UPI id in
the stock exchange bidding platform.

2. UPI as part of blocking:

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• The Escrow/Sponsor Bank will initiate a mandate request on the investor i. e. request the
investor to authorize blocking of funds equivalent to applicant amount and subsequent debit
of funds in case of allotment.
• The request raised by the Escrow/Sponsor Bank, would be electronically received by the
investor as SMS/intimation on his/her bank provided mobile no. linked to UPI ID.
• Upon validation of block request by the investor, the said information would be electronically
received by the investor’s bank, where the funds, equivalent to application amount, would
get blocked in investors accounts. Intimation regarding confirmation of such block of funds
in investors account would also be received by the investor.

3. UPI as part of payment for shares post allocation process: (June 2022)
• The registrar to the issue, based on information of bidding and blocking received from stock
exchange, would undertake reconciliation and prepare the basis of allotment.
• Upon approval of such basis the instructions would be sent to sponsor bank to initiate
process for credit of funds in the public issue escrow account and unblocking excess money.
• Based on authorization given by investor using UPI PIN at the time of blocking, the funds,
equivalent to the allotment, would be debited from investors account and remaining funds,
if any, would be unblocked.

43. Whether use of UPI, as a payment mechanism in public issues, is mandatory? (Dec 2021)
The applicability of UPI as a payment mechanism has been prescribed in a Phased manner as
under:
• Phase I: From January 01, 2019, the UPI mechanism for retail individual investors through
intermediaries will be made effective along with the existing process and existing timeline of
T+6 days. The same will continue, for a period of 3 months or floating of 5 main board public
issues, whichever is later.
• Phase II: Thereafter, for applications by retail individual investors through intermediaries,
the existing process of physical movement of forms from intermediaries to Self-Certified
Syndicate Banks (SCSBs) for blocking of funds will be discontinued and only the UPI
mechanism with existing timeline of T+6 days will continue, for a period of 3 months or
floating of 5 main board public issues, whichever is later.
• Phase III: Subsequently, final reduced timeline will be made effective using the UPI
mechanism.

44. Up to what limit one can apply for a public issue in UPI?
The limit for IPO application is 2 Lakhs per transaction on UPI.

45. Are all category of investors eligible to apply in public issues using UPI for payment?
No. Only retail individual investors are allowed to use UPI for payment in public issues. Qualified
Institutional Buyers and High Net-worth Individuals shall continue to apply as per the existing
process.

46. ROLE OF STOCK EXCHANGES

• Acts as a continuous market for securities: Investors can invest in any securities, but in
case of any risk, they can exit from that security and freshly re-enter into whichever security
they feel as secure.
• Responsible for securities evaluation: The stock price indicates the performance and
stability of the company. Through these investors decide according to their risk appetite
whether to enter or exit or hold. The stock exchange acts as a regulator for the securities
price evaluation for all the listed stocks.
• Mobilizes savings: Most of the public cannot invest the bulk amount in securities, so they
invest in indirect ways such as mutual funds and investment trusts, and these are mobilized
by stock exchanges.
• Enables healthy speculation: Stock exchange encourages businessmen and provides
healthy speculation opportunities to speculate and gain profits from fluctuations in stock
prices.
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• Protect investors: Stock exchange ensures the protection of the funds of investors by
allowing only genuine companies to be listed in the stock exchange.
• Ensures liquidity: Banks and some other institutions like Life Insurance Corporation (LIC)
invest their funds in the stocks and earn a profit within a short period and are sold
immediately if there is any necessity of funds. Thus, there is an opportunity to liquidate
immediately at any time if required in the stock market.
• Acts as an economic barometer: The country’s economic growth is measured with the
trends in the stock market. An upward trend in the stock market denotes growth potential
and downward trend denotes the fall in the economy. Hence the stock exchange is called as
an economic barometer as it indicates conditions prevailing in the country.
• Exercise vigilance/control on companies: Every company listed on an exchange must
produce their annual reports and an audited balance sheet to the stock exchange Such.
reports being available in public domain promotes transparency.
• Attracts foreign capital: Foreign Institutional Investors (FII) are likely to invest in
developing economy as the rate of returns will be high in developing economies due to growth
opportunities.
• Stock exchanges ensure Safety of Capital and Fair Dealing: The transactions made in
the stock exchange are made available to the public under well-defined rules and regulations
abided by laws. This ensures safety and fair dealings for the average investors.
• Regulate company management: The firms wanting to get their securities listed must
follow certain rules and fulfil certain conditions. Stock exchanges safeguard the interest of
the investors and regulate the company management.

47. ROLE OF CLEARING CORPORATION

Clearing corporation is responsible
• 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 counterparty risk guarantee, and
• to operate a tight risk containment system.

48. TRADING MECHANISM (June 2021)

• In the Indian securities market, various products are trading like equity shares, warrants,
debenture, etc. The trading in the securities of the company takes place in dematerialized
form in India.
• Dematerialisation is the process by which physical certificates of an investors are converted
to an equivalent number of securities in electronic form and credited to the investors’
account with his Depository Participant (DP).
• Trading in the securities of the company takes place on the screen-based platforms provided
by the Exchanges.
• Currently for equity shares the settlement cycle is (T+2 days) (T means trading
day/Transaction Day). Any shares which are traded on the Exchange are required to be
settled by the clearing corporation of the exchange on 2 working day.
• In electronic trading order received are matched electronically on a strict price/time priority
and hence cuts down on time, cost and risk of error, as well as on fraud resulting in improved
operational efficiency.
• It enables market participants, irrespective of their geographical locations, to trade with one
another simultaneously.
• It provides full anonymity by accepting orders, big or small, from brokers without revealing
their identity, thus providing equal access to everybody.
• It also provides a perfect audit trail, which helps to resolve disputes by logging in the trade
execution process in entirety.

49. TYPES OF SECURITIES ON STOCK EXCHANGE

LISTED SECURITIES:
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The securities of companies, which have signed the listing agreement with a stock exchange,
are traded as “Listed Securities” in that exchange.

PERMITTED SECURITIES:
To facilitate the market participants to trade in securities of such companies, which are actively
traded at other stock exchanges in India but are not listed on an exchange, trading in such
securities is facilitated as “permitted securities” provided they meet the relevant norms specified
by the stock exchange.

50. MARGINS (June 2021)

An advance payment of a portion of the value of a stock transaction. The amount of credit a
broker or lender extends to a customer for stock purchase.

“Initial margin” in this context means the minimum amount, calculated as a percentage of the
transaction value, to be placed by the client, with the broker, before the actual purchase. The
broker may advance the balance amount to meet full settlement obligations.

“Maintenance margin” means the minimum amount, calculated as a percentage of market value
of the securities, calculated with respect to last trading day’s closing price, to be maintained by
client with the broker.

When the balance deposit in the client’s margin account falls below the required maintenance
margin, the broker shall promptly make margin calls. However, no further exposure can be
granted to the client on the basis of any increase in the market value of the securities.

The broker may liquidate the securities if the client fails to meet the margin calls made by the
broker or fails to deposit the cheques on the day following the day on which the margin call has
been made or the cheque has been dishonoured.

The broker may also liquidate the securities in case the client’s deposit in the margin account
(after adjustment for mark to market losses) falls to 30% or less of the latest market value of
the securities, in the interregnum between making of the margin call and receipt of payment
from the client.

The broker must disclose to the stock exchange details on gross exposure including the name
of the client, unique identification number, name of the scrip and if the broker has borrowed
funds for the purpose of providing margin trading facilities, name of the lender and amount
borrowed, on or before 12 Noon on the following day.

Stock exchanges disclose scrip wise gross outstanding in margin accounts with all brokers to
the market. Such disclosures regarding margin trading done on any day shall be made available
after the trading hours on the following day through the website.

51. BOOK CLOSURE & RECORD DATE (Dec 2018)

• Book closure is the periodic closure of the Register of Members and Transfer Books of the
company, to take a record of the shareholders to determine their entitlement to dividends or
to bonus or right shares or any other rights pertaining to shares.
• Record date is the date on which the records of a company are closed for the purpose of
determining the stock holders to whom dividends, proxy rights etc. are to be sent.
• In accordance with Section 91 of the Companies Act, 2013 a company may close the register
of members for a maximum of 45 days in a year and for not more than 30 days at any one
time subject to giving of previous notice by advertisement at least once in a vernacular
newspaper in the principal vernacular language of the district and having a wide circulation
in the place where the registered office of the company is situated, and at least once in
English language in an English newspaper circulating in that district and having wide
circulation in the place where the registered office of the company is situated.
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• As per SEBI (LODR) Regulation 2015 the companies are required to give 7 working days
advance notice of book closure or record date to stock exchange where the securities of the
companies are listed.

52. BLOCK DEAL & HOW IT IS EXECUTED ON STOCK EXCHANGE (Dec 2018) (June 2023)
The SEBI vide letter MRD/DoP/SE/Cir – 19/05 dated September 02, 2005 and
CIR/MRD/DP/118/2017 dated October 26, 2017 guidelines outlining a facility of allowing
Stock Exchanges to provide separate trading window to facilitate execution of large trades. The
Exchanges have introduced new block window mechanism for the block trades from January
01, 2018.

• Session Timings:
(a) Morning Block Deal Window: This window shall operate between 08:45 AM to 09:00 AM.
(b) Afternoon Block Deal Window: This window shall operate between 02:05 PM to 2:20 PM.

• In the block deal the minimum order size for execution of trades in the Block deal window
shall be ` 10 Crore.
• The orders placed shall be within ±1% of the applicable reference price in the respective
windows as stated above.
• The stock exchanges disseminates the information on block deals such as the name of the
scrip, name of the client, quantity of shares bought/sold, traded price, etc. to the general
public on the same day, after the market hours.

53. BULK DEAL (June 2019)

• Bulk deal is a trade, where total quantity bought or sold is more than 0.5% of the number of
equity shares of a listed company.
• Bulk deal can be transacted by the normal trading window provided by brokers throughout
the trading hours in a day.
• Bulk deals are market driven and take place throughout the trading day.
• The stock broker, who facilitates the trade, is required to reveal to the stock exchange about
the bulk deals on a daily basis.
• Bulk orders are visible to everyone.
• If the bulk deal happens through a single trade, it should be notified to the exchange
immediately upon the execution of the order. If it happens through multiple trades, it should
be notified to the exchange within one hour from the closure of the trading.

54. SENSEX (June 2019)

• Sensitive Index or Sensex is the stock market index indicator for the BSE.
• It is also sometimes referred to as BSE S & P Sensex.
• It was first published in 1986 and is based on the market weighted stock index of 30
companies based on the financial performance. The large, established companies that
represent various industrial sectors are a part of this.
• The calculation of Sensex is done by a Free-Float method that came into existence from
September 1, 2003.
• The level of Sensex is a direct indication of the performance of 30 stocks in the market.
• The free-float method takes into account the proportion of the shares that can be readily
traded in the market. This does not include the ones held by various shareholders and
promoters or other locked-in shares not available in the market.

Steps to calculate Sensex: (Dec 2022)

• The market capitalization is taken into account. This is done by multiplying all the shares
issued by the company with the price of its stock.
• BSE determines a Free-Float factor that is a multiple of the market capitalization of the
company. This helps in determining the Free-Float market capitalization based on the details
submitted by the company.

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• Ratio and Proportion are used based on the base index of 100. This helps to determine the
Sensex.

55. NIFTY (Dec 2023)

• National Stock Exchange Fifty or Nifty is the market indicator of NSE.
• It is a collection of 50 stocks. It is also referred to as Nifty 50.
• It is owned and managed by India Index Services and Products Ltd. (IISL).
• Nifty is calculated through the Free-Float market capitalization weighted method.
• It multiples the Equity capital (expressed in terms of number of shares outstanding) with a
price, to derive the market capitalization. To determine the Free-Float market capitalization,
equity capital (as stated earlier) is multiplied by a price which is further multiplied with IWF
(Investible Weight Factors) which is the factor for determining the number of shares available
for trading freely in the market.
• The Index is determined on a daily basis by taking into consideration the current market
value (Free Float market capitalization) divided by base market capital and then multiplied
by the Base Index Value of 1000.
• These indices are broad-market indices, consisting of the large, liquid stocks listed on the
Exchange. They serve as a benchmark for measuring the performance of the stocks or
portfolios such as mutual fund investments.

56. KYC PROCESS FOR OPENING AN ACCOUNT

• KYC is mandatory under the Prevention of Money Laundering Act, 2002 and Rules framed
thereunder.
• While opening of Demat/Trading/Bank account, client have to submit officially valid
documents (OVDs) as proof of identity and proof of address and these documents form a
part of the KYC requirements.
• An investor can establish his identity and address through relevant supporting prescribed
documents such as PAN card/Unique Identification (UID) (Aadhaar)/Passport/Voter ID
card/Driving license, etc.
• Once the KYC form is submitted, a unique KYC Identification Number (KIN) is generated and
communicated to the client by SMS/Email.
• KYC is a one-time process and is valid across all the intermediaries.

57. WHAT IS MARKET SURVEILLANCE? WHAT ARE THE DIFFERENT WAYS OF PREVENTIVE SURVEILLANCE? (Dec 2020)
Market surveillance plays a vital role in ensuring market integrity which is the core objective of
regulators. Market integrity is achieved through combination of surveillance, inspection,
investigation and enforcement of relevant laws and rules.

Market Surveillance is broadly categorised in 2 parts viz, Preventive Surveillance and Post trade
Surveillance.

PREVENTIVE SURVEILLANCE – (June 2021)

• Stringent On boarding norms for Trading Members - Stringent net worth, back ground,
viability etc. checks while on boarding Trading Members.

• Index circuit filters – It brings coordinated trading halt in all equity and equity derivative
markets at 3 stages of the index movement, either way viz., at 10%, 15% and 20% based on
previous day closing index value.

• Trade Execution Range - Orders are matched and trades take place only if the trade price
is within the reference price and execution range.

• Order Value Limitation - Maximum Order Value limit allowed per order.

• Cancel on logout - All outstanding orders are cancelled, if the enabled user logs out.

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• Kill switch - All outstanding orders of that trading member are cancelled if trading member
executes kill switch.

• Risk reduction mode - Limits beyond which orders level risk management shall be initiated
instead of trade level.

• Compulsory close out - Incoming order, if it results in member crossing the margins
available with the exchange, such order will be partially or fully cancelled, as the case may
be, and further disallow the trading member to create fresh positions.

• Capital adequacy check - Refers to monitoring of trading member’s performance and track
record, stringent margin requirements, position limits based on capital, online monitoring of
member positions and automatic disablement from trading when limits are breached.

• Fixed Price Band/Dynamic Price band - Limits applied within which securities shall move;
so that volatility is curbed orderliness is bought about. For non-derivative securities price
band is 5%, 10% & 20%. For Derivative products an operating range of 10% is set and
subsequently flexed based on market conditions.

• Trade for Trade Settlement - The settlement of scrip’s available in this segment is done on
a trade for trade basis and no netting off is allowed.

• Periodic call auction – Shifting the security form continuous to call auction method.

• Rumour Verification – Any unannounced news about listed companies is tracked on online
basis and letter seeking clarification is sent to the companies and the replay received is
disseminated.

Post Trade Surveillance (June 2022)

It is one of the category of market surveillance which plays a vital role in ensuring market
integrity, which is the core objective of regulators. It includes following:
• End of day alert – Alerts generated using statistical tools. The tool highlights stocks which
have behaved abnormally form its past behaviour.

• Pattern recognition model - Models designed using high end tools and trading patterns
which itself identifies suspects involving in unfair trading practice.

• Transaction alerts for member - As part of surveillance obligation of members the alerts are
downloaded to members under 14 different heads.

58. KEY RIKS IN INVESTING IN SECURITIES MARKET

Key risks in investing in securities market.
• Market risk or Systematic Risk: It means that an investor may experience losses due to
factors affecting the overall performance of financial markets and general economy of the
country.

• Unsystematic Risk: Unsystematic risk can be described as the uncertainty attached with a
particular company or industry.

• Inflation risk: Inflation risk is also called as purchasing power risk. It is defined as the
chance that the cash flows from an investment would loser their value in future because of
a decline in its purchasing power due to inflation.

• Liquidity risk: Liquidity risk arises when an investment can’t be bought or sold quickly
enough.

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• Business Risk: It refers to the risk that a business of a company might be affected or may
stop its operations due to any unfavourable operational, market or financial situation.

• Volatility Risk: Volatility risk arises as the Companies’ stock prices may fluctuate over time.

• Currency Risk: It refers to the potential risk of loss from fluctuating foreign exchange rates
that an investor may face when he has invested in foreign currency or made foreign currency-
traded investments.

59. FEATURES OF SCORES / GRIEVANCE REDRESSAL BY SEBI

1) Centralised database of investor complaints;
2) Online movement of complaints to the concerned listed company or SEBI registered
intermediary;
3) Online upload of Action Taken Reports (ATRs) by the concerned listed company or SEBI
registered intermediary;
4) Online viewing by investors of actions taken on the complaint and its current status;
5) SCORES is web enabled and provides online access 24 ×7;
6) Complaints and reminders there on can be lodged online at the above website at anytime
from anywhere;
7) An email is generated instantaneously acknowledging the receipt of complaint and allotting
a unique complaint registration number to the complainant for future reference and
tracking;
8) The complaint forwarded online to the entity concerned for its redressal.

60. KEY RISK MANAGEMENT MEASURES INITIATED BY SEBI

The key risk management measures initiated by SEBI include –
• Categorization of securities into groups 1, 2 and 3 for imposition of margins based on their
liquidity and volatility.
• VaR (value at risk) based margining system.
• Specification of mark to Market margins.
• Specification of Intra-day trading limits and Gross Exposure Limits.
• Real time monitoring of the Intra-day trading limits and Gross Exposure Limits by the Stock
Exchanges.
• Collection of margins on upfront basis.
• Index based market wide circuit breakers.
• Automatic de-activation of trading terminals in case of breach of exposure limits.
• VaR based margining system has been put in place based on the categorization of stocks
based on the liquidity of stocks depending on its impact cost and volatility. It addresses 99%
of the risks in the market.
• Additional margins have also been specified to address the balance 1% cases.
• Collection of margins from institutional clients on T+1 basis.

61. FED POLICY (Dec 2021) (June 2022)

The Federal Reserve System is the central bank of the United States. It performs five general
functions to promote the effective operation of the U.S. economy and, more generally, the public
interest. The Federal Reserve:
• conducts the nation’s monetary policy to promote maximum employment, stable prices, and
moderate long-term interest rates in the U.S. economy;
• promotes the stability of the financial system and seeks to minimize and contain systemic
risks through active monitoring and engagement in the U.S. and abroad;
• promotes the safety and soundness of individual financial institutions and monitors their
impact on the financial system as a whole;
• fosters payment and settlement system safety and efficiency through services to the banking
industry and the U.S. government that facilitate U.S. dollar transactions and payments; and
• promotes consumer protection and community development through consumer-focused
supervision and examination, research and analysis of emerging consumer issues and
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 trends, community economic development activities, and the administration of consumer
laws and regulations.

62. HOW CHANGE IN US FED RATE CAN IMPACT INDIA? (Dec 2021)
The Fed Funds Rate is the interest rate at which the top US banks borrow overnight money from
common reserves. All American banks are required to park a portion of their deposits with the
Federal Reserve in cash, as a statutory requirement.

Actually, fed fund rate gives the direction in which US interest rates should be heading at any
given point of time. If the Fed is increasing the interest rates, lending rates for companies and
retail borrowers will go up and vice versa. In India, hike in repo rate may not impact the
countries outside India. On the other hand, US interest rates matter a lot to global capital flows.
Some of the world’s richest institutions and investors have their base in USA. They constantly
compare Fed rates with interest rates across the world to make their allocation decisions.

In the globalised world, markets are connected. An increase in Fed rates will be negative in
general for the US stock market and if it leads to another round of sell-offs, it will also have
ripple effects on the Indian market.

Any changes in the Fed Fund Rates impact the domestic borrowing market to a large extent.
For instance, if the Fed rates go up, it will make the RBI hesitant in cutting rates at that time.
The reason is that if RBI cut rates it will lead to heavy pullout of foreign investors from the
Indian bond market.

63. RUPEE VS. DOLLAR

• If the Fed rates are hiked, the value of the dollar would go up, thus weakening Indian rupee
in comparison. This might hurt India’s forex reserves and imports.
• However, the weaker rupee is good for India’s exports but low global demand and stiff
competition would not leave much room for Indian exporters to capitalise the situation.
• DBS said that India’s financing requirements will keep the rupee vulnerable to rising US
rates this year.

64. INFLATION INDEX (Dec 2021)

An inflation index is an economic tool used to measure the rate of inflation in an economy. There
are several different ways to measure inflation, leading to more than one inflation index with
different economists and investors preferring one method to another, sometimes strongly.

Inflation Indices
In India, Consumer Price Index (CPI) and Wholesale Price Index (WPI) are two major indices for
measuring inflation.

In United States, CPI and PPI (Producer Price Index) are two major indices.

The Wholesale Price Index (WPI) was main index for measurement of inflation in India till April
2014 when RBI adopted new Consumer Price Index (CPI) (combined) as the key measure of
inflation.

65. WHOLESALE PRICE INDEX (WPI)

Wholesale Price Index (WPI) is computed by the Office of the Economic Adviser in Ministry of
Commerce & Industry, Government of India. It was earlier released on weekly basis for Primary
Articles and Fuel Group. However, since 2012, this practice has been discontinued. Currently,
WPI is released monthly.

Salient notes on WPI are as follows:

Base Year
Current WPI Base year is 2004-05=100. It’s worth note that the base year for CPI is 2012
currently. This is one reason for increasing difference between CPI and WPI in recent times.
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Items
There are total 676 items in WPI and inflation is computed taking 5482 price quotations. Theses
items are divided into three broad categories viz. (1) Primary Articles (2) Fuel & power and (3)
Manufactured Products.

WPI does not take into consideration the retail prices or prices of the services.

66. CONSUMER PRICE INDEX (CPI)

Consumer Price Indices (CPI) released at national level are:
• CPI for Industrial Workers (IW)
• CPI for Agricultural Labourers (AL)/Rural Labourers (RL)
• CPI (Rural/Urban/Combined).

While the first two are compiled and released by the Labour Bureau in the Ministry of Labour
and Employment, the third by the Central Statistics Office (CSO) in the Ministry of Statistics
and Programme Implementation.
In India, RBI uses CPI (combined) released by CSO for inflation purpose.
Important notes on this index are as follows:
Base Year
Base year for CPI (Rural, Urban, Combined) is 2012=100.

Number of items
The number of items in CPI basket include 448 in rural and 460 in urban. Thus, it makes it
clear that CPI basket is broader than WPI basket. The items in CPI are divided into 6 main
groups.

67. KEY DIFFERENCES BETWEEN WPI & CPI (June 2019)

• Primary use of WPI is to have inflationary trend in the economy as a whole. However, CPI is
used for adjusting income and expenditure streams for changes in the cost of living.
• WPI is based on wholesale prices for primary articles, administered prices for fuel items and
ex-factory prices for manufactured products. On the other hand, CPI is based on retail
prices, which include all distribution costs and taxes.
• Prices for WPI are collected on voluntary basis while price data for CPI are collected by
investigators by visiting markets.
• CPI covers only consumer goods and consumer services while WPI covers all goods including
intermediate goods transacted in the economy.
• WPI weights primarily based on national accounts and enterprise survey data and CPI
weights are derived from consumer expenditure survey data.

68. REPO & REVERSE REPO (Dec 2021) (June 2022)

• Repo Rate: The rate at which the Commercial Banks borrow money from RBI. Reduction in
Repo Rate helps the Commercial Banks to get money at a cheaper rate and an Increase in
Repo Rate discourages the Commercial Banks to get money as the rate increases and
becomes expensive. The increase in the Repo Rate will increase the cost of borrowing and
lending of the banks which will discourage the public to borrow money and encourages them
to deposit.

• Reverse Repo Rate (RRR): is the rate at which the RBI borrows money from the Commercial
Banks. An increase in the reverse repo rate will decrease the money supply and vice -versa,
other things remaining constant. An increase in Reverse Repo Rate means that Commercial
Banks will get more incentives to park their funds with the RBI, therefore decreasing the
supply of money in market. An increase in the Repo Rate and the Reverse Repo Rate indicates
strengthening of RBI’s Monetary Policy.

69. CASH RESERVE RATIO & STATUTORY LIQUIDITY RATIO (CRR) & (SLR)

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• Cash Reserve Ratio (CRR): Cash reserve ratio is the amount which the commercial banks
have to maintain as cash deposit with the Reserve Bank of India. RBI may increase the CRR
if it thinks that there is large amount of money supply in the economy. Conversely, it will
decrease the CRR if it is of the opinion that inflation is in control and the industry needs a
monetary boosts up. The reduction in CRR will provide more money in the hands of
commercial banks which it will pass it on to the industry. More money in the hands of
industry will boost up production, consumption and employment.

• Statutory Liquidity Ratio (SLR): Statutory Liquidity Ratio is the amount which commercial
banks have to keep it with itself. So, SLR is the amount of money which banks have to keep
in its custody at all times. SLR is also a very powerful tool to control liquidity in the economy.
To encourage industries to boost up their production, SLR may be decreased to put more
money in the hands of commercial banks. An increase in SLR is used as an inflation control
measure to control price rise.

70. SIGNIFICANCE OF CREDIT POLICY OF RBI

• Rapid Economic Growth: It is an important objective as it can play a decisive role in the
economic growth of country. It influences the interest rates and thus has an impact on the
investment. If the RBI adopts an easy credit policy, it would be doing so by reducing interest
rates which in turn would improve the investment outlook in the country. This would in turn
enhance the economic growth. However faster economic growth is possible if the monetary
policy succeeds in maintaining income and price stability.

• Exchange Rate Stability: Another important objective is maintaining the exchange rate of
the home currency with respect to foreign currencies. If there is volatility in the exchange
rate, then the international community loses confidence in the economy. So, it is necessary
for the monetary policy to maintain the stability in exchange and tries to maintain the
exchange rate stability.

• Price Stability: The monetary policy is also supposed to keep the inflation of the country in
check. Any economy can suffer both inflation and deflation both of which are harmful to the
economy. So the RBI has to maintain a fair balance in ensuring that during recession i t
should adopt an ‘easy money policy; whereas during inflationary trend it should adopt a
‘dear money policy’.

• Balance of Payments (BOP) Equilibrium: Another key objective is to maintain the BOP
equilibrium which most of the developing economies don’t tend to have. The BOP has two
aspects which are ‘BOP surplus’ and ‘BOP deficit’. The former reflects an excess money
supply in the domestic economy, while the later stands for stringency of money. If the
monetary policy succeeds in maintaining monetary equilibrium, then the BOP equilibrium
can be achieved.

• Neutrality of Money: RBI’s policy should regulate the supply of money. It is possible that
the change in money supply causes disequilibrium and the monetary policy should
neutralize it. However this objective of a monetary policy is always criticized on the ground
that if money supply is kept constant then it would be difficult to attain price stability.

71. BENEFITS OF REIT (Dec 2022)

Benefits of REITs include:
1. Less Capital Intensive : Direct investment in real estate property is very capital intensive.
But each shares of REITs will be comparatively more affordable (it will not require large
capital outflows).

2. Suitable for small Investors : Investing through REITs will eliminate dealing with
builders, thereby avoiding potential exposure to big builders.

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 3. Transparency : REITs stocks are listed in stock market, hence details will be available on
public domain.

4. Assured Dividends : REITs generates income in form of dividend. REITs dividend payment
is relatively assured as most of their income is in the form of rental (lease) income.

5. Tax Free : Dividend earned by the investors of REIT will be tax free.

6. Fast Capital Appreciation : Capital appreciation can be phenomenal.

7. Easy to buy : Investment in REITS easier than investment in Real Estate properties.

72. POLICIES LISTED COMPANIES NEED TO DISCLOSE ON THEIR WEBSITE

Regulation Title of Policy
9 Preservation
documents Policy
Requirements
of To be classified into two categories:-
1. documents whose preservation shall be permanent in
nature
2. documents with preservation period of not less than eight
years after completion of the relevant transactions

16(1)(c ) Policy on The listed entity shall formulate a policy for determining
determining ‘material’ subsidiary.
"material subsidiary"

17(5) Code of Conduct The board of directors shall lay down a code of conduct for
all members of board of directors and senior management
of the listed entity. The code of conduct shall suitably
incorporate the duties of independent directors as laid down
in the Companies Act, 2013

17(9)(b) Risk Management The board of directors shall be responsible for framing,
Policy implementing and monitoring the risk management plan for
the listed entity

22 Vigil Mechanism The listed entity shall formulate a vigil mechanism/whistle

blower policy for directors and employees to report genuine
concerns

23(1) Materiality of related The listed entity shall formulate a policy on materiality of
party transactions related party transactions and on dealing with related party
and on dealing with transactions, including clear threshold limits duly approved
related party by the board of directors and such policy shall be reviewed
transactions by the board of directors at least once every 3 years and
updated accordingly

30 Policy on The listed entity shall frame a policy for determination of

determination of materiality, based on criteria specified in this sub-
materiality of regulation, duly approved by its board of directors, which
events/information shall be disclosed on its website.

43A Dividend The top 1000 listed entities based on market capitalization
Distribution Policy 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

Part D of Board Diversity The Nomination and Remuneration Committee shall devise
Schedule II Policy a policy on diversity of board of directors

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73. EMPLOYEE STOCK OPTION SCHEME (ESOP)
The ESOS shall contain the details of the manner in which the scheme will be implemented and
operated. ESOS shall not be offered unless the disclosures, as specified by SEBI in this regard,
are made by the company to the prospective option grantees.

Pricing
The company granting option to its employees pursuant to ESOS will have the freedom to
determine the exercise price subject to conforming to the accounting policies as specified in
these regulation.

Vesting Period
There shall be a minimum vesting period of one year in case of ESOS. However, in case where
options are granted by a company under an ESOS in lieu of options held by a person under an
ESOS in another company which has merged or amalgamated with that compan y, the period
during which the options granted by the transfer or company were held by him shall be adjusted
against the minimum vesting period required under this sub-regulation.

The company may specify the lock-in period for the shares issued pursuant to exercise of option.

Rights of the option holder

The employee shall not have right to receive any dividend or to vote or in any manner enjoy the
benefits of a shareholder in respect of option granted to him, till shares are issued upon exercise
of option.

Consequence of failure to exercise option

The amount payable by the employee, if any, at the time of grant of option, -
(i) may be forfeited by the company if the option is not exercised by the employee within the
exercise period; or

(ii) may be refunded to the employee if the options are not vested due to non -fulfilment of
conditions relating to vesting of option as per the ESOS.

74. EMPLOYEE STOCK PURCHASE SCHEME (ESPS)

The ESPS scheme shall contain the details of the manner in which the scheme will be
implemented and operated.

Pricing And Lock-In

The company may determine the price of shares to be issued under an ESPS, provided they
conform to the provisions of accounting policies under these regulation. Shares issued under
an ESPS shall be locked-in for a minimum period of one year from the date of allotment.

However, in case where shares are allotted by a company under an ESPS in lieu of shares
acquired by the same person under an ESPS in another company which has merged or
amalgamated with the first mentioned company, the lock-in period already undergone in respect
of shares of the transferor company shall be adjusted against the lock-in period required under
this sub-regulation.

If ESPS is part of a public issue and the shares are issued to employees at the same price as in
the public issue, the shares issued to employees pursuant to ESPS shall not be subject to lock-
in.

75. STOCK APPRECIATION RIGHTS (SAR) (Dec 2018)

The SAR scheme shall contain the details of the manner in which the scheme will be
implemented and operated. The company shall have the freedom to implement cash settled or
equity settled SAR scheme. However, in case of equity settled SAR scheme, if the se ttlement

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results in fractional shares, then the consideration for fractional shares should be settled in
cash.

SAR shall not be offered unless the disclosures, as specified by SEBI in this regard, are made
by the company to the prospective SAR grantees.

VESTING
There shall be a minimum vesting period of one year in case of SAR scheme. However, in a case
where SAR is granted by a company under a SAR scheme in lieu of SAR held by the same person
under a SAR scheme in another company which has merged or amalgamated with the first
mentioned company, the period during which the SAR granted by the transferor company were
held by the employee shall be adjusted against the minimum vesting period required under this
sub-regulation.

Rights of the SAR Holder

The employee shall not have right to receive dividend or to vote or in any manner enjoy the
benefits of a shareholder in respect of SAR granted to him.

76. PRIOR CONDITIONS TO BE FULFILLED FOR A NOMINEE DIRECTOR FOR ESOP ELIGIBILITY (Dec 2019)
As per regulation 4 of SEBI (Share Based Employee Benefits) Regulations, 2014, an employee
shall be eligible to participate in the schemes of the company and where such employee is a
director nominated by an institution as its representative on the board of directors of the
company;-
(i) The contract or agreement entered into between the institution nominating its employee as
the director of a company, and the director so appointed shall, inter alia, specify the following:-
(a) whether the grants by the company under its scheme(s) can be accepted by the said employee
in his capacity as director of the company:
(b) that grant if made to the director, shall not be renounced in favour of the nominating
institution; and
(c) the conditions subject to which fees, commission, other incentives, etc. can be accepted by
the director from the company.

(ii) the institution nominating its employee as a director of a company shall file a copy of' the
contract or agreement with the said company, which shall in turn file the copy with all the stock
exchanges on which its shares are listed.

(iii) the director so appointed shall furnish a copy of the contract or agreement at the first board
meeting of the company attended by him after his nomination.

77. ROLL OVER OF DEBT SECURITIES

(1) The issuer shall redeem the debt securities in terms of the offer document.

(2) Where the issuer intends to roll-over debt securities of a particular International Securities
Identification Number, it shall do so only upon giving fifteen days notice for the proposed roll
over.

(3) The roll-over shall be approved by a majority of holders holding not less than three-fourths
in value through postal ballot or e-voting of such debt securities in a duly convened meeting as
per the offer document.

(4) The notice referred to in sub- regulation (2) shall contain disclosures with regard to rationale
for roll-over and at least one credit rating, which shall be obtained from a credit rating agency
within six months prior to the due date of redemption.

(5) The issuer shall, prior to sending the notice to holders of debt securities, file a copy of the
notice and proposed resolution with the stock exchange(s) where such debt securities are listed,
for dissemination of the same to public on its website.
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(6) The existing trust deed may be continued if it provides for such continuation or the same
may be amended or fresh trust deed may be executed at the time of such roll over.

(7) The issuer shall on completion of the roll over, intimate the stock exchange(s) about the roll-
over of the debt securities.

(8) The issuer shall create and maintain adequate security in respect of such debt securities to
be rolled over.

(9) The issuer shall redeem the debt securities of all such holders, who have not given their
positive consent for the roll-over.

78. RIGHT TO RECALL OR REDEEM PRIOR TO MATURITY IN RELATION TO NON-CONVERTIBLE SECURITIES

(1) An issuer making issuance of NCS shall:
(a) have the right to recall such securities prior to the maturity date (call option); or,
(b) shall have a right to provide such right of redemption of debt securities prior to the maturity
date (put option) to all the investors or only to retail investors.

(2) Such right to recall NCS or redeem debt securities prior to the maturity date shall be
exercised in accordance with the terms of issue and detailed disclosure in this regard shall be
made in offer document including date from which such right is exercisable, period of exercise
(which shall not be less than three working days) and redemption amount (including the
premium or discount at which such redemption shall take place).

(3) The issuer or investor may exercise such right with respect to all the NCS issued or held by
them respectively or with respect to a part of the non-convertible securities so issued or held.

(4) In case of partial exercise of such right in accordance with the terms of the issue by the
issuer, it shall be done on proportionate basis only.

(5) No such right shall be exercisable before the expiry of one year from the date of issue of such
non-convertible securities.

(6) Issuer shall send notice to all the eligible holders of such non-convertible securities and
debenture trustee at least twenty-one days before the date from which such right is exercisable.

(7) Issuer shall also provide a copy of such notice to the stock exchange(s) where such non -
convertible securities are listed for wider dissemination and shall make an advertisement in an
english national daily and regional daily having wide circulation at the place where the registered
office of the issuer is situated, indicating the details of such rights and eligibility of the holders
who are entitled to avail such right.

(8) Issuer shall pay interest at the rate of fifteen percent per annum for the period of delay, if
any.

(9) After the completion of the exercise of such right, the issuer shall
(a) submit a report to the stock exchange(s) where the non-convertible securities are listed for
public dissemination regarding the details of non-convertible securities redeemed during the
exercise period and details of redemption thereof;

(b) inform the debenture trustee regarding the debt securities redeemed during the exercise
period and details of redemption thereof; and,

(c) inform the depositories for extinguishing the non-convertible securities that have been
redeemed.

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79. ISSUE OF WARRANTS (REGULATION 13 OF ICDR 2013)
An issuer shall be eligible to issue warrants in an initial public offer subject to the following:
a) the tenure of such warrants shall not exceed eighteen months from the date of their allotment
in the initial public offer;

b) a specified security may have one or more warrants attached to it;

c) the price or formula for determination of exercise price of the warrants shall be determined
upfront and disclosed in the offer document and at least 25% of the consideration amount based
on the exercise price shall also be received upfront;

Provided that 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.

d) 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 3 months from the date of payment of
consideration, such consideration made in respect of such warrants shall be forfeited by the
issuer.

80. SECURITIES INELIGIBLE FOR MINIMUM PROMOTERS CONTRIBUTION

(1) For the computation of minimum promoters’ contribution, the following specified securities
shall not be eligible:
(a) specified securities acquired during the preceding 3 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

(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 acquired by the promoters and alternative investment funds or foreign
venture capital investors or scheduled commercial banks or public financial institutions or
insurance companies registered with IRDAI, during the preceding one year at a price lower than
the price at which specified securities are being offered to the public in the initial public offer:

Provided that nothing contained in this clause shall apply:

(i) if the promoters and alternative investment funds, as applicable, pay to the issuer the
difference between the price at which the specified securities are offered in the initial public
offer and the price at which the specified securities had been acquired;

(ii) if such specified securities are acquired in terms of the scheme under sections 230 to 234 of
the Companies Act, 2013, as approved by a High Court or a tribunal or the Central Government,
as applicable, by the 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;

(iii) 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 the infrastructure sector;

(c) specified securities allotted to the promoters and alternative investment funds 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 or limited
liability partnerships, where the partners of the erstwhile partnership firms or limited liability
partnerships are the promoters of the issuer and there is no change in the management:

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Provided that specified securities, allotted to the promoters against the capital existing in such
firms for a period of more than one year on a continuous basis, shall be eligible;

(d) specified securities pledged with any creditor.

(2) Specified securities referred to in clauses (a) and (c) of sub-regulation (1) shall be eligible for
the computation of promoters’ contribution if such securities are acquired pursuant to a scheme
which has been approved by a tribunal or the Central Government under sections 230 to 234
of the Companies Act, 2013.

81. DIFFERENTIAL PRICING

An issuer company can offer securities subject to the following provisions:-
(i) It will only be offered to retail individual investors/employees.

(ii) The value for making an application under this category shall not be more than ` 2 lacs.

(iii) The difference shall not be more than 10% of the price at which specified securities are offered
to other categories of applicants excluding Anchor Investors;

(iv) If the issuer company opts for alternate method of book building, the issuer company can
offer securities to its employees at a price, lower than floor price and the difference between
such price and floor price shall not be more than 10%.

Discount, if any, shall be expressed in rupee terms in the offer document.

82. MINIMUM OFFER TO PUBLIC (IPO)

The minimum offer to the public shall be subject to the provisions of clause (b) of sub-rule (2)
of rule 19 of Securities Contracts (Regulations) Rules, 1957;

Rule 19(2)(b):
The minimum offer and allotment to public in terms of an offer document shall be-
(i) at least 25% of each class or kind of equity shares or debenture convertible into equity shares
issued by the company, if the post issue capital of the company calculated at offer price is less
than or equal to 1,600 crore rupees;

(ii) at least such percentage of each class or kind of equity shares or debentures convertible into
equity shares issued by the company equivalent to the value of 400 crore rupees, if the post
issue capital of the company calculated at offer price is more than 1,600 crore rupees but less
than or equal to 4,000 crore rupees;

(iii) at least ten percent of each class or kind of equity shares or debentures convertible into
equity shares issued by the company, if the post issue capital of the company calculated at offer
price is above 4,000 crore rupees but less than or equal to 1,00,000 crore rupees;

(iv) at least such percentage of each class or kind of equity shares or debentures convertible into
equity shares issued by the company equivalent to the value of 5,000 crores rupees and at least
5% of each such class or kind of equity shares or debenture convertible into equity shares issued
the company, if the post issue capital of the company calculated at the offer price is above
1,00,000 Crore rupees.

83. RESERVATION ON COMPETITIVE BASIS (IPO)

(1) The issuer may make reservations on a competitive basis out of the issue size excluding
promoters’ contribution in favour of the following categories of persons:
a) employees;

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b) Shareholders (other than promoters and promoter group) of listed subsidiaries or listed
promoter companies.

Provided that the issuer shall not make any reservation for the lead manager(s), registrar,
syndicate member(s), their promoters, directors and employees and for the group or associate
companies of the lead manager(s), registrar and syndicate member(s) and their promoters,
directors and employees.

(2) The reservations on a competitive basis shall be subject to the following conditions:
a) the aggregate of reservations for employees shall not exceed 5% of the post-issue capital of
the issuer and the value of allotment to any employee shall not exceed ` 2 lakhs:

Provided that in the event of under-subscription in the employee reservation portion, the
unsubscribed portion may be allotted on a proportionate basis, for a value in excess of ` 2 lakhs,
subject to the total allotment to an employee not exceeding ` 5,00,000.

b) Reservation for shareholders shall not exceed 10% of the issue size;

c) no further application for subscription in the net offer can be made by persons (except an
employee and retail individual shareholder) in favour of whom reservation on a competitive basis
is made;

d) any unsubscribed portion in any reserved category may be added to any other reserved
category and the unsubscribed portion, if any, after such inter-se adjustments among the
reserved categories shall be added to the net offer category;

e) in case of under-subscription in the net offer category, spill-over to the extent of under-
subscription shall be permitted from the reserved category to the net offer.

84. UNDERWRITTING (IPO)

(1) If the issuer making an initial public offer or further public offer, other than through the book
building process, desires to have the issue underwritten to cover under-subscription in the
issue, it shall, prior to the filing of the prospectus, enter into an underwriting agreement with
the merchant bankers or stock brokers registered with the Board to act as underwriters,
indicating therein the maximum number of specified securities they shall subscribe to, either
by themselves or by procuring subscription, at a predetermined price which shall not be less
than the issue price, and shall disclose the fact of such underwriting agreement in the
prospectus.

(2) The issuer making an initial public offer or further public offer, other than through the book
building process, shall, prior to the filing of the prospectus, enter into an underwriting
agreement with the merchant bankers or stock brokers registered with the Board to act as
underwriters, indicating therein the number of specified securities they shall subscribe to on
account of rejection of applications, either by themselves or by procuring subscription, at a
predetermined price which shall not be less than the issue price, and shall disclose the fact of
such underwriting agreement in the prospectus.

(3) If the issuer makes a public issue through the book building process:
(a) the issue shall be underwritten by lead manager(s) and syndicate member(s):
Provided that at least seventy five per cent. of the net offer proposed to be compulsorily allotted to
qualified institutional buyers for the purpose of compliance of the eligibility conditions specified in
sub-regulation (2) of regulation 6 shall not be underwritten.

(b) the issuer shall, prior to the filing of the prospectus, enter into an underwriting agreement
with the lead manager(s) and syndicate member(s), indicating therein the number of specified
securities they shall subscribe to on account of rejection of bids, either by themselves or by

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procuring subscription, at a price which shall not be less than the issue price, and shall disclose
the fact of such underwriting agreement in the prospectus.

(c) if the issuer desires to have the issue underwritten to cover under-subscription in the
issue, it shall, prior to the filing of the red herring prospectus, enter into an underwriting
agreement with the lead manager(s) and syndicate member(s) to act as underwriters, indicating
therein the maximum number of specified securities they shall subscribe to, either by
themselves or by procuring subscription, at a price which shall not be less than the issue price,
and shall disclose the fact of such underwriting agreement in the red herring prospectus.

(d) if the syndicate member(s) fail to fulfil their underwriting obligations, the lead manager(s)
shall fulfil the underwriting obligations.

(e) the lead manager(s) and syndicate member(s) shall not subscribe to the issue in any manner
except for fulfilling their underwriting obligations.

(f) in case of every underwritten issue, the lead manager(s) shall undertake minimum
underwriting obligations as specified in the Securities and Exchange Board of India (Merchant
Bankers) Regulations, 1992.

(g) where the issue is required to be underwritten, the underwriting obligations should be at
least to the extent of minimum subscription.

85. PRE ISSUE ADVERTISEMENT (IPO)

(1) Subject to the provisions of the Companies Act, 2013, the issuer shall, after registering the
red herring prospectus (in case of a book built issue) or 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.

(2) The pre-issue advertisement shall be in the format and shall contain the disclosures specified
in Part A of Schedule X.

Provided that 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 pursuant to sub-regulation (4) of regulation
29.

(3) 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.

(4) 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.

86. POST ISSUE ADVERTISEMENT (IPO)

(1) The lead manager(s) shall ensure that an advertisement giving details relating to:
• Subscription,
• basis of allotment,
• number, value and percentage of all applications including ASBA,
• number, value and percentage of successful allottees for all applications including ASBA,
• date of completion of despatch of refund orders, as applicable, or instructions to self-
certified syndicate banks by the registrar,
• date of credit of specified securities and
• date of filing of listing application, etc.

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is released within 10 days from the date of completion of the various activities in at least:
• one English national daily newspaper with wide circulation,
• one Hindi national daily newspaper with wide circulation and
• one regional language daily newspaper with wide circulation at the place where registered
office of the issuer is situated.

(2) Details specified in sub regulation (1) shall also be placed on the websites of the stock
exchange(s).

87. PRICING OF PREFERENTIAL ISSUE TO PERSONS OTHER THAN QIB (FREQUENTLY TRADED SHARES) (REGULATION 164)
(1) If the equity shares of the issuer have been listed on a recognised stock exchange for a period
of 90 Trading Days or more as on the relevant date, the price of the equity shares to be allotted
pursuant to the preferential issue shall be not less than higher of the following:
a. the 90 trading days Volume Weighted average price of the related equity share quoted on
recognized stock exchange preceding the relevant date; or

b. the 10 trading days Volume Weighted average price of the related equity share quoted on
recognized stock exchange preceding the relevant date

Provided that if the Articles of Association of the issuer provide for a method of determination
which results in a floor price higher than that determined under these regulations, then the same
shall be considered as the floor price for equity shares to be allotted pursuant to the preferential
issue.

(2) If the equity shares of the issuer have been listed on a recognised stock exchange for a period
of less than 90 trading days as on the relevant date, the price of the equity shares to be
allotted pursuant to the preferential issue shall be not less than the higher of the following:

a) the price at which equity shares were issued by the issuer in its initial public offer or the
value per share arrived at in a scheme of compromise, arrangement and amalgamation under
sections 230 to 234 the Companies Act, 2013, as applicable, pursuant to which the equity
shares of the issuer were listed, as the case may be; or

b) the average of the volume weighted average prices of the related equity shares quoted on the
recognised stock exchange during the period the equity shares have been listed preceding
the relevant date; or

c) the average of the 10 trading days volume weighted average prices of the related equity shares
quoted on a recognised stock exchange preceding the relevant date.

Provided that if the Articles of Association of the issuer provide for a method of determination
which results in a floor price higher than that determined under these regulations, then the same
shall be considered as the floor price for equity shares to be allotted pursuant to the preferential
issue.

(3) Where the price of the equity shares is determined in terms of sub-regulation (2), such price
shall be recomputed by the issuer on completion of 90 trading days from the date of listing
on a recognised stock exchange with reference to the 90 trading days volume weighted average
prices of the related equity shares quoted on the recognised stock exchange during these 90
trading days and if such recomputed price is higher than the price paid on allotment, the
difference shall be paid by the allottees to the issuer.

(4)
(a) A preferential issue of specified securities to qualified institutional buyers, not exceeding
5 in number, shall be made at a price not less than the 10 trading days volume weighted average
prices of the related equity shares quoted on a recognised stock exchange preceding the relevant
date.
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(b) no allotment shall be made, either directly or indirectly, to any qualified institutional buyer
who is a promoter or any person related to the promoters of the issuer:

Provided that a qualified institutional buyer who does not hold any shares in the issuer and who
has acquired rights in the capacity of a lender shall not be deemed to be a person related to the
promoters.

Explanation. — For the purpose of this clause, a qualified institutional buyer who has any of
the following rights shall be deemed to be a person related to the promoters of the issuer:-
(a) rights under a shareholders‘ agreement or voting agreement entered into with promoters or
promoter group;
(b) veto rights; or
(c) right to appoint any ` director on the board of the issuer.

(5) For the purpose of this Chapter, “frequently traded shares” means the shares of the issuer,
in which the traded turnover on any recognised stock exchange during the 240 Trading days
preceding the relevant date, is at least 10% of the total number of shares of such class of
shares of the issuer:

88. APPLICATION SUPPORTED BY BLOCKED AMOUNT (ASBA)

• ASBA means “Application Supported by Blocked Amount”.
• ASBA is an application containing an authorization to block the application money in the
bank account, for subscribing to an issue.
• If an investor is applying through ASBA, his application money shall be debited from the
bank account only if the application is selected for allotment after the basis of allotment is
finalized.
• In other words, ASBA is a process for subscribing to a public issue. An investor authorities
a Bank (SCSB) for blocking a specific amount in his account for the purpose of subscribing
in a public Issue.
• The ASBA process is available in all public issues made through the book building route.

89. APPLICABILITY OF ICDR 2018

These regulations shall apply to the following:
(a) an initial public offer by an unlisted issuer;
(b) a rights issue by a listed issuer; where the aggregate value of the issue is ` 50 Crores or
more;
(c) a further public offer by a listed issuer;
(d) a preferential issue by a listed issuer;
(e) a qualified institutions placement by a listed issuer;
(f) an initial public offer of Indian depository receipts;
(g) a rights issue of Indian depository receipts;
(h) an initial public offer by a small and medium enterprise;
(i) a listing on the Innovators Growth Platform through an issue or without an issue; and
(j) a bonus issue by a listed issuer.

Provided that in case of rights issue of size less than ` 50 Crores, the issuer shall prepare the
letter of offer in accordance with requirements as specified in these regulations and file the same
with the Board for information and dissemination on the Board’s website.

90. ENTITIES NOT ELIGIBLE TO MAKE AN IPO

(1) 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 Board.
(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 Board.
(c) if the issuer or any of its promoters or directors is a willful defaulter.
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(d) if any of its promoters or directors is a fugitive economic offender.

(2) An issuer shall not be eligible to make an initial public offer if there are any outstanding
convertible securities or any other right which would entitle any person with any option to
receive equity shares of the issuer:

Provided that the provisions of this sub-regulation shall not apply to:
(a) outstanding options granted to employees, whether currently an employee or not, pursuant to
an employee stock option scheme in compliance with the Companies Act, 2013, the relevant
Guidance Note or accounting standards, if any, issued by the Institute of Chartered Accountants
of India or pursuant to the Companies Act, 2013, in this regard;

(b) fully paid-up outstanding convertible securities which are required to be converted on or before
the date of filing of the red herring prospectus (in case of book-built issues) or the prospectus (in
case of fixed price issues), as the case may be.

91. PRICE & PRICE BANK (ICDR)

• For Book Building Process: The issuer company has to announce price band in place of fixed
price for the issue of securities. The price band shall be included in the red herring
prospectus of the Company.
• For Other than Book Building Process: The issuer company has to fix price of issue of
securities before submitting prospectus with the Registrar of Companies.

(1) The issuer company can mention a price in the draft prospectus (in case of a fixed price
issue) and floor price or price bank in the red herring prospectus (in case of a fixed built issue)
and determine the price at a later date before registering the prospectus with the Registrar of
Companies.

However, The Final prospectus registered with the Registrar of Companies should contain only
one price.

(2) The cap on the price band shall be less than or equal to 120% of the floor price.
Provided that the cap of the price band shall be at least 105% of the floor price.

(3) The floor price or the final price should not be less than the face value of the securities.

(4) If the floor price or price band is not mentioned in the red herring prospectus, the issuer
company should announce the floor price or price band in all the newspapers in which the pre
– issue advertisement was released at least 2 working days before the opening of the bid.

(5) The announcement referred to in sub-regulation (4) shall contain relevant financial ratios
computed for both upper and lower end of the price band and also a statement drawing attention
of the investors to the section titled “basis of issue price” of the offer document.

(7) The announcement referred to in sub-regulation (4) and the relevant financial ratios referred
to in sub-regulation (5) shall be disclosed on the websites of the stock exchange(s) and shall
also be pre-filled in the application forms to be made available on the websites of the stock
exchange(s).

92. OPENING OF THE ISSUE (IPO)

(1) Subject to the compliance with the provisions of the Companies Act, 2013, a public issue may be
opened within twelve months from the date of issuance of the observations by the Board under
regulation 25;
(2) An issue shall be opened after at least 3 working days from the date of registering, the red
herring prospectus, in case of a book built issue and the prospectus, in case of a fixed price issue,
with the Registrar of Companies.

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93. PERIOD OF SUBSCRIPTION (IPO)
(1) Except as otherwise provided in these regulations, an initial public offer shall be kept open for at
least 3 working days and not more than 10 working days.
(2) In case of a revision in the price band, the issuer shall extend the bidding (issue) period disclosed
in the red herring prospectus, for a minimum period of 3 working days, subject to the provisions of
sub-regulation (1).
(3) 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, subject to the provisions of sub-regulation (1).

94. MANNER OF CALLS

If the issuer proposes to receive subscription monies in calls, it shall ensure that the outstanding
subscription money is called within twelve months from the date of allotment in the issue and
if any applicant fails to pay the call money within the said twelve months, the equity shares on
which there are calls in arrears along with the subscription money already paid on such shares
shall be forfeited:

Provided that it shall not be necessary to call the outstanding subscription money within twelve
months, if the issuer has appointed a monitoring agency in terms of regulation 41.

95. APPLICATION MONEY & MINIMUM APPLICATION VALUE

(1) A person shall not make an application in the net offer category for a number of specified
securities that exceeds the total number of specified securities offered to the public.

Provided that the maximum application by non-institutional investors shall not exceed total
number of specified securities offered in the issue less total number of specified securities offered
in the issue to qualified institutional buyers.

(2) The issuer shall stipulate in the offer document the minimum application size in terms of
number of specified securities which shall fall within the range of minimum application value
of ` 10,000 to ` 15,000.

(3) The issuer shall invite applications in multiples of the minimum application value, an
illustration whereof is given in Part B of Schedule XIV.

(4) The minimum sum payable on application per specified security shall be at least 25% of the
issue price:

Provided that in case of an offer for sale, the full issue price for each specified security shall be
payable at the time of application.

Explanation: For the purpose of this regulation, “minimum application value” shall be with
reference to the issue price of the specified securities and not with reference to the amount
payable on application.

96. POST ISSUE RESPONSIBILITIES OF LEAD MANAGER (IPO)

(1) The responsibility of the lead manager(s) shall continue until completion of the issue process and
for any issue related matter thereafter.
(2) The lead manager(s) shall regularly monitor redressal of investor grievances arising from any
issue related activities.
(3) The lead manager(s) shall continue to 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.
(4) The lead manager(s) shall be responsible for and 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 SCSB, processing of the
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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/ despatch of refund orders are completed and securities are listed, as applicable.
(5) 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 the Board.
(6) 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 10 days from
the date of closure of the issue.
(7) In the case of undersubscribed issues that are underwritten, the lead manager(s) shall furnish
information in respect of underwriters who have failed to meet their underwriting devolvement to the
Board, in the format specified in Schedule XVIII.

97. GREEN SHOE OPTION

• Green Shoe Company, an American company was the first company which was allowed to
use this option; therefore, this option is known as Green Shoe Option.
• A green shoe option (GSO) provides the option of allotting equity shares in excess of the
equity shares offered in the public issue as a post – listing price stabilizing mechanism.
• the issuer has been authorized, by a resolution passed in the general meeting of shareholders
approving the public issue, to allot specified securities to the stabilizing agent, if required,
on the expiry of the stabilization period
• the issuer has appointed a lead manager as a stabilizing agent, who shall be responsible for
the price stabilization process;
• The stabilization mechanism should be available for the period disclosed by the company in
the prospectus, which shall not exceed 30 days from the date when trading permission was
given by the exchange(s).
• The stabilizing agent shall open a special account, distinct from the issue account, with a
bank for crediting the monies received from the applicants against the over-allotment and a
special account with a depository participant for crediting specified securities to be bought
from the market during the stabilization period out of the monies credited in the special
bank account.
• Return of Securities borrowed from Promoters:
o if SA bought securities from market: The specified securities bought from the market and
credited in the special account with the depository participant shall be returned to the
promoters or pre-issue shareholders immediately, in any case not later than 2 working days
after the end of the stabilization period. The balance in Bank Account shall be transferred
to Investor Education & Protection Fund (IEPF).

o If SA not able to buy securities from market: On expiry of the stabilization period, if the
stabilizing agent has not been able to buy specified securities from the market to the extent
of such securities over-allotted, the issuer shall allot specified securities at issue price in
dematerialised form to the extent of the shortfall to the special account with the depository
participant, within 5 days of the closure of the stabilization period and such specified
securities shall be returned to the promoters or pre-issue shareholders by the stabilizing
agent in lieu of the specified securities borrowed from them and the account with the
depository participant shall be closed thereafter.
98. FAST TRACK FPO / FAST TRACK RIGHT ISSUE
A Listed Company has to satisfy the following conditions for accessing primary market under
Fast Track Issues scheme:-
(a) Listing: The issuer company has been listed on any recognized stock exchange having
nationwide terminals (i. e. BSE/NSE) for a period of at least 3 years immediately preceding the
reference date.

(b) Avg. Market Capitalization: The issuer company has the average market capitalization of
public shareholding at least

Right Issue: ` 250 crores

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 in at least one of the recognized stock exchanges with nationwide trading terminal, where its
securities are listed

FPO: ` 1000 Crores

“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.

(c) Annualized Trading Turnover: The annualized trading turnover of the shares of the company
during six calendar months immediately preceding the month of the reference date has been at
least 2% of the weighted average number of the shares listed during the said six months’ period.

Provided that for issuers, whose public shareholding is less than 15% 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;

The annualized delivery-based trading turnover of the equity shares during six calendar months
immediately preceding the month of the reference date has been at least 10% of the annualized
trading turnover of equity shares during such six months‘ period;

(d) Shareholder Grievances: The issuer company has redressed at least 95% of total shareholder
grievances complaints received till the end of the quarter immediately preceding the month of
the reference date.

(e) Compliances of Listing Agreement: The issuer company has complied with the listing
agreement for a period of at least 3 years immediately preceding the reference date.

(f) Auditor’s Qualification: for audit qualifications, if any, in respect of any of the financial
years for which accounts are disclosed in the letter of offer, the issuer shall provide the
restated financial statements adjusting for the impact of the audit qualifications.

Further, that for the qualifications wherein impact on the financials cannot be ascertained the
same shall be disclosed appropriately in the letter of offer.

(g) No prosecution: that no show-cause notices, excluding proceedings for imposition of

penalty, have been issued by the Board and pending against the issuer or its promoters or
whole-time directors as on the reference date.;

In cases where against the issuer or its promoters or whole-time directors,

i) show-cause notice(s) has been issued by the Board or the Adjudicating officer, in a
proceeding for imposition of penalty; or

ii) prosecution proceedings have been initiated by the Board; necessary disclosures in respect
of such action(s) along-with its potential adverse impact on the issuer shall be made in the
letter of offer

(h) Dematerialized shares: The entire shareholding of the promoter group is held in
dematerialized form.

(i) No Conflict of Interest: there shall be no conflict of interest between the lead manager(s) and
the issuer or its group companies in accordance with the applicable regulations.

(j) Disclosure of Settlement of Alleged Violation: if the issuer or the promoter or the promoter
group or the director of the issuer has settled any alleged violations of securities laws through
the settlement mechanism of the Board in the past three years immediately preceding the
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reference date, then the disclosure of such compliance of the settlement order, shall be made in
the letter of offer;

(k) No Suspension of Trading: the equity shares of the issuer have not been suspended from
trading as a disciplinary measure during last 3 years immediately preceding the reference date;

(l) Shall not renounce the Rights Entitlement: the promoters and promoter group shall
mandatorily subscribe to their rights entitlement and shall not renounce their rights, except to
the extent of renunciation within the promoter group or for the purpose of complying with
minimum public shareholding norms prescribed under the Securities Contracts (Regulation)
Rules, 1957;

99. Manner of providing exit to dissenting shareholders (Schedule XX of ICDR 2018)

❖ The notice proposing the passing of special resolution for changing the objects of the issue and
varying the terms of contract, referred to in the prospectus shall also contain information about
the exit offer to the dissenting shareholders.
❖ In addition to the disclosures required the provisions of section 102 of the Companies Act, 2013
read with Rule 32 of Companies (Incorporation) rules, 2014 and Rule 7 of Companies (Prospectus
and Allotment of Securities) Rules, 2014 and any other applicable law, a statement to the effect
that the promoters or the shareholders having control shall provide an exit opportunity to the
dissenting shareholders shall also be included in the explanatory statement to the notice for
passing special resolution.
❖ After passing of the special resolution, the issuer shall submit the voting results to the recognized
stock exchange in terms of the provisions of SEBI LODR Regulations, 2015.
❖ The issuer shall also submit the list of dissenting shareholders, as certified by its compliance
officer, to the recognized stock exchange.
❖ The promoters or shareholders in control, shall appoint a merchant bankers registered with SEBI
and finalize the exit offer price in accordance with these regulations.
❖ The issuer shall intimate the recognized stock exchange about the exit offer to dissenting
shareholders and the price at which such offer is being given.
❖ The stock exchange shall immediately on receipt of such intimation disseminate the same to
public within one working day.
❖ To ensure security for performance of their obligations, the promoter or shareholders having
control, as applicable, shall create an escrow account which may be interest bearing and deposit
the aggregate consideration in the account at least 2 working days prior to opening of the
tendering period.
❖ The tendering period shall start not later than 7 working days from passing of the special
resolution and shall remain open for 10 working days.
❖ The dissenting shareholders who have tendered their shares in acceptance of the exit offer shall
have the option to withdraw such acceptance till the date of closure of tendering period.
❖ The promoter or shareholders having control shall facilitate tendering of shares by the
shareholders and settlement of the same through recognized stock exchange mechanism as
specified by SEBI for the purpose of takeover, buy back and delisting.
❖ The promoter or shareholders having control shall, within a period of 10 working days from the
last date of tendering period, make payment of consideration to the dissenting shareholders who
have accepted the exit offer.
❖ Within a period of 2 working days from the payment of consideration, the issuer shall furnish to
the recognized stock exchange, disclosure giving details of aggregate number of shares tendered,
accepted, payment of consideration and post offer shareholding pattern of the issuer and a report
by the merchant banker that the payment has been duly made to all the dissenting shareholders
whose shares have been accepted in the exit offer.

100. CIRCUMSTANCES WHEN SR EQUITY SHARES SHALL BE TREATED AS ORDINARY SHARES (REG 41A OF LODR 2015)
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The SR equity shares shall be treated as ordinary equity shares in terms of voting rights (i.e.
one SR share shall only have one vote) in the following circumstances -
i. appointment or removal of independent directors and/or auditor;
ii. where a promoter is willingly transferring control to another entity;
iii. related party transactions in terms of these regulations involving an SR shareholder;
iv. voluntary winding up of the listed entity;
v. changes to the Articles of Association or Memorandum of Association of the listed entity,
except any change affecting the SR equity share;
vi. initiation of a voluntary resolution process under the Insolvency Code;
vii. utilization of funds for purposes other than business;
viii. substantial value transaction based on materiality threshold as specified under these
regulations;
ix. passing of special resolution in respect of delisting or buy-back of shares; and
x. other circumstances or subject matter as may be specified by the Board, from time to time.

101. DIVIDEND DISTRIBUTION POLICY (REG 43A OF LODR 2015)

(1) The top 1000 listed entities based on market capitalization (calculated as on March 31 of
every financial year) 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.

(2) The dividend distribution policy shall include the following parameters:
(a)the circumstances under which the shareholders of the listed entities may or may not expect
dividend;
(b)the financial parameters that shall be considered while declaring dividend;
(c)internal and external factors that shall be considered for declaration of dividend;
(d)policy as to how the retained earnings shall be utilized; and
(e)parameters that shall be adopted with regard to various classes of shares:

Provided that if the listed entity proposes to declare dividend on the basis of parameters
in addition to clauses (a) to (e) or proposes to change such additional parameters or the dividend
distribution policy contained in any of the parameters, it shall disclose such changes along
with the rationale for the same in its annual report and on its website.

(3) The listed entities other than those specified at sub-regulation (1) of this regulation may
disclose their dividend distribution policies on a voluntary basis on their websites and provide
a web-link in their annual reports.

102. MAXIMUM NUMBER OF DIRECTORSHIPS (REGULATION 17A OF LODR)

The directors of listed entities shall comply with the following conditions with respect to the
maximum number of directorships, including any alternate directorships that can be held by
them at any point of time:
(1) A person shall not be a director in more than 7 listed entities with effect from April 1, 2020:
Provided that a person shall not serve as an independent director in more than 7 listed entities.
(2) Notwithstanding the above, 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 3 listed entities.

103.COMPLIANCES RELATING TO BOARD OF DIRECTORS IN LODR

COMPOSITION OF BOARD OF DIRECTORS:

▪ The composition of board of directors shall have an optimum combination of executive
and non-executive directors with at least one woman director and not less than 50% of the board
of directors shall comprise of non-executive directors.
Provided that the Board of directors of the top 1000 listed entities shall have at least one
independent woman director by April 1, 2020;

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▪ where the listed company has outstanding SR equity shares, atleast half of the board of directors
shall comprise of independent directors.

CHAIRPERSON OF THE BOARD:

▪ where the chairperson of the board of directors is a non-executive director, at least
one-third of the board of directors shall comprise of independent directors and
▪ where the listed entity does not have a regular non-executive chairperson, at least half of the
board of directors shall comprise of independent directors:
▪ where the regular non-executive chairperson is a promoter of the listed entity or is related to
any promoter or person occupying management positions at the level of board of director
or at one level below the board of directors, at least half of the board of directors of the listed
entity shall consist of independent directors.

MINIMUM NUMBER OF DIRECTORS:

The board of directors of the top 2000 listed entities (with effect from April 1, 2020) shall comprise
of not less than six directors.

MAXIMUM AGE OF NON-EXECUTIVE DIRECTOR:

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

(1C) The listed entity shall ensure that approval of shareholders for appointment of a person on the
Board of Directors or as a manager is taken at the next general meeting or within a time period of 3
months from the date of appointment, whichever is earlier.

Provided that the appointment or a re-appointment of a person, including as a managing director or

a whole-time director or a manager, who was earlier rejected by the shareholders at a general meeting,
shall be done only with the prior approval of the shareholders:

Provided further that the statement referred to under sub-section (1) of section 102 of the Companies
Act, 2013, annexed to the notice to the shareholders, for considering the appointment or re-appointment
of such a person earlier rejected by the shareholders shall contain a detailed explanation and
justification by the Nomination and Remuneration Committee and the Board of directors for
recommending such a person for appointment or re-appointment.

MEETINGS OF BOARD OF DIRECTORS:

The board of directors shall meet at least 4 times a year, with a maximum time gap of 120 days
between any two meetings.

QUORUM OF BOARD MEETINGS:

The quorum for every meeting of the board of directors of the top 2000 listed entities with
effect from April 1, 2020 shall be one-third of its total strength or 3 directors, whichever is higher,
including at least one independent director.
104. AUDIT COMMITTEE (LODR)
COMPOSITION:
▪ The audit committee shall have minimum three directors as members.
▪ at least Two-thirds of the members of audit committee shall be independent directors and in
case of a listed entity having outstanding SR equity shares, the audit committee shall only
comprise of independent directors.
▪ All members of audit committee shall be financially literate and at least one member
shall have accounting or related financial management expertise.

Explanation (1).For the purpose of this regulation, “financially literate” shall mean the
ability to read and understand basic financial statements i.e. balance sheet, profit and
loss account, and statement of cash flows.

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Explanation (2).-For the purpose of this regulation , a member shall be considered to have
accounting or related financial management expertise if he or she possesses experience in
finance or accounting, or requisite professional certification in accounting, or any other
comparable experience or background which results in the individual’s financial
sophistication, including being or having been a chief executive officer, chief financial
officer or other senior officer with financial oversight responsibilities.

CHAIRPERSON OF COMMITTEE:
▪ The chairperson of the audit committee shall be an independent director and
▪ he shall be present at Annual general meeting to answer shareholder queries.

MEETINGS OF AUDIT COMMITTEE:

The audit committee shall meet at least four times in a year and not more than 120 days shall
elapse between two meetings.

QUORUM OF MEETINGS:
The quorum for audit committee meeting shall either be two members or one third of the
members of the audit committee, whichever is greater, with at least two independent
directors.

ROLE OF COMMITTEE:
The role of the audit committee and the information to be reviewed by the audit
committee shall be as specified in Part C of Schedule II.

SECRETARY OF COMMITTEE:
The Company Secretary shall act as the secretary to the audit committee.

105. NOMINATION & REMUNERATION COMMITTEE (LODR)

COMPOSITION OF COMMITTEE:
▪ the committee shall comprise of atleast three directors;
▪ all directors of the committee shall be non-executive directors;
▪ atleast two third of the directors shall be independent directors.

CHAIRPERSON OF COMMITTEE:
▪ The Chairperson shall be an independent director:

Provided that the chairperson of the listed entity, whether executive or non -executive,
may be appointed as a member of the Nomination and Remuneration Committee and
shall not chair such Committee.

▪ The Chairperson 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.

MEETINGS OF COMMITTEE:
The nomination and remuneration committee shall meet at least once in a year.

QUORUM OF MEETINGS:
The quorum for a meeting shall be either two members or one third of the members of
the committee, whichever is greater, including atleast one independent director in attendance.

ROLE OF COMMITTEE:
The role of the nomination and remuneration committee shall be as specified as in Part D of the
Schedule II.

106. STAKEHOLDER’S RELATIONSHIP COMMITTEE

COMPOSITION OF COMMITTEE:
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• At least three directors, with at least one being an independent director, shall be
members of the Committee.
• in case of a listed entity having outstanding SR equity shares, at least two thirds of the
Stakeholders Relationship Committee shall comprise of independent directors.

CHAIRPERSON OF COMMITTEE:
• The chairperson of this committee shall be a non-executive director.
• The Chairperson shall be present at the annual general meetings to answer queries of
the security holders.

MEETINGS OF THE COMMITTEE:

The stakeholders relationship committee shall meet at least once in a year.

ROLE OF COMMITTEE:
The role of the Stakeholders Relationship Committee shall be as specified as in Part D of the
Schedule II.

107. RISK MANAGEMENT COMMITTEE

COMPOSITION OF COMMITTEE:
• Committee shall have minimum three members with majority of them being members of
the board of directors, including at least one independent director ;
• In case of a listed entity having outstanding SR equity shares, at least two thirds of
the Risk Management Committee shall comprise independent directors.

CHAIRPERSON OF COMMITTEE:
The Chairperson shall be a member of the board of directors and senior executives of the listed
entity may be members of the committee.

MEETINGS OF COMMITTEE:
• The risk management committee shall meet at least twice in a year.
• The meetings of the risk management committee shall be conducted in such a manner that
on a continuous basis not more than 180 days shall elapse between any two consecutive
meetings.

QUORUM OF MEETINGS:
• The quorum for a meeting shall be either two members or one third of the members of
the committee, whichever is higher, including at least one member of the board of directors
in attendance.

ROLE OF COMMITTEE:
• The board of directors shall define the role and responsibility of the Risk Management
Committee and may delegate monitoring 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.
• The role and responsibilities of the Risk Management Committee shall mandatorily
include the performance of functions specified in Part D of Schedule II.

APPLICABILITY:
The provisions of this regulation shall be applicable to
(i) top 1000 listed entities, determined on the basis of market capitalization, as at the end
of the immediate previous financial year.
(ii) a ‘high value debt listed entity’.

108.VIGIL MECHANISM (June 2022)

According to the Regulation 22 of the SEBI (LODR) Regulations, 2015, the listed entity shall
formulate a vigil mechanism / whistle blower policy for directors and employees to report
genuine concerns.
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 The vigil mechanism shall provide for adequate safeguards against victimization of director(s)
or employee(s) or any other person who avail the mechanism and also provide for direct
access to the chairperson of the audit committee in appropriate or exceptional cases.

109. BENEFITS OF DEPOSITORY SYSTEM:

(a) Elimination of bad deliveries.
(b) Elimination of all risks associated with the physical certificates.
(c) It facilitates the immediate transfer and registration of the securities.
(d) It facilitates faster disbursement of non – cash corporate benefits like rights, bonus, etc.
(e) It reduces the brokerage for trading in dematerialized securities.
(f) Elimination of paper work and recording of transactions like transfer of shares.
(g) Elimination of problems related to change of the address of investor, transmission, etc.
(h) Elimination of problems related to selling securities on behalf of minor.

110. DEMATERILISATION (Dec 2018)

It is a process of conversion of physical share certificate into electronic form. So, when a
shareholder uses the dematerialization facility, a company takes back the shares, through
depository system and equal number of shares is credited in his Demat account in electronic
form.

The investors can dematerialize only those shares certificate that are already registered in their
name and belong to the list of securities admitted for dematerialized at the depositories. This
method is cost effective and simple and has been adopted in India.

An Investor will have to first open an account with a Depository Participant and then request
for Dematerialization of his share certificate through the Depository Participant so that the
dematerialized holdings can be credited into that account. This is very similar to opening a bank
account.

Dematerialization of shares is optional and an investor can still hold shares in physical form.
However, he/ she have to Demat the shares if he/she wishes to sell the same through stock
exchanges. Similarly, if an Investor purchases shares from stock exchange, he/she will get the
delivery of shares in Demat form.

111. FUNGIBILITY: (Dec 2018)

• Fungibility means interchangeable or exchangeability.
• All securities held in depository shall be fungible i. e. all certificates of the same security
shall become interchangeable in the sense that investor loses the right to obtain the exact
certificate he surrenders at the time of entry into depository.
• It is like withdrawing money from the bank without bothering about the distinctive numbers
of the currencies.
• In short, if a security or commodity is fungible if it is perfectly interchangeable with any
other of the same type and class securities or commodities.
• Most financial securities are fungible a share in a particular company is exactly the same as
another share in the same company.
• Fungibility is the property of a good or a commodity whose individual units are capable of
mutual substitution.

112. SARAL ACCOUNT OPENING (June 2022)

SEBI vide circular dated 4th March, 2015 provided for SARAL account opening for resident
individuals. An individual investors can open a trading account and demat account by filling
up a simplified Account Opening From (AOF") termed as 'SARAL AOF' and will also have the
option to obtain other facilities, whenever they require, on furnishing of additional
information as per prescribed regulations/circulars.

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 For a set of individual investors, it has been decided by the SEBI to simplify the requirement
of submission of ‘proof of address’. The requirement of submission of proof of address is as
follows:
(i) Individual investor may submit only one documentary proof of address (either
residence/correspondence or permanent) while opening a trading account and / or demat
account or while undergoing updation.

(ii) In case the proof of address furnished by the said investor is not the address where the
investors is currently residing the intermediary may take a declaration of the
residence/correspondence address on which all correspondence will be made by the
intermediary with the investor. No proof is required to be submitted for such
correspondence/residence address.

(iii) In the event of change of address due to relocation or any other reason, investor may
intimate the new address for correspondence to the intermediary within two weeks of such
a change. The residence/ correspondence address and any such change thereof may be
verified by the intermediary through positive confirmation such as (i) acknowledgment of
receipt Welcome Kit/ dispatch of contract notes/ any periodical statement, etc. (ii) telephonic
conversation; (iii) visits, etc

113. RECONCILIATION AUDIT UNDER SEBI (DEPOSITORY & PARTICIPANT) REGULATIONS

(1) Every issuer shall submit audit report on a quarterly basis, starting from September 30,
2003, to the concerned stock exchanges audited by a qualified Chartered Accountant or a
practicing Company Secretary, for the purposes of reconciliation of the total issued capital,
listed capital and capital held by depositories in dematerialized form, the details of changes in
share capital during the quarter and the in-principle approval obtained by the issuer from all
the stock exchanges where it is listed in respect of such further issued capital.

(2) The audit report under sub-regulation (1) shall also give the updated status of the register
of members of the issuer and confirm that securities have been dematerialized as per requests
within twenty one days from the date of receipt of requests by the issuer and where the
dematerialization has not been effected within the said stipulated period, the report shall
disclose the reasons for such delay.

(3) The issuer shall immediately bring to the notice of the depositories and the stock exchanges,
any difference observed in its issued, listed, and the capital held by depositories in
dematerialized form.

114. INTERNAL AUDIT OF OPERATIONS OF DEPOSITORY PARTICIPANTS

The two Depository service providers in India, viz., National Securities Depository Ltd. (NSDL)
and Central Depository Services (India) Limited (CDSL) have allowed Company Secretaries in
Whole – time Practice to undertake internal audit of the operations of Depository Participants
(DPs).

NSDL:
Every Depository Participant shall ensure that an internal audit in respect of the operations of
the Depository is conducted at intervals of not more than three months by a qualified
Chartered Accountant or a Company Secretary holding a certificate of Practice and a copy of the
internal audit report shall be furnished to the Depository.

CDSL:
Every Depository Participant shall ensure that an internal audit shall be conducted in respect
of the participant’s operations relating to CDS by a qualified Chartered Accountant in
accordance with the provisions of the Chartered Accountants Act, 1949 or by a Company
Secretary in practice in accordance with the provisions of the Company Secretaries Act, 1980,
at such intervals as may be specified by CDS from time to time. A copy of Internal Audit report
shall be furnished to CDS.
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115. INTERNAL AUDIT OF INTERMEDIARIES (Dec 2021)
• Efficient internal control systems and processes are pre requisite for good governance.
• The governance being a dynamic concept requires constant evaluation and monitoring of
the systems and processes.
• In the context of Capital Markets, capital markets intermediaries are an important
constituent of overall governance framework.
• Being an important link between regulators, investors and issuers, they are expected to
ensure that their internal controls are so efficient that ensure effective investor service at
all times and provide regulators comfort as to the compliance of regulatory prescription.
• In this direction that SEBI has authorised Practising Company Secretaries to undertake
internal audit of various capital market intermediaries.

116. CHECKLIST OF INTERNAL AUDIT OF OPERATIONS OF DEPOSITORY PARTICIPANTS:

• Account Opening
• Reporting to BOs
• Dematerialisation of Securities
• Rematerialisation of Securities
• Market Trades
• Off Market Trades
• Transmission
• Returns to Depository
• Grievance Redressal Mechanism
• Collateral Security
• Assignment of Business
• Freezing of Account
• Closure of Account
• Pledge & Hypothecation
• Invocation of Pledge/ Hypothecation by Pledgee
• Lending & Borrowing of Securities
• Records to be maintained by DPs
• Disclosure & Publication of Information
• Supervision by DP
• Code of Ethics for DPs
• Branch of Depository Participants

117. CONCURRENT AUDIT OF DEPOSITORY PARTICIPANTS

NSDL vide Circular No. NSDL/POLICY/2006/0021 dated June 24, 2006 provides for concurrent
audit of the Depository Participants. The Circular provides that w.e.f August 1, 2006, the
process of demat opening, control and verification of DIS is subject to Concurrent Audit.

Depository Participants have been advised to appoint a firm of Qualified CA or CS holding a

certificate of practice for conducting the Concurrent Audit. However, the participant in case they
so desire, may entrust the Concurrent Audit to their Internal Auditors. In respect of account
opening, the auditor should verify all the documents including KYC documents furnished by
the Clients and verified by the officials of the Participants.

The Concurrent Auditor should conduct the Audit in respect of all accounts opened, DIS issued
and controls on DIS as mentioned above, during the day, by the next working day. In case the
audit could not be completed within the next working day due to large volume, the auditor
should ensure that the audit is completed within a week’s time.

Any deviation and/or non-compliance observed in the aforesaid areas should be mentioned in
the audit report of the Concurrent Auditor. The management of the participant should comment
on the observations made by the Concurrent Auditor. The Concurrent Audit report should be

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submitted to NDSL, on a quarterly basis, in a hard copy form. If the auditor for Internal and
Concurrent Audit is the same, consolidated report may be submitted.

118. ISSUANCE & VERIFICATION OF DIS

Issuance of Delivery Instruction Slips (DIS):
The procedure followed by the Participants with respect to:
(a) Issuance of DIS booklets including loose slips.
(b) Existence of controls on DIS issued to Clients including pre-stamping of Client ID and unique
pre-printed serial numbers.
(c) Record maintenance for issuance of DIS booklets (including loose slips) in the back office.

Verification of Delivery Instruction Slips (DIS):

The procedure followed by the Participants with respect to:
(a) Date and time stamping (including late stamping) on instruction slips.
(b) Blocking of used/reported lost/stolen instruction slips in back-office system/ manual
record.
(c) Blocking of slips in the back-office system/manual record which are executed in DPM
directly.
(d) Two step verification for a transaction for more than `5 lakh, especially in case of off market
transactions.
(e) Instructions received from dormant accounts.

119. ADVANTAGES OF MUTUAL FUNDS

The advantages of investing in a mutual fund are:
1. Professional Management: Investors avail the services of experienced and skilled
professionals who are backed by a dedicated investment research team which analyses the
performance and prospects of companies and selects suitable investments to achieve the
objectives of the scheme.

2. Diversification: Mutual funds invest in a number of companies across a broad cross-section

of industries and sectors. This diversification reduces the risk because seldom do all stocks
decline at the same time and in the same proportion.

3. Convenient Administration: Investing in a mutual fund reduces paper work and helps
investors to avoid many problems such as bad deliveries, delayed payments and unnecessary
follow up with brokers and companies. Mutual funds save investors time and make investing
easy and convenient.

4. Return Potential: Over a medium to long term, Mutual funds have the potential to provide
a higher return as they invest in a diversified basket of selected securities.

5. Low Costs: Mutual funds are a relatively less expensive way to invest compared to directly
investing in the capital markets because the benefits of scale in brokerage, custodial and other
fees translate into lower costs for investors.

6. Liquidity: In open ended schemes, investors can get their money back promptly at net asset
value related prices from the mutual fund itself. With close ended schemes, investors can sell
their units on a stock exchange at the prevailing market price or avail of the facility of direct
repurchase at net asset value (NAV) related prices which some close ended and interval schemes
offer periodically or offer it for redemption to the fund on the date of maturity.

7. Transparency: Investors get regular information on the value of their investment in addition
to disclosure on the specific investments made by scheme, the proportion invested in each class
of assets and the fund manager’s investment strategy and outlook.

120. RISKS INVOLVED IN MUTUAL FUNDS (Dec 2019)

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• VOLATILITY RISK: Typically, equity-based funds invest in the shares of companies that are
listed on stock exchanges. The value of such funds is based on companies’ performance,
which often gets affected due to the prevalent microeconomic factors.

• CREDIT RISK: Credit risk in mutual fund investment often results from a situation, wherein,
the issuer of the scheme fails to pay the promised interest. In case of debt funds, typically,
fund managers include investment-grade securities with high credit ratings.

• LIQUIDITY RISK: Mutual funds with a long-term and rigid lock-in period like ELSS often
come with liquidity risk. Such a risk signifies that investors often find it challenging to
redeem their investments without incurring a loss.

• CONCENTRATED RISK: This mutual fund risk is also prevalent among investors. It can be
described as the situation when investors tend to put all their money into a single investment
scheme or in one sector. For instance, investing entirely in just one company’s stocks often
bears a substantial risk of losing capital if caught amidst bad market situations.

• INFLATION RISK: It can be best described as the risk of losing one’s purchasing power,
mainly due to the rising inflation rate. Typically, investors are exposed to the impact of this
risk when the rate of returns earned on investments fails to keep up with the increasing
inflationary rate.

121. EXPENSE RATIO (MUTUAL FUNDS)

• The fees charged by the scheme to manage investors’ money.

What does it contain?

• Fees paid to service providers like trustees, Registrar & Transfer Agents, Custodian, Auditor,
etc.
• Asset management expenses
• Commissions paid to distributors
• Other selling expenses including advertising expenses
• Expenses on investor communication, account statements, dividend / redemption cheques
/ warrants
• Listing fees and Depository fees
• Service tax

122. CODE OF CONDUCT FOR MUTUAL FUNDS

i. The schemes should not be organized, operated and managed in the interest of sponsors
or the directors of AMC or special class of unit holders;
ii. It shall ensure the adequate dissemination of adequate, fair, accurate and timely
information of all the stake holders;
iii. The excessive concentration of business with the broking firm or associates should be
avoided;
iv. The scheme - wise segregation of bank accounts and securities accounts must be
ensured;
v. The investment should be made in accordance with the investment objectives stated on
the offer documents;
vi. It must not use any unethical means to sell, market or induce any investor to buy their
schemes.
vii. The high standards of integrity and fairness in all the dealings should be maintained by
the trustees and AMCs;
viii. The AMCs shall not make any exaggerated statements.

123. ADVERTISEMENT CODE OF MUTUAL FUNDS

1. Advertisement shall be accurate, true, fair, clear, complete, unambiguous and concise.

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2. Advertisement shall not contain statement which are false, misleading, biased or deceptive,
based on assumptions and shall not contain any testimonials or any ranking based on any
criteria.
3. No celebrities shall form part of advertisement.
4. No advertisement shall directly or indirectly discredit other advertisements or make unfair
comparisons.
5. Advertisements shall be accompanied by a standard warning in legible fonts which states
“Mutual fund investments are subject to market risks, read all schemes related document
carefully.” No addition or deletion of words shall be made to the standard warning.
6. In audio visual media based advertisements, the standard warning in visual and
accompanying voice over reiteration shall be audible in a clear and understandable manner.
For example, in standard warning both the visual and the voice over reiteration containing
14 words running for at least 5 seconds may be considered as clear and understandable.
7. Advertisement shall not be so designed as likely to be misunderstood or likely to be disguise
the significance of any statement.

124. Which are the matters that are not considered as complaints by SEBI? (Dec 2019)
The matters that cannot be considered as complaints in SCORES:
✓ Complaints that are incomplete or not specific
✓ Allegations without supporting documents
✓ Offering suggestions or seeking guidance/explanation
✓ Seeking explanation for non-trading of shares or illiquidity of shares
✓ Not satisfied with trading price of the shares of the companies
✓ Non-listing of shares of private offer
✓ Disputes arise out of private agreement with companies/intermediaries.
✓ Matter involving fake/forged documents
✓ Complaints on matters not in SEBI purview
✓ Complaints about any unregistered/un-regulated activity
✓ Complaint not pertaining to investment in securities market

125. Types of Companies not covered under SCORES (Dec 2019)

Complaint against the following companies cannot be dealt through SCORES even though the
complaint may be against a listed entity/ SEBI Registered intermediary:
• Complaints against the companies which are unlisted/ delisted.
• Complaints against a sick company or a company where a moratorium order is passed in
winding up/ insolvency proceedings.
• Complaints against the companies where the name of company is struck off from ROC or a
vanishing company as per list published by MCA, suspended companies, companies under
Liquidation, BIFR, etc
• Complaints that are sub-judice i.e relating to cases which are under consideration by court
of law, quasi-judicial proceedings, etc
• Complaints against companies, falling under the purview of other regulatory bodies viz. RBI,
IRDA, PFRDA, CCI, etc or under the purview of other ministries viz MCA, etc.

126. SEBI Mobile Application: Recent Development

• In its efforts to improve the ease of doing business, SEBI dated March 5, 2020, launched a
Mobile Application for the convenience of investors to lodge their grievances in SEBI
Complaints Redress System (SCORES).
• SCORES mobile app will make it easier for investors to lodge their grievances with SEBI, as
they can now access SCORES at their convenience of a smart phone. The Mobile App will
encourage investors to lodge their complaints on SCORES rather than sending le tters to
SEBI in physical mode.
• This is another effort of SEBI in improving digitalization in securities market. The App has
all the features of SCORES which is presently available electronically where investors have
to lodge their complaints by using internet medium. After mandatory registration on the App,

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 for each grievance lodged, investors will get an acknowledgement via SMS and e -mail on
their registered mobile numbers and e-mail ID respectively.
• Investors can, only file their grievances but also track the status of their complaint redressal.
Investors can also key in reminders for their pending grievances. Tools like FAQs on SCORES
for better understanding of the complaint handling process can also be accessed.
Connectivity to the SEBI Toll Free Helpline number has been provided from the App for any
clarifications/ help that investors may require.
• SCORES is a platform designed to help investors to lodge their complaints online with
SEBI, pertaining to securities market, against listed companies, SEBI registered
intermediaries and SEBI recognized Market Infrastructure Institutions.
• As per SEBI norms, entities against whom complaints are lodged are required to file an
Action Taken Report with SEBI within 30 days of receipt of complaints.
• The Mobile App “SEBI SCORES” is available on both iOS and Android platforms.

127. TRADING PLAN UNDER SEBI PIT REGULATIONS (Dec 2018)

Requirements relating to Trading Plan as contained in SEBI PIT Regulations 2015:
(1) An insider shall be entitled to formulate a trading plan 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.

(2) Such trading plan shall:–

(i) not entail commencement of trading on behalf of the insider earlier than six months
from the public disclosure of the plan;

(ii) not entail trading for the period between the twentieth trading day prior to the last
day of any financial period for which results are required to be announced by the issuer
of the securities and the second trading day after the disclosure of such financial results;

(iii) entail trading for a period of not less than twelve months;

(iv) not entail overlap of any period for which another trading plan is already in existence;

(v) set out either the value of trades to be effected or the number of securities to be traded
along with the nature of the trade and the intervals at, or dates on which such trades
shall be effected; and

(vi) not entail trading in securities for market abuse.

(3) 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.

(4) 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.

(5) Upon approval of the trading plan, the compliance officer shall notify the plan to the stock
exchanges on which the securities are listed.

128. TIME LINE FOR LODGING COMPLAINT ON SCORES

an investor may lodge a complaint on SCORES within 1 year from the date of cause of complaint,
where:
• Investor has approached the listed company or registered intermediary for redressal of the
complaint and,
• The concerned listed company or registered intermediary rejected the complaint or,

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• The complainant does not receive any communication from the listed company or intermediary
concerned or,
The complainant is not satisfied with the reply given to him or redressal action taken by the listed
company or an intermediary.

129. CONFIDENTIALITY OF REQUEST UNDER INFORMAL GUIDANCE (Dec 2023)

❖ Any person submitting a letter or written communication under this scheme may request
that it receive confidential treatment for a specified period of time not exceeding 90 days
from the date of the Department’s response.
❖ The request shall include a statement of the basis for confidential treatment.
❖ If the Department determines to grant the request, the letter or written communication will
not be available to the public until the expiration of the specified period.
❖ If it appears to the Department that the request for confidential treatment should be denied,
the requestor will be so advised and such person may withdraw the letter or written
communication within 30 days of receipt of the advice, in which case the fee, if any, paid by
him would be refunded to him.
❖ In case a request has been withdrawn under clause (c), no response will be given and the
letter or written communication will remain with the SEBI but will not be made available to
the public.
❖ If the letter or written communication is not withdrawn, it shall be available to the public
together with any written staff response.
❖ A no action letter or an interpretive letter issued by a department constitutes the view of the
Department but will not be binding on SEBI, though the SEBI may generally act in
accordance with such a letter.
❖ The letter issued by a department under this scheme should not be construed as a conclusive
decision or determination of any question of law or fact by SEBI. Such a letter cannot be
construed as an order of SEBI under Section 15T of the Act and shall not be appealable.
❖ Where a no action letter is issued by a department affirmatively, it means that the
Department will not recommend enforcement action to the Board, subject to other provisions
of this scheme.

130.POWERS OF SAT AS A CIVIL COURT

The Securities Appellate Tribunal shall have, for the purposes 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:
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses or documents;
(e) reviewing its decisions;
(f) dismissing an application for default or deciding it ex-parte;
(g) setting aside any order of dismissal of any application for default or any order passed by it
ex-parte;
(h) any other matter which may be prescribed.

131. RIGHT OF APPEAL TO SECURITIES APPELLATE TRIBUNAL (SAT) AGAINST REFUSAL TO LIST SECURITIES BY STOCK
EXCHANGE (Dec 2019)

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 15 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
sub-section (1A) of section 40 of the Companies Act, 2013, the application for permission for
the shares or debentures to be dealt with on the stock exchange, within 15 days from the date
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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, –
(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 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 Securities Appellate Tribunal is as per the procedure laid down under
Securities Contract (Regulation) (Appeal to Securities Appellate Tribunal) rules, 2000.

132. DELISTING IS NOT PERMITTED UNDER CERTAIN CIRCUMSTANCES (REGULATION 4 OF DELISTING REGULATIONS)
(1) Neither any company shall apply for nor any recognised stock exchange shall permit delisting
of equity shares of a company:-
(a) unless a period of 3 years has elapsed since the listing of that class of equity shares on
any recognised stock exchange;
(b) if any instrument issued by the company, which is convertible into the same class of
equity share(s) that is sought to be delisted, is outstanding;
(c) pursuant to a buyback of equity shares by the company, including a buyback pursuant
to consolidation or division of all or part of the equity share capital of the company, unless
a period of six months has elapsed from the date of completion of such buyback;
(d) pursuant to a preferential allotment made by the company unless a period of six
months has elapsed from the date of such allotment:

(2) No acquirer shall propose delisting of equity shares of a company, if the acquirer had sold
the equity shares of the company during the period of six months prior to the date of the
initial public announcement.

(3) No acquirer shall, directly or indirectly,–

(a) employ any device, scheme or artifice to defraud any shareholder or other person; or
(b) engage in any transaction or practice that operates as a fraud or deceit upon any
shareholder or other person; or
(c) engage in any act or practice that is fraudulent, deceptive or manipulative
in connection with any delisting of equity shares sought or permitted or exit opportunity
given or other acquisition of equity shares made under these regulations.

133.ONCE DELISTED, A COMPANY CANNOT BE LISTED AGAIN (REGULATION 40 OF DELISTING REGULATIONS)

(1) No application for listing shall be made in respect of equity shares of a company,-
(a) which have been delisted under Chapter III or under Chapter VI of these regulations,
for a period of 3 years from the delisting;
(b) which have been delisted under Chapter V of these regulations, for a period of 10 years
from the delisting.

(2) Notwithstanding anything contained in sub-regulation (1), an application for listing of

delisted equity shares may be made in respect of a company:

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 (a) whose equity shares have been delisted pursuant to a resolution plan under section
31 of the Insolvency Code;
(b) whose equity shares are listed and traded on the innovators growth platform pursuant
to an initial public offer and which is delisted from the said platform;
(c) whose equity shares have been delisted in terms of regulation 35 of these regulations.

(3) While considering an application for listing of equity shares of a company which had been delisted
earlier, the recognised stock exchange shall give due regard to the facts and circumstances under
which such equity shares were delisted.

(4) An application for listing made in respect of delisted equity shares shall be deemed to be an
application for fresh listing of such equity shares and shall be subject to provisions of law relating
to listing of equity shares of unlisted companies.

134. OBJECTIVES OF BUY BACK

• To strategically increase promoter’s shareholding
• To improve Earnings per share
• To Improve return on capital, return on networth and to enhance the long-term
shareholders value
• To enhance consolidation of stake in the company
• To Prevent unwelcome takeover bids
• To return surplus cash to shareholders and allow profitable deployment of cash surplus
• To achieve optimum Capital Structure
• To support share price during periods of sluggish market conditions
• To service the equity more efficiently
• To Provide an additional exit route to shareholders when shares are undervalued or are
thinly traded.

135.CONDITIONS FOR BUY BACK (Dec 2019)

• 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 the standalone or consolidated financial
statements of the company, whichever sets out a lower amount.

• 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.

• All shares or other specified securities for buy-back shall be fully paid-up.

• 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 be less than or equal to 2:1, based on the
standalone or consolidated financial statements of the company whichever sets out a lower
amount. 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;

• 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.
(b) from any person through negotiated deals, whether on or off the stock exchange or
through spot transactions or through any private arrangement.

• 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.

• A company shall not allow buy-back of its shares unless the consequent reduction of its
share capital is effected.
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• Every buy-back shall be comleted 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 30 days of
such expiry, in the format as specified in the Companies (Share Capital and Debentures)
Rules, 2014.

136. ACCEPTABLE FORMS IN WHICH BALANCE OF ESCROW ACCOUNT CAN BE DEPOSITED FOR THE PURPOSE OF BUY BACK
OF SECURITIES

The escrow account referred to above shall subject to appropriate margin as specified by
the Board, consist of:
• cash including bank deposits deposited with any scheduled commercial bank, or
• bank guarantee issued in favour of the merchant banker by any scheduled commercial bank,
or
• deposit of frequently traded and freely transferable equity shares or other freely transferable
securities, or
• government securities, or
• units of mutual funds invested in gilt funds and overnight schemes, or
• a combination of above.

137. ELIGIBILITY CONDITIONS FOR BEING IDENTIFIED AS A SOCIAL ENTERPRISE

In order to establish the primacy of its social intent, such Social Enterprise shall meet the
following eligibility criteria:-
(a) the Social Enterprise shall be indulged in at least one of the following activities:
(i) eradicating hunger, poverty, malnutrition and inequality;
(ii) promoting health care including mental healthcare, sanitation and making available safe
drinking water;
(iii) promoting education, employability and livelihoods;
(iv) promoting gender equality, empowerment of women and LGBTQIA+ communities;
(v) ensuring environmental sustainability, addressing climate change including
mitigation and adaptation, forest and wildlife conservation;
(vi) protection of national heritage, art and culture;
(vii) training to promote rural sports, nationally recognised sports, Paralympic sports and
Olympic sports;
(viii) supporting incubators of Social Enterprises;
(ix) supporting other platforms that strengthen the non-profit ecosystem in fundraising and
capacity building;
(x) promoting livelihoods for rural and urban poor including enhancing income of small and
marginal farmers and workers in the non-farm sector;
(xi) slum area development, affordable housing and other interventions to build sustainable and
resilient cities;
(xii) disaster management, including relief, rehabilitation and reconstruction activities;
(xiii) promotion of financial inclusion;
(xiv) facilitating access to land and property assets for disadvantaged communities;
(xv) bridging the digital divide in internet and mobile phone access, addressing issues of
misinformation and data protection;
(xvi) promoting welfare of migrants and displaced persons;
(xvii) any other area as identified by the Board or Government of India from time to time .

(b) the Social Enterprise shall target underserved or less privileged population segments or
regions recording lower performance in the development priorities of central or state
governments;

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(c) the Social Enterprise shall have at least 67% of its activities, qualifying as eligible
activities to the target population, to be established through one or more of the following:
(i) at least 67% of the immediately preceding 3-year average of revenues comes from providing
eligible activities to members of the target population;
(ii) at least 67% of the immediately preceding 3-year average of expenditure has been incurred
for providing eligible activities to members of the target population;
(iii) members of the target population to whom the eligible activities have been provided
constitute at least 67% of the immediately preceding 3-year average of the total customer base
and/or total number of beneficiaries.

138. INELIGIBILITY FOR RAISING FUNDS BY A SOCIAL ENTERPRISE

A Social Enterprise shall not be eligible to register or raise funds through a Social Stock
Exchange or Stock Exchange, as the case may be:
(a) if the Social Enterprise, any of its promoters, promoter group or directors or selling
shareholders or trustees are debarred from accessing the securities market by the Board;
(b) if any of the promoters or directors or trustees of the Social Enterprise is a promoter or
director of any other company or Social Enterprise which has been debarred from accessing the
securities market by the Board;
(c) if the Social Enterprise or any of its promoters or directors or trustees is a wilful defaulter or
a fraudulent borrower;
(d) if any of its promoters or directors or trustees is a fugitive economic offender;
(e) if the Social Enterprise or any of its promoters or directors or trustees has been debarred
from carrying out its activities or raising funds by the Ministry of Home Affairs or any other
ministry of the Central Government or State Government or Charitable Commissioner or any
other statutory body.

139. INTIMATIONS & DISCLOSURES BY SOCIAL ENTERPRISE OF EVENTS OR INFORMATION TO SOCIAL STOCK EXCHANGE
OR STOCK EXCHANGE (LODR)
(1)A Social Enterprise whose designated securities are listed on the Social Stock
Exchange(s) or the Stock Exchange(s), as the case may be, shall frame a policy for determination
of materiality, duly approved by its board or management, as the case may be, which shall be
disclosed on the Social Stock Exchange(s) or the Stock Exchange(s).

(2) The board and management of the Social Enterprise shall authorize one or more of
its Key Managerial Personnel for the purpose of determining materiality of an event or
information and for the purpose of making disclosures to the Social Stock Exchange(s) or the
Stock Exchange(s), as the case may be, under this regulation and the contact details of such
personnel shall also be disclosed to the Social Stock Exchange(s) or the Stock Exchange(s).

(3) A Social Enterprise whose designated securities are listed on the Social Stock Exchange(s)
or the Stock Exchange(s), as the case may be, shall disclose to the Social Stock Exchange(s) or
the Stock Exchange(s) where it is registered or has listed its specified securities, as the case
may be, any event that may have a material impact on the planned achievement of outputs or
outcomes.

(4) The disclosure referred in sub-regulation (3) shall be made as soon as reasonably possible
but not later than seven days or within such period as may be specified by the Board, from the
occurrence of the event and shall comprise details of the event including the potential impact of
the event and the steps being taken by the Social Enterprise to address the same.

(5)The Social Enterprise shall provide updates on a regular basis along with relevant
explanations in respect of the disclosures required in sub-regulation (3) till the time the
concerned event remains material.

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(6)The Social Enterprise shall provide specific and adequate reply to all queries raised by the
Social Stock Exchange(s) or the Stock Exchange(s), as the case may be, with respect to any
events or information:

Provided that the Social Stock Exchange(s) or the Stock Exchange(s), as the case may be,
shall disseminate the information and clarification as soon as reasonably practicable.

(7)The Social Enterprise may suo moto confirm or deny any reported event or information to
Social Stock Exchange(s) or the Stock Exchange(s), as the case may be.

(8)The Social Enterprise shall disclose on its website all such events or information
which have been disclosed to the Social Stock Exchange(s) or the Stock Exchange(s), as the case
may be, under this regulation.

140. SPONSOR DISASSOCIATION WITH AMC & MUTUAL FUNDS

(1) The sponsor may be permitted to disassociate from the asset management company and the
mutual fund subject to such conditions as may be specified by the SEBI.
(2) In the event of the sponsor disassociating itself from the asset management company and
the mutual fund, the asset management company of the existing mutual fund may act as
sponsor of the same mutual fund subject to such conditions and in the form and manner as
may be specified by the SEBI.
(3) In the event of the disassociation of the sponsor from the asset management company and
the mutual fund, the shareholding for any shareholder in the asset management company shall
be below 10%.
(4) In the event of the sponsor disassociating itself from the asset management company and
the mutual fund, the board of directors of such asset management company shall have at least
two third independent directors.
(5) If the asset management company fails to fulfill the conditions specified above, the
dissociated sponsor or any new entity may become sponsor of the mutual fund subject to such
conditions as may be specified by the SEBI from time to time.

141. FUND RAISING BY SOCIAL ENTERPRISES

A Social Enterprise may raise funds through following means:-
(a) a Not for Profit Organization may raise funds on a Social Stock Exchange through:
(i) issuance of Zero Coupon Zero Principal Instruments to institutional investors and/or non-
institutional investors in accordance with the applicable provisions of this Chapter;
(ii) donations through Mutual Fund schemes as specified by the Board;
(iii) any other means as specified by the Board from time to time.

(b) A For Profit Social Enterprise may raise funds through:

(i) issuance of equity shares on the main board, SME platform or innovators growth
platform or equity shares issued to an Alternative Investment Fund including a Social Impact Fund;
(ii) issuance of debt securities;
(iii) any other means as specified by the Board from time to time

Explanation.—Securities issued by For Profit Social Enterprises shall be listed and traded under
the applicable segment of the stock exchange with an identifier stating that the scrip is that of a For
Profit Social Enterprise and such For Profit Social Enterprises shall meet the eligibility criteria for
the main board, SME Platform or innovators growth platform, as applicable, in addition to the criteria
provided in this Chapter.

142. SOCIAL ENTERPRISES NOT ELIGIBLE FOR RAISING FUNDS

A Social Enterprise shall not be eligible to register or raise funds through a Social Stock Exchange
or Stock Exchange, as the case may be:
(a) if the Social Enterprise, any of its promoters, promoter group or directors or selling shareholders
or trustees are debarred from accessing the securities market by the Board;

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(b) if any of the promoters or directors or trustees of the Social Enterprise is a promoter or director
of any other company or Social Enterprise which has been debarred from accessing the securities
market by the Board;
(c) if the Social Enterprise or any of its promoters or directors or trustees is a wilful defaulter or a
fraudulent borrower;
(d) if any of its promoters or directors or trustees is a fugitive economic offender;
(e) if the Social Enterprise or any of its promoters or directors or trustees has been debarred from
carrying out its activities or raising funds by the Ministry of Home Affairs or any other ministry of
the Central Government or State Government or Charitable Commissioner or any other statutory
body.

Explanation.—The restrictions under clauses (a) and (b) above shall not apply to the persons or
entities mentioned therein, who were debarred in the past by the Board and the period of debarment
is already over as on the date of filing of application for registration with the Social Stock Exchange
or filing of draft fund raising document or draft offer document, as may be applicable, with the Social
Stock Exchange or the Stock Exchange or the Board.
143. Delisting of equity shares of small companies (REGULATION 35 OF DELISTING REGULATIONS)

(1) 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 of these regulations, if,-
(a) 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;
(b) the number of equity shares of the company traded on each such recognised stock
exchange during the twelve calendar months immediately preceding the date of board meeting
held for consideration of the proposal referred to in sub-regulation (4) of regulation 10 of these
regulations is less than 10% of the total number of shares of the company:
(c) the company has not been suspended by any of the recognised stock exchanges having
nationwide trading terminals for any non-compliance in the preceding one year.

(2) Delisting of equity shares may be made under sub-regulation (1) only if, in addition to fulfilment
of the requirements of regulations 10 and 11 of these regulations, the following conditions are
fulfilled:-
(a) acquirer(s) 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 90% 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 75 working days of the first communication made under clause
(c);
(f) the acquirer makes payment of consideration in cash within 15 working days from the date of
expiry of 75 working days mentioned in clause (e).

144. DISCLOSURES OF TRADING BY INSIDER (REGULATION 7 OF PIT REGULATIONS)

1. Initial Disclosures:
(a) omitted
(b) Every person on appointment as a KMP or a director of the company or upon becoming a promoter
or member of the promoter group shall disclose his holding of securities of the company as on the
date of appointment or becoming a promoter, to the company within 7 days of such appointment or
becoming a promoter.

2. Continual Disclosures:

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(a) Every promoter, member of promoter group, designated person and director of every company
shall disclose to the company the number of such securities acquired or disposed of within 2 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 ` 10 lakh or such
other value as may be specified.
(b) Every company shall notify the particulars of such trading to the stock exchange on which the
securities are listed within 2 trading days of receipt of the disclosure or from becoming aware of such
information.
(c) The above disclosures shall be made in such form and such manner as may be specified
by the Board from time to time.

3. Disclosures by other connected persons:

Any company whose securities are listed on a stock exchange may, at its discretion require any other
connected person or 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.

145. DESIGNATED PERSONS UNDER PIT REGULATIONS

(1)The board of directors of the asset management company and trustees shall in consultation
with the compliance officer specify the Designated Persons to be covered by the code of conduct on
the basis of their role and function in the organisation and the access that such role and
function would provide to unpublished price sensitive information in addition to seniority and
professional designation and shall include:
i.Head of the asset management company (designated as Chief Executive Officer/Managing
Director/President or by any other name),
ii.Directors of the asset management company or the trustee company,
iii.Chief Investment Officer, Chief Risk Officer, Chief Operation Officer, Chief Information
Security Officer, Fund Managers, Dealers, Research Analysts, all employees in the Fund Operations
Department, Compliance Officer and Heads of all divisions and/or departments or any
other employee as designated by the asset management company and/or trustees.

Explanation :Non-Executive Directors of the asset management company/trustee company

or trustees who are in possession of / have access to any “unpublished price sensitive
information", shall also be deemed to be Designated Persons.

(2) Every other Intermediary and other persons shall in consultation with the compliance
officer specify the Designated Persons to be covered by the code of conduct on the basis of their
role and function in the organisation and the access that such role and function would provide to
unpublished price sensitive information in addition to seniority and professional designation.

146. MUTUAL FUND SCHEMES ACCORDING TO INVESTMENT OBJECTIVES

Besides these, there are other types of mutual funds also to meet the investment needs of several
groups of investors. Some of them include the following:
(a) Income Oriented Schemes: The fund primarily offers fixed income to investors. Naturally
enough, the main securities in which investments are made by such funds are the fixed income
yielding ones like bonds, corporate debentures, Government securities and money market
instruments, etc.

(b) Growth Oriented Schemes: These funds offer growth potentialities associated with investment
in capital market namely: (i) high source of income by way of dividend and (ii) rapid capital
appreciation, both from holding of good quality scrips. These funds, with a view to satisfying the
growth needs of investors, primarily concentrate on the low risk and high yielding spectrum of equity
scrips of the corporate sector.

(c) Hybrid Schemes also known as “balanced funds”: These funds cater to both the investment
needs of the prospective investors – namely fixed income as well as growth orientation. Therefore,
investment targets of these mutual funds are judicious mix of both the fixed income securities like
bonds and debentures and also sound equity scrips.
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(d) High Growth Schemes: As the nomenclature depicts, these funds primarily invest in high risk
and high return volatile securities in the market and induce the investors with a high degree of
capital appreciation.

(e) Capital Protection Oriented Scheme: It is a scheme which protects the capital invested in the
mutual fund through suitable orientation of is portfolio structure.

(f) Tax Saving Schemes: These schemes offer tax rebates to the investors under tax laws as
prescribed from time to time. This is made possible because the Government offers tax incentive for
investment in specified avenues. For example, Equity Linked Saving Schemes (ELSS) and pensions
schemes.

(g) Special Schemes: This category includes index schemes that attempt to replicate the
performance of particular index such as the BSE, Sensex or the NSE-50 or industry specific schemes
or sectoral schemes. Index fund schemes are ideal for investors who are satisfied with a return
approximately equal to that of an index. Sectoral fund schemes are ideal for investors who have
already decided to invest in particular sector or segment.

(h) Real Estate Funds: These are close ended mutual funds which invest predominantly in real
estate and properties.

(i) Off-shore Funds: Such funds invest in securities of foreign companies with RBI permission.

(j) Leverage Funds: Such funds, also known as borrowed funds, increase the size and value of
portfolio and offer benefits to members from out of the excess of gains over cost of borrowed funds.
They tend to indulge in speculative trading and risky investments.

(k) Hedge Funds: They employ their funds for speculative trading, i.e. for buying shares whose prices
are likely to rise and for selling shares whose prices are likely to fall.

(l) Fund of Funds: They invest only in units of other mutual funds. Such funds do not operate at
present in India.

(m) New Direction Funds: They invest in companies engaged in scientific and technological research
such as birth control, anti-pollution, oceanography etc.

(n) Exchange Trade Funds (ETFs) are a new variety of mutual funds that first introduced in 1993.

(o) Money Market Mutual Funds: These funds invest in short- term debt securities in the money
market like certificate of deposits, commercial papers, government treasury bills etc. Owing to their
large size, the funds normally get a higher yield on such short-term investments than an individual
investor.

(p) Infrastructure Debt Fund: They invest primarily in the debt securities or securitized debt
investment of infrastructure companies.

147. WHAT IS NET ASSET VALUE OF MUTUAL FUND ? HOW IT IS CALCULATED?

• The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV).
In simple words, NAV is the market value of the securities held by the scheme.
• Mutual funds invest the money collected from investors in securities markets. Since market value
of securities changes every day, NAV of a scheme also varies on day to day basis.
• The NAV per unit is the market value of securities of a scheme divided by the total number of
units of the scheme on any particular date.
• Unlike stocks (where the price is driven by the market and changes from minute-to-minute),
mutual funds don’t declare NAVs through the day. Instead, NAVs of all mutual fund schemes are
declared at the end of the trading day after markets are closed, in accordance with SEBI Mutual
Fund Regulations.

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How is it calculated?
𝑁𝑒𝑡 𝐴𝑠𝑠𝑒𝑡 𝑜𝑓 𝑡ℎ𝑒 𝑆𝑐ℎ𝑒𝑚𝑒
𝑁𝑒𝑡 𝐴𝑠𝑠𝑒𝑡 𝑉𝑎𝑙𝑢𝑒 =
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔

Net Asset of the Scheme = Market value of investments + Receivables+ other accrued income+ other
assets – Accrued Expenses- Other Payables- Other Liabilities

148. RELATED PARTY TRANSACTIONS (LODR REGULATIONS)

(1) 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.

Provided that a transaction with a related party shall be considered material, if the transaction(s)
to be entered into individually or taken together with previous transactions during a financial year,
exceeds rupees 1000 crore or 10% of the annual consolidated turnover of the listed entity as per
the last audited financial statements of the listed entity, whichever is lower.

(1A) Notwithstanding the above, with effect from July 01, 2019 a transaction involving payments
made to a related party with respect to brand usage or royalty shall be considered material if
the transaction(s) to be entered into individually or taken together with previous transactions
during a financial year, exceed 5% of the annual consolidated turnover of the listed entity as
per the last audited financial statements of the listed entity.

(2) All related party transactions and subsequent material modifications shall require prior
approval of the audit committee of the listed entity:

Provided that only those members of the audit committee, who are independent directors, shall
approve related party transactions.

Provided further that:

(a) the audit committee of a listed entity shall define “material modifications” and disclose it as
part of the policy on materiality of related party transactions and on dealing with related party
transactions;
(b) a related party transaction to which the subsidiary of a listed entity is a party but the listed
entity is not a party, shall require prior approval of the audit committee of the listed entity if the
value of such transaction whether entered into individually or taken together with previous
transactions during a financial year exceeds ten per cent of the annual consolidated turnover,
as per the last audited financial statements of the listed entity;
(c) with effect from April 1, 2023, a related party transaction to which the subsidiary of a listed
entity is a party but the listed entity is not a party, shall require prior approval of the audit
committee of the listed entity if the value of such transaction whether entered into individually
or taken together with previous transactions during a financial year, exceeds ten per cent of the
annual standalone turnover, as per the last audited financial statements of the subsidiary;
(d) prior approval of the audit committee of the listed entity shall not be required for a related
party transaction to which the listed subsidiary is a party but the listed entity is not a party, if
regulation 23 and sub-regulation (2) of regulation 15 of these regulations are applicable to such
listed subsidiary. Explanation: For related party transactions of unlisted subsidiaries of a listed
subsidiary as referred to in (d) above, the prior approval of the audit committee of the listed
subsidiary shall suffice.

(3) Audit committee may grant omnibus approval for related party transactions proposed to
be entered into by the listed entity subject to the following conditions, namely-

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(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:
Provided that where the need for related party transaction cannot be 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.

(4) All material related party transactions and subsequent material modifications as defined by
the audit committee under sub-regulation (2) shall require prior 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:

Provided that prior approval of the shareholders of a listed entity shall not be required for a related
party transaction to which the listed subsidiary is a party but the listed entity is not a party, if
regulation 23 and sub-regulation (2) of regulation 15 of these regulations are applicable to such
listed subsidiary.
Explanation: For related party transactions of unlisted subsidiaries of a listed subsidiary as
referred above, the prior approval of the shareholders of the listed subsidiary shall suffice.

Provided further that the requirements specified under this sub-regulation 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;

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 CASE STUDY QUESTIONS

1. Prateek applied in the IPO of Maxgrow Ltd. for 100 Equity Shares. He was not eligible to get
any shares according to the allotment schedule and also has not received the refund amount
within the time stipulated under the Companies Act, 2013. Prateek approached the Company
through written representation on January 10, 2018. The company neither replied nor
processed the refund claim. In the light of the SEBI Regulations, answer the following:
(i) How much time should elapse before approaching Ombudsman from the date of written
representation ?
(ii) State the grounds and the procedure for filing a complaint before Ombudsman.
(iii) Whether Prateek can hire services of a legal practitioner to plead his case before
Ombudsman ? (December 2018)

(i) As per the SEBI (Ombudsman) Regulations, 2003, if a complainant had not received any
reply within a period of 1 month after the listed company or intermediary concerned received
his representation or the complainant is not satisfied with the reply given to him by the listed
company or an intermediary, he/she can approach to the Ombudsman.
(ii) Grounds of Complaint
A person may lodge a complaint on any one or more of the following grounds either to SEBI or
to the Ombudsman concerned:
• Non-receipt of refund order, allotment letter in respect of a public issue of securities of
companies are units of mutual funds or collective investment schemes;
• Non-receipt of share certificates, unit certificate, debenture certificates, bonus shares;
• Non-receipt of dividend by shareholders or unit-holders;
• Non-receipt of interest on debentures, redemption amount of debentures or interest on
delayed payment of interest on debentures;
• Non-receipt of interest on delayed refund of application monies;
• Non-receipt of annual reports or statements pertaining to the portfolios;
• Non-receipt of redemption amount from a mutual fund or return from collective investment
scheme;

Procedure of Filing Complaint

Any person who has a grievance against a listed company or an intermediary relating to any of
the matters specified in regulation 13 may himself or through his authorised representative or
any investors association recognised by SEBI, make a complaint against a listed company or an
intermediary to the Ombudsman within whose jurisdiction the registered or corporate office of
such listed company or intermediary is located.

However, if SEBI has not notified any Ombudsman for a particular locality or territorial
jurisdiction, the complainant may request the Ombudsman located at the Head Office of SEBI
for forwarding his complaint to the Ombudsman of competent jurisdiction.

The complaint shall be in writing duly signed by the complainant or his authorised
representative (not being a legal practitioner) in the Form specified in the Schedule to these
regulations and supported by documents, if any.

(iii) As per regulation 19 (3) of the SEBI (Ombudsman) Regulations, 2003, no legal practitioner
shall be permitted to represent the defendants or respondents at the proceedings before the
Ombudsman except where a legal practitioner has been permitted to represent the complainants
by the Ombudsman. In this given case, as Prateek is the petitioner, hence he can hire the
services of the legal practitioner.

2. MCS Ltd. is a listed company with Bombay Stock Exchange Ltd. The Company enters into
related party transactions frequently with MAP Ltd. in which one of director of MCS Ltd. holds
3% paid up capital of MAP Ltd. MCS Ltd. feels that getting the approval of Audit Committee for
each transaction is time-consuming and delaying the operational plan. You, being a Company
Secretary of MCS Ltd., advise the management with reference to SEBI (LODR) Regulations,

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 2015 for approval of the related party transactions from the Audit Committee for next one
year. Will your answer be different if MAP Ltd. is wholly owned subsidiary of MCS Ltd. ?
(December 2018)

According to Regulation 23 (2) of the SEBI (LODR) Regulations, 2015, all related party
transactions shall require prior approval of the Audit Committee. The Audit Committee may
grant omnibus approval for related party transactions proposed to be entered into by the listed
entity subject to the following conditions:
(i) 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;

(ii) 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;

(iii) The omnibus approval shall specify:

A. the name(s) of the related party, nature of transaction, period of transaction, maximum
amount of transactions that shall be entered into;
B. the indicated base price/current contracted price and the formula for variation in the price
if any; and
C. such other conditions as the audit committee may deem fit.
However, where the need for related party transaction cannot be 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.

(iv) 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 approval is given.

(v) Such omnibus approval shall be valid for a period not exceeding one year and shall require
fresh approvals after the expiry of one year.

3. Hon’ble Justice A, a retired Chief Justice of a High Court, attained the age 62 years on
December 31, 2017. The Central Government had appointed him as the Presiding Officer of
the Securities Appellate Tribunal (SAT) with effect from January 1, 2018. You are required to
state with reference to SEBI Act, 1992,
(a) the term for which he may be appointed as Presiding Officer of the SAT
(b) Whether he can be re-appointed as such and remains as Presiding Officer of the Securities
Appellate Tribunal ? (December 2018) (Dec 2023)

According to Section 15N of SEBI Act, 1992, the Presiding Officer or every Judicial or Technical
Member of the Securities Appellate Tribunal shall hold office for a term of five years from the
date on which he enters upon his office, and shall be eligible for reappointment for another term
of maximum 5 years.

However, no Presiding Officer or the Judicial or Technical Member shall hold office after he has
attained the age of seventy years.

In the given case, Hon'ble Justice A has already attained age of 62 years at the time of first
appointment as Presiding Officer of SAT, hence he can be appointed for first five years. He can
be also re-appointed further but only for 3 years, as after further 3 years he will attain the age
of 70 years.

4. Bombay Stock Exchange Ltd. had suspended trading in shares of XYZ Ltd. for violating
conditions of listing agreement. The company has now complied with the listing regulations
requirements. By referring to SEBI circular/regulations, discuss the criteria for suspension of
the trading in the shares of the listed entities. (December 2018)

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SEBI vide its Circular dated May 3, 2018, prescribed the criteria for suspension of the trading
in the shares of the listed entities which are as follows: Failure to comply with respect to:
(i) board composition including appointment of woman director for two consecutive quarters;
(ii) constitution of audit committee for two consecutive quarters;
(iii) submission of corporate governance compliance report for two consecutive quarters;
(iv) submission of the shareholding pattern for two consecutive quarters;
(v) submission of financial result for two consecutive quarters;
(vi) submission of Annual Report for two consecutive financial years;
(vii) submit information on the reconciliation of shares and capital audit report, for consecutive
quarters;
(viii) receipt of the notice of suspension of trading of that entity by any other recognised stock
exchange or any or all of the above grounds.

5. Answer the following with reference to the Companies (Share Capital and Debentures) Rules,
2014, as to whether these are the eligible employees under Employee Stock Option ? (Yes/No
with reasons)
(i) Ankit is a permanent employee deputed in USA for a specific project.
(ii) Smart Ltd. is an independent company.
(iii) Anil is a promoter and employee.
(iv) Aneesh is a director holding 11% of outstanding equity shares of the company.
(v) If it is a startup company, will the situation be the same in (iii) & (iv) above? (December
2018)

Rule 12 of Companies (Share Capital and Debentures) Rules 2014, define the eligible employees
for the purpose of employee stock option. The answers given below are based on the eligibility
criteria set out in the rule:
(i) Yes. As per Rule 12 (1) (a), a permanent employee of the company who has been working in
India or outside India. Hence, ankit is an eligible employee for ESOP.

(ii) No. Since Smart Ltd. is a company, the Companies Act, 2013 and rules made there under
does not recognise a company as an employee.

(iii) No. As per Rule 12 (1) (i), an employee who is a promoter or a person belonging to the
promoter group is not an employee. Hence, Anil is not an eligible employee for ESOP.

(iv) No. As per Rule 12 (1) (ii), a director who either himself or through his relative or through
anybody corporate, directly or indirectly, holds more than ten percent of the outstanding equity
shares of the company, is not eligible employee. Hence, Aneesh is not an eligible employee for
this purpose.

(v) Yes, Anil and Aneesh are eligible employees for both the situation in (iii) & (IV) above. The
conditions shall not apply to a Startup company upto 10 years from the date of its
commencement or registration.

6. The price of equity share of a listed company viz. NextDial Ltd. (NDL) increased from `10 to
high of `50 i.e. a rise of 500% during the period 1st April, 2018 to 30th Sept., 2018. NDL had
entered into a Share Purchase Agreement (SPA) with the proposed acquirer(s) to acquire
40% of the subscribed equity share capital as of 31st Aug., 2018 which would result in change
of management. This initial discussion on the deal was made on 1st April, 2018 but SPA was
signed on 25th April, 2018. During 1st April, 2018 to 30th Sept., 2018, the promoter and his
wife dealt in the script of NextDial Ltd.
Referring to the provisions of SEBI (PIT) Regulations, answer the following :
(i) Define Unpublished Price Sensitive Information.
(ii) Whether there was any Unpublished Price Sensitive Information (UPSI) ?
(iii) What will be the date of UPSI ?
(iv) What are the factors to be taken into account by the adjudicating officer while imposing
penalty for the act ? (June 2019)

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(i) The SEBI (Prohibition of Insider Trading) Regulations, 2015 defines “Unpublished Price
Sensitive Information” which means any information, relating to a company or its securities,
directly or indirectly, that is not generally available which upon 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, delistings, disposals and expansion of business and such
other transactions;
(v) changes in key managerial personnel.

(ii) The promoter of Next Dial Ltd. was involved in the negotiation for fixing the share price and
traded in the shares of the company while being privy to the price sensitive information.
Therefore, it is alleged that promoter had dealt in the shares of the company while in possession
of or on the basis of the Unpublished Price Sensitive Information (UPSI). Additionally, he has
also communicated or counseled, directly or indirectly, the UPSI to his wife, who in turn has
also traded in the shares of the company.

The definition of Price Sensitive Information also includes the following as Price Sensitive
Information; (a) amalgamation, mergers or takeovers, (b) disposal of the whole or substantial
part of the undertaking. So Unpublished Price Sensitive Information (UPSI) was existed.

(iii) In the mentioned case, Share Purchase Agreement (SPA) was signed on 25th April, 2018.
Taking into consideration when the SPA was signed, the UPSI is considered to have originated
on April 25, 2018.

(iv) While imposing monetary penalty, it is obligatory to consider the factors stipulated in
Section 15J of the SEBI Act, 1992 which reads as under:
a. the amount of disproportionate gain or unfair advantage, whenever 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.

7. An unlisted public company ("Acquirer") doing business of exporting steel and it is a part of
the Promoter Group of Maurya Hotels (India) Ltd. (MHIL), a company listed on stock exchange.
In view of improving its efficiency, MHIL is planning to restructure its group. The Acquirer has
agreed to enter into a scheme of arrangement where the shares held by the promoter group
companies (eight companies) will be transferred to it. Post-merger, the shareholding of the
Acquirer in the Company will increase from 2% to 24%. However, the overall promoter
shareholding will remain unchanged.
You, being practicing company secretary, appointed as consultant by the Acquirer, answer
the following :
(i) Will the transfer of shares trigger an obligation to make an open offer under the SEBI (SAST)
Regulations on the Acquirer ?
(ii) What are the disclosure requirements under the SAST Regulations, if any, that the parties
to the scheme will have to comply with ? (June 2019)

(i) Regulations 3, 4 and 5 of the SEBI (SAST) Regulations, 2011 set out the events that trigger
an obligation to make an open offer on the acquirer (along with persons acting in concert).

The said triggers points are as follows:

• Acquisition (directly or indirectly) of such shares or voting rights in an Indian listed company
whereby the acquirer becomes entitled to exercise 25% or more of the voting rights in such
Indian listed company;

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• Where an acquirer (along with persons acting in concert with him) is already entitled to
exercise 25% or more of the voting rights in an Indian listed company, and acquires (directly
or indirectly) additional shares or voting rights entitling an acquirer to exercise more than
5% voting rights in an Indian listed company, in a financial year; and
• Acquisition (directly or indirectly) of control.

Since the Acquirer, in the above facts, does not attract any of the triggers setout above, the
transfer of shares will not impose any obligation on the Acquirer to make an open offer under
the SEBI (SAST) Regulations.
(ii) The Acquirer and promoter group companies will be required to make a disclosure of change
in shareholding under Regulation 29(2) of the SEBI (SAST) Regulations, 2011. According to
Regulation 29(3) of the said regulations, the disclosure should be made within 2 working days
of such acquisition or the disposal to the target company at its registered office and to the stock
exchanges where the shares of the target company are listed.

8. The Board of directors of a listed company desires to delist its equity shares from all the
recognised stock exchanges.
The voting details through postal ballot are as under :
— Total nos. of voters : 7,000 (Public : 5,000 & Promoters : 2,000)

— Voting at shareholders meeting :

(a) Public shareholders :
In favour : 3,300 votes
In against : 1,700 votes

(b) All promoters shareholders have voted in favour of resolution. By referring SEBI delisting
regulation, decide upon the resolution passed by the shareholders. (June 2019)

Regulation 11 of the SEBI (Delisting of Equity Shares) Regulations, 2021, prescribed that if a
company proposes to delist its equity shares from all the recognized stock exchanges where they
are listed, it is required to obtain the prior approval of shareholders of the company by special
resolution passed through postal ballot, 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 if and only if the votes cast by public shareholders in favour of
the proposal amount to at least two times the number of votes cast by public shareholders
against it.

In the mentioned case, the resolution was passed as special resolution as it has approval of 75%
of the shareholders, however, the resolution does not have requisite approval of public
shareholders. The votes cast in favour of resolution (3300 votes) is not the twice of the votes
cast against the resolution (1700 votes) by the public shareholders. Therefore, the special
resolution cannot be acted upon by the company.

9. The financial data of a listed company as on 31st March, 2018 are as follows : Authorized
equity share capital `10 crore (1 crore shares of `10 each)
Paid-up equity share capital ` 5 crore
General reserve ` 3 crore
Debenture redemption reserve ` 2 crore
The Board of directors of your company passed resolution by circulation for buy-back of
shares to the extent of 9% of the company's paid-up share capital and free reserves. You are
required to examine the validity of the proposal with reference to the provisions of the SEBI
Regulations. (June 2019)

According to the regulation 5 of the SEBI (Buy-back of Securities) Regulations, 2018, the
company shall not authorize any buy-back (whether by way of tender offer or from open market
or odd lot) unless a special resolution has been passed at a general meeting of the company
authorising the buy-back.

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However, special resolution is not required, where the buy-back is, ten per cent 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.

In the given case, the company desired to buy-back of shares to the extent
of 9% of paid-up capital and free reserves by way of passing of board resolution through
circulation, however as per above regulations, the board resolution should be passed at its
meeting not through circulation. Therefore with reference to the above stated provisions, the
proposal of buy-back is not valid.

10. M/s Highspeed Ltd. manufacturing a car components for leading car manufacturer. Its public
issue of `500 crore was fully subscribed. The public issue money ought to be utilized for setup
an assembly-line for the existing business. Out of `500 crore, the company spent `400 crore
for assembly-line. The management consultant, hired for Business Process re-engineering
has suggested to invest balance amount to setup bike components manufacturing unit. You,
being company secretary of the company, advise on the opinion of management consultant
by referring provisions of SEBI Guidelines. (June 2019)

According to the Regulation 59 of the SEBI (ICDR) Regulations, 2018, the promoters, or
shareholders in control of an issuer, shall provide an exit offer to dissenting shareholders as
provided for in the Companies Act, 2013, in case of change in objects or variation in the terms
of contract related to objects referred to in the offer document as per conditions and manner as
provided in Schedule XX of the SEBI (ICDR) Regulations, 2018.

According to the Schedule XX, the promoter or the shareholders in control, as the case may be,
shall make an exit offer in accordance with the provisions of Chapter II of SEBI (ICDR)
Regulations to the dissenting shareholders, in cases only if a public issue has opened after April
1, 2014; if:
(a) The proposal for change in objects or variation in terms of a contract, referred to in the offer
document is dissented by atleast 10% of the shareholders who voted in the general meeting;
and

(b) The amount to be utilized for the objects for which the offer document was issued is less
than seventy five percent of the amount raised (including the amount for general corporate
purposes as disclosed in the offer document).

In the given problem M/s Highspeed Ltd. has utilized Rs. 400 crore out of total Rs. 500 crore
raised through public issue. As the amount utilized is more than 75% of the total amount raised,
the company may utilize the remaining unutilized 100 crore for the purpose as stated in the
question.

11. Life-Changing Assets Management Ltd., a mutual funds company desires to engage a
bollywood celebrity to popularize its schemes. Explain the SEBI provisions with regard to
celebrity endorsements of Mutual Funds at industry level. (June 2019)

SEBI vide its Circular No. CIR/lMD/DF/23/2017 dated 15/03/2017 reviewed the
advertisement guidelines for mutual funds.

In this respect, it has been decided to permit celebrity endorsements at industry level, for the
purpose of increasing awareness of Mutual Funds as a financial product category. However,
such celebrity endorsements of Mutual Funds at industry level, shall be subject to the following
conditions:
i. Celebrity endorsement shall be allowed only at the industry level, for the purpose of increasing
awareness of Mutual Funds as a financial product category. Such celebrity endorsements
should not promote a scheme of a particular Mutual Fund or be used as a branding exercise of
a Mutual Fund house.
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ii. Expenses towards such celebrity endorsements for increasing awareness of Mutual Funds
shall be limited to the amounts that are aggregated by Mutual Funds at industry level for the
purpose of conducting investor education and awareness initiatives, in terms of clause F of SEBI
circular dated September 13, 2012.

iii. Prior approval of SEBI shall be required for issuance of any endorsement of Mutual Funds
as a financial product, which features a celebrity for the purpose of increasing awareness of
Mutual Funds

12. An acquirer, holding 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. Explain the statem ent
indicating the creeping acquisition limit for making an open offer by an acquirer. (JUNE 2019)

As per Regulation 3 (2) of the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011, 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.
— An acquirer can, who has reached at a level of 25% or more and made detailed public
statement to acquire = 26% shares, received in this process.
— Then acquirer in any financial year cannot take > 5% share.
— If acquirer wants to acquire > 5% share in one FY, again public offer shall be made to receive
26% (or) more shares subject to delisting level.

13. Explain the Modes of Payment to the shareholders of the Target Company on acquisition of
shares by the acquirer under SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011. (June 2019)

The offer price may be paid, —

(a) in cash;
(b) by issue, exchange or transfer of listed shares in the equity share capital of the acquirer or
of any person acting in concert;
(c) by issue, exchange or transfer of listed secured debt instruments issued by the acquirer or
any person acting in concert with a rating not inferior to investment grade as rated by a credit
rating agency registered with the Board;
(d) by issue, exchange or transfer of convertible debt securities entitling the holder thereof to
acquire listed shares in the equity share capital of the acquirer or of any person acting in
concert; or
(e) a combination of the mode of payment of consideration stated in clause (a), clause (b), clause
(c) and clause (d):

14. A listed company can apply to stock exchange for re-classification of the Promoter's holdings
as public shareholders under SEBI regulations. Whether following promoters can apply for
re-classification with reference to SEBI regulations?
(a) Promoter is declared as wilful defaulter as per RBI guidelines.
(b) Promoter is holding 12% of total voting rights in the listed entity.
(c) Promoter is acting as CEO of the listed entity.
(d) The promoter company has outstanding listing fees only for one year. (June 2019)

Regulation 31A of the SEBI (LODR) Regulations, 2015 (“SEBI LODR Regulations”) deals with
the conditions for re-classification of any person as promoter / public. Based on the provisions
of Regulation 31A of the SEBI LODR Regulations, the following are the answers to the
circumstances given:

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(a) Promoter is declared as wilful defaulter as per RBI guidelines. As per Regulation 31A (b)(vi),
the Promoter declared as a ‘wilful defaulter’ as per the Reserve Bank of India Guidelines is not
eligible to apply for re-classification themselves as public shareholders.

(b) Promoter is holding 12 % of total voting rights in the listed entity. As per Regulation 31A
(b)(i), if the promoter holds more than 10% of the total voting rights in the listed entity, they are
not eligible for re-classification. Hence in this case, the promoter is not eligible to apply for re-
classification.

(c) As per Regulation 31A (b)(v), if the promoter acts as a key managerial person in the listed
entity he is not eligible for re-classification. In the given case, the promoter is a CEO hence he
is not eligible for re-classification

(d) As per Regulation 31A (c)(iii), the listed entity shall not have any outstanding dues to the
SEBI, the stock exchanges or the depositories to be is eligible to apply for reclassification. In
this case, the promoter company has outstanding listing fees for one year, hence it is not eligible
for re-classification.

15. Can a Company buy-back its own shares or any specified securities through negotiated deals
or through any private arrangements? Comment with methods allowed for buy-back. (June
2019)

As per Regulation 4 (vi) of the SEBI (Buy-back of Securities) Regulations, 2018, a company shall
not buy-back its shares or other specified securities from any person through negotiated deals,
whether on or off the stock exchange or through spot transactions or through any private
arrangement.

As per Regulation 4 (iv) of the SEBI (Buy-back of Securities) Regulations, 2018, a company may
buy-back its shares or other specified securities by any one of the following methods:
(a) from the existing shareholders or other specified securities holders on a proportionate basis
through the tender offer;
(b) from the open market through — (i) book-building process, (ii) stock exchange;
(c) from odd-lot holders.

16. 'A stock exchange on its own can delist any security thereon'. Explain how Recognized Stock
Exchange delists any securities listed thereon under Securities Contracts (Regulations)
Rules, 1957. (June 2019)

Rule 21 of the Securities Contracts (Regulations) Rules, 1957 deals with the delisting of
securities. A recognized stock exchange may, without prejudice to any other action that may be
taken under the Act or under any other law for the time being in force, delist any securities
listed thereon on any of the following grounds in accordance with the regulations made by the
SEBI, namely:—
(a) the company has incurred losses during the preceding three consecutive years and it has
negative networth;
(b) trading in the securities of the company has remained suspended for a period of more than
six months;
(c) the securities of the company have remained infrequently traded during the preceding three
years;
(d) the company or any of its promoters or any of its director has been convicted for failure to
comply with any of the provisions of the Act or the SEBI Act, 1992 or the Depositories Act, 1996
or rules, regulations, agreements made thereunder, as the case may be and awarded a penalty
of not less than rupees one crore or imprisonment of not less than three years;
(e) the addresses of the company or any of its promoter or any of its directors, are not known or
false addresses have been furnished or the company has changed its registered office in
contravention of the provisions of the Companies Act, 2013;

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(f) shareholding of the company held by the public has come below the minimum level applicable
to the company as per the listing agreement under the Act and the company has failed to raise
public holding to the required level within the time specified by the recognized stock exchange.
No securities shall be delisted unless the company concerned has been given a reasonable
opportunity of being heard.

17. The stock market of a developing countries is normally attractive for the foreign investors. A
foreign endowments fund is planning to invest in equity shares of Indian companies. State the
category under which this Foreign Portfolio Investor (FPI) be covered. Will your answer be
different if it is a central bank of a foreign country ? (Dec 2019)

As per Regulation 5 of the SEBI (Foreign Portfolio Investors), Regulations, 2014, an applicant
shall seek registration as a foreign portfolio investor in one of the categories mentioned under
the regulations or any other category as may be specified by the SEBI from time to time.

The foreign endowments fund will be covered under category III. This category includes foreign
portfolio investor which shall include all others not eligible under Category I and II foreign
portfolio investors such as endowments, charitable societies, charitable trusts, foundations,
corporate bodies, trusts, individuals and family offices.

Yes, if it is central bank of a foreign country, this will include in Category – I. The Category – I
includes foreign portfolio investor which includes Government and Government related
investors such as central banks, Governmental agencies, sovereign wealth funds and
international or multilateral organizations or agencies.

18. Visualsight Ltd. is a listed company. The promoters hold 61.50% paid up equity share capital
as on 31st March, 2018. On November 2, 2018, some of the promoters who hold convertible
warrants in the company converted 1500000 warrants into shares, as result of which the
holding of promoters increased by 4.10%. Vihaan (“Transferor”), one of the promoters holds
18.50% of equity share capital in the company proposed to gift 1.20% equity shares of the
company to immediate relative by way of Transferor. Taking into account SEBI (SAST)
regulations, answer the following questions in detail:
(i) Whether the proposed transfer trigger an obligation upon the Transferor for open offer ?
(ii) Will the transaction covered under creeping acquisition ?
(iii) Would the promoters be permitted to avail any exemption under the regulation? (Dec
2019)

(i) In terms of Regulation 3(2) and 3(3) or the SEBI (SAST) Regulations, 2011, an obligation to
make an open offer would arise if the acquirer (along with persons acting in concert) is already
entitled to exercise 25% or more of the voting rights in an Indian listed company, and acquires
additional shares or voting rights entitling it to exercise more than 5% voting rights in an Indian
listed company, in a financial year. By virtue of conversion of warrants into shares, the promoter
shareholding in the Company has already increased by 4.10%. Therefore. a further transfer (by
way of gift) of shares constituting 1.2% of the equity share capital of the Company to an
immediate relative in the same financial year would increase the gross acquisition of shares by
the promoter group in excess of the 5% threshold under Regulation 3(2) of SEBI (SAST)
Regulations, 2011, hence triggering the requirement to make an open offer.

(ii) In terms of the explanation to Regulation 3(2) of the SAST Regulations, while calculating the
limit of 5% of shares, the gross acquisition alone is to be taken into account regardless of an
intermittent fall in shareholding or voting rights. Therefore, the proposed Transfer would be
considered for the purpose of calculating the creeping acquisition limit of 5% under Regulation
3(2) of the SAST Regulations.

(iii) The Transfer would qualify as an inter-se transfer between immediate relatives under
Regulation 10(1)(a)(i) of the SAST Regulation subject to fulfillment of pre conditions specified

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therein and hence exempted from the requirement to make an open offer under the SAST
Regulations. In addition the disclosure requirements have been complied with.

19. Nalin Estates Ltd. (“Target Company”) is a listed company. The promoter group shareholding
in the target company is 47%. It proposes to transfer of 2% shares held by one promoter group
to another promoter group. The target company sought your advise as a practicing Company
Secretary on the applicability of exemption provided under SEBI (SAST) Regulations for
making compulsory open offer. (Dec 2019)

As per Regulation 10(a)(ii) of the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011, the following acquisitions shall be exempt from the obligation to make an
open offer under regulation 3 and regulation 4 of the of SEBI(Substantial Acquisition of Shares
and Takeovers) Regulations, 2011 subject to fulfillment of the conditions stipulated .

(a) acquisition pursuant to inter se transfer of shares amongst qualifying persons, being,
persons named as promoters in the shareholding pattern filed by the target company in terms
of the listing agreement or these regulations for not less than three years prior to the proposed
acquisition.

20. A company has implemented Employee Stock Option Scheme to retain the best talent in the
company. After one year of implementation of the scheme, the company desires to increase
the vesting period from 2 year to 3 year. Is it possible for the company to vary the terms and
condition of the option after implementation of the scheme under SEBI regulation? (Dec 2019)

According to the Regulation 7 of the SEBI (SBEBSE) Regulation, 2021 the company shall not
vary the terms of the schemes in any manner which may be detrimental to the interests of the
employees, provided that the company shall be entitled to vary the term of the schemes to meet
any regulatory requirements.

Subject to the above, the company may by special resolution in a general meeting vary the terms
of the schemes offered pursuant to an earlier resolution of the general body but not yet exercised
by the employee provided such variation is not prejudicial to the interests of the employees.

The company desires to increase the vesting period from 2 years to 3 years. This will get shares
after 3 years instead of earlier 2 years and it is prejudicial to the interests of the employees.

Hence, the company cannot change the vesting period as per SEBI regulations.

21. TechNoGrow Ltd. approved buy back proposal of 200000 Equity share capital in its Board
meeting on 25th April, 2019. The record date was fixed on 25th June, 2019. The closing market
price on NSE as on 25th April, 2019 and 25th June, 2019 was `2640.40 and `2514.05
respectively. Determine the number of equity shares which is eligible to be tendered by Small
Shareholder Category (rounded off to lower whole number). (Dec 2019)

In terms of proviso to the Regulation 6 of the SEBI (Buyback of Securities) Regulations, 2018,
15% 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. Hence the total shares reserved for buyback under the offer will be:
200,000 x 15% = 30,000 shares

Further, as per regulation 2(n) of the SEBI (Buy back of Securities) Regulations, 2018 'small
shareholder' means a shareholder of a company, who holds shares or other specified securities
whose market value, on the basis of closing price or shares or other specified securities, on the
recognized stock exchange in which highest trading volume in respect of such securities, as on
record date is not more than two lakh rupee.

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The closing price on record date is `2514.05. The number of shares eligible for buy back under
small shareholders category will be:
200000 / 2514.05 = 79.55 shares.
79.55 shares rounded off to lower whole number i.e 79 shares.

Hence, equity shareholders holding not more than 79 shares of TechNoGrow Ltd. shall be
classified as Small Shareholders.

Please Note the amendment in this regard:

Provided that the buy-back from the open market through stock exchanges, based on the
standalone or consolidated financial statements of the company, whichever sets out a lower
amount, shall be less than:—
(i) 15% of the paid up capital and free reserves of the company till March 31, 2023;
(ii) 10% of the paid up capital and free reserves of the company till March 31, 2024;
(iii) 5% of the paid up capital and free reserves of the company till March 31, 2025: Provided
further that buy-back from the open market through the stock exchange shall not be allowed
with effect from April 1, 2025.

So, if the question comes in exam regarding this, you have to take 10% as the limit and
calculate accordingly.

22. A company is planning for Initial Public Offer of its equity shares. It has decided differential
pricing for retail individual investors (RII) and QIBs and Non-Institutional Investors (NIIs). The
proposed price for RII is `250 and for QIB and NII is `300. Examine the validity of proposal of
the company in light of SEBI regulations. What will be your answer if company is proposing
`280 to anchor investors in book building issue? Explain. (Dec 2019)

As per the Regulation 30 of SEBI (ICDR) Regulations 2018, the issuer may offer its specified
securities at different prices, subject to the following:
(a) retail individual investors or retail individual shareholders or employees entitled for
reservation made under the regulation 33 of SEBI (ICDR) Regulations 2018, may be offered
specified securities at a price not lower than by more than ten percent of the price at which net
offer is made to other categories of applicants, excluding anchor investors:

(b) in case of a book built issue, the price of the specified securities offered to the anchor
investors shall not be lower than the price offered to other applicants.

The difference between the proposed price for Retail Individual Investor (RII) and Qualified
Institutional Buyer (QIB) and Non-Institutional Investors (NIIs) is more than 10%, as envisages
in the regulation, hence the company cannot issue securities to RII at ` 250 per share.

If the equity shares is proposing to anchor investors at `280, it is not as per the regulation 30
of SEBI (ICDR) Regulations, 2018 as the price is lower than the other applicants i,e., QIB and
FII.(assuming QIB and FII are other applicants)

23. Who can be a Compliance Officer under SEBI (PIT) Regulation, 2015 ? Will an Engineering
graduate from a top engineering college with 5 years of experience working as Chief
Technical Officer (CTO) be a Compliance Officer ? Discuss (Dec 2019)

According to the Regulation 2(c) of SEBI (Prohibition of Insider Trading) Regulations, 2015
"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 compliance of policies, procedures, maintenance
of records, monitoring adherence to the rules for the preservation of unpublished price sensitive
information, monitoring of trades and the implementation of the codes specified in these

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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.

Explanation - For the purpose of this regulation, "financially literate" shall mean a person who
has the ability to read and understand basic financial statements i.e. balance sheet, profit and
Loss account, and statement of cash flows.

As per the explanations, a person can be compliance officer only if he understands the basic
financial statement. An engineer graduate who has experience of working as Chief Technology
Officer can neither understand the basic financial statement i.e. balance sheet, profit and loss
account, and statement of cash flows nor capable of understanding legal and regulatory
compliance. Hence he is not eligible for appointment as compliance officer.

24. Yale is a ` director on the Board of a listed company. On the proposal of ESOP in the Board
meeting, he objected about his exclusion from this scheme. State the prior conditions to be
fulfilled for a ` directors under the SEBI regulations for ESOP eligibility. (Dec 2019)

As per regulation 4 of SEBI (Share Based Employee Benefits) Regulations, 2014, an employee
shall be eligible to participate in the schemes of the company and where such employee is a
director nominated by an institution as its representative on the board of directors of the
company;-
(i) The contract or agreement entered into between the institution nominating its employee as
the director of a company, and the director so appointed shall, inter alia, specify the following:-
(a) whether the grants by the company under its scheme(s) can be accepted by the said employee
in his capacity as director of the company:
(b) that grant if made to the director, shall not be renounced in favour of the nominating
institution; and
(c) the conditions subject to which fees, commission, other incentives, etc. can be accepted by
the director from the company.

(ii) the institution nominating its employee as a director of a company shall file a copy of' the
contract or agreement with the said company, which shall in turn file the copy with all the stock
exchanges on which its shares are listed.

(iii) the director so appointed shall furnish a copy of the contract or agreement at the first board
meeting of the company attended by him after his nomination. In the current problem, if the
above conditions have been satisfied, Yale is eligible for ESOP and company cannot exclude him
on the proposal of ESOP.

25. After the Initial Public Offer, the equity capital of promoters group holding in a listed company
is `140 crore. The post issue equity capital of the company is `600 crore. The promoters group
holding includes (acquired during previous year):
(i) `20 crore equity capital allotted in consideration of transfer of Technical knowhow by the
promoters.
(ii) `10 crore equity capital pledged with bank. Whether the promoters group is satisfying
minimum promoters contribution requirement as per SEBI regulation? Explain. (Dec 2019)

As per regulation 14 of the SEBI (ICDR) Regulations, 2018, the promoters of the issuer shall
hold at least twenty per cent of the post-issue capital. Further as per regulation 15 of the SEBI
(ICDR) Regulations, 2018, 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 it is acquired for
consideration other than cash and revaluation of assets or capitalization of' intangible assets is
involved in such transaction;

(b) specified securities pledged with any creditor.

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In the present case, `20 crore equity capital acquired in consideration of transfer of technical
know-how will not be eligible for promoters’ contribution, further `10 crore equity capital was
pledged with bank will also not eligible for promoters contribution.

The net promoter’s contribution after deduction of `30 crore (`20 crore & `10 crore) will be `110
crore (`140 crore - `30 crore), which is below then the prescribed limit i.e, 20% of post issued
capital (`600 x 20%= `120 crore), Therefore, promoters are not satisfying minimum promoters
contribution requirements as per SEBI (ICDR) Regulations, 2018.

26. Raman Ltd. issued 50 Lakh equity shares at a price of `200 per share. The company provided
Green Shoe Option for stabilizing the post listing price of the shares. The issue was
oversubscribed and it was decided that stabilizing agent would borrow maximum number of
shares permitted by SEBI (ICDR) regulations. Due to rise in price during Green Shoe Option
period, only 5 Lakh shares could be bought back at the price of `180. You are required to:
(i) Calculate the number of shares that the stabilizing agent needs to borrow in this case at
the time of allotment and explain the same with relevant provisions.
(ii) Explain the responsibility of Issuer Company in the above case with respect to shortfall
while exercising Green Shoe Option.
(iii) Calculate the amount if any, to be transferred to Investor Protection and Education Fund.
(Dec 2020)

(i) As per SEBI (ICDR) Regulations, 2018, the maximum number of shares that can be borrowed
by the stabilizing agent shall not be in excess of 15% of the issue size. In the given case,
stabilizing agent can borrow 7.5 Lakh shares (15% of 50 Lakh shares).

(ii) The issuer company would allot the differential 2.5 Lakhs shares into the Green Shoe Demat
Account to cover up the shortfall, and the Stabilising Agent would discharge his obligation to
the lending shareholder(s) by returning the 7.5 Lakhs shares that had been borrowed from
them. The issuer company would need to apply to the exchanges for obtaining listing/ trading
permissions for the incremental shares allotted by them, pursuant to the Green Shoe
mechanism.

(iii) The Amount which should be transferred to Investor Protection and Education Fund will be
calculated as follows: = 5,00,000 (200-180) = `1,00,00,000

27. Nova Industries Ltd. (‘Nova’) is an Indian company engaged in the business of manufacturing
of Automotive Equipments. The equity shares of the ‘Nova’ are listed on NSE. Star Investment
Ventures Ltd. (‘Star’) owns 16% stake in the Nova. Moon Investment Company Pvt. Ltd.
(‘Moon’) owns 14% stake in the Nova. Star and Moon have also been classified as promoters
of the Nova in its shareholding pattern for over 5 years. As decided by the management of
Star and Moon, it is proposed that Moon will be absorbed by Star through a scheme of
arrangement, pursuant to which Star’s shareholding in the Nova will increase from 16% to
30% as the shares held by Moon will be transferred to Star and vested in Star and their
shareholders will become shareholders of Star. The entire consideration for the
amalgamation would be discharged by Star by the issue of its shares. The scheme is likely to
be completed and approved by the National Company Law Tribunal sometime during the
financial year 2019-2020.
(i) Explain the provisions and conditions given under regulation 10(1)(d)(iii) of SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations, 2011 for availing the
exemption.

(ii) Would the transfer and vesting of shares of the Nova in Star, be exempt from open offer
obligations ? (Dec 2020)

(i) Regulation 10(1)(d)(iii) of the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011, the acquisition of shares of the Target company pursuant to a scheme of

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arrangement sanctioned by the National Company Law Tribunal provides an exemption to an
acquirer from making an open offer subject to the following conditions:
a. The consideration paid in terms of cash and cash equivalents is less than 25% of the
consideration paid under the scheme; and
b. Post implementation of the scheme, the persons holding at least 33% of voting rights in the
combined entity are the same as the persons who held the entire voting rights before the
implementation of the scheme.

(ii) Star is eligible to avail this exemption under Regulation 10(1)(d)(iii) of the SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011 since:
(i) The acquisition of shares of the Target Company is being made pursuant to a scheme of
arrangement sanctioned by the NCLT.
(ii) The entire consideration is being discharged by Star by issue of its shares, there is no portion
of the consideration being paid in terms of cash and cash equivalents.
(iii) Post-merger, since Star will issue its shares to the shareholders of Moon, such shareholders
will hold more than 33% stake in Star.

28. RP Ltd. is planning to issue an IPO in 2019 for which a draft offer document is proposed to be
filed in September, 2019. The following data is available regarding the company: (` in crore)
2015-16 2016-17 2017-18
Net Tangible Assets 5.00 8.00 7.00
Monetary Assets 1.00 3.00 3.00
Net Worth 3.00 4.00 5.00
(i) Advice the company whether they can proceed with the IPO
(ii) Will your answer be different if value of monetary assets is ` 4 crore in 2016-17?
(iii) How will you deal with the situation, if company has monetary assets of ` 5 crore in the
year 2017-18 ? (Dec 2020)

(i) Regulation 6 of SEBI (ICDR) Regulations, 2018 deals with the eligibility requirement of an
IPO. The provisions pertaining to Net tangible Assets, Monetary Assets and Net worth as per
SEBI (ICDR) Regulations are as under:
a) the issuer has net tangible assets of at least `3 crores 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;
b) the issuer has a net worth of at least 1 crore in each of the preceding three full years,
calculated on a restated and consolidated basis;

In the given case, RP Ltd. has net tangible assets of at least `3 crores in three years and Net
worth of at least `1 crores. Monetary assets are also within the threshold limit of 50% in each
year, thereby satisfying all the conditions. Therefore, RP Ltd. can proceed with the IPO.

(ii) A company can proceed for IPO, if value of monetary assets is upto 50% of the Net Tangible
Assets. In case monetary assets is `4 crores in 2016-2017 i.e. 50% of Net Tangible Asset. Hence,
RP Ltd. can still proceed for IPO.

(iii) As per SEBI regulation, if more than 50% of the net tangible assets are held in monetary
assets, the issuer has utilized or made firm commitment to utilize such excess monetary assets
in its business or project. Therefore, if monetary assets are `5 corers in 2017-2018, the company
should have made firm commitment to utilize such excess monetary assets in its business or
project, otherwise the company will not be able to proceed for IPO.

29. SEBI has imposed a penalty of `25 crore on Sunset Company Ltd. However, due to problem
of liquidity, the company is unable to pay the amount of penalty. Explain, how the amount can
be recovered under the provisions of SEBI Act, 1992. (Dec 2020)

Section 28A (1) of the SEBI Act, 1992 deals with recovery of amounts. If a person:
i. fails to pay the penalty imposed by adjudicating officer or
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ii. fails to comply with any direction of SEBI for refund of monies or
iii. fails to comply with a direction of disgorgement order under Section 11 B) or
iv. fails to pay any fees due to SEBI, The Recovery Officer may draw up under his signature a
statement in a specified form specifying the amount due from the person and shall proceed to
recover from such person the amount specified in the certificate by one or more of the following
modes, namely:-
a. attachment and sale of the person’s movable property;
b. attachment of the person's bank accounts;
c. attachment and sale of the person’s immovable property;
d. arrest of the person and his detention in prison;
e. appointment a receiver for the management of the person’s movable and immovable
properties.

30. “Increase in voting rights in a target company by any shareholder pursuant to buyback is
exempted from the obligation to make an open offer subject to certain conditions”. In the light
of the statement, you are required to enumerate these conditions. (Dec 2020)

As per Regulation 10 of SEBI (SAST) Regulations, 2011, certain acquisitions are exempt from
the obligation to make an open offer. Increase in voting rights in a target company by any
shareholder pursuant to buy-back is exempted from the obligation to make an open offer subject
to the following conditions:
• Such shareholder has not voted in favour of the resolution authorising the buyback of
securities under section 68 of the Companies Act 2013;
• In the case of shareholder resolution, voting is by way of postal ballot;
• Where a resolution of shareholders is not required for the buy-back, such shareholder in his
capacity as a director, or any other interested director has not voted in favour of the resolution
of the board of directors of the target company authorising the buyback of securities under
section 68 of the Companies Act 2013; and
• the increase in voting rights does not result in an acquisition of control by such shareholder
over the target company. However, where the aforesaid conditions are not met, in the event such
shareholder reduces his shareholding such that his voting rights fall below the level at which
the obligation to make an open offer would be attracted within 90 days from the date of closure
of the buy-back offer by the target company, the shareholder shall be exempt from the obligation
to make an Open offer.

31. Tango Trading Ltd. is a public company which has its equity shares listed on NSE. The
Company wants to implement Employee Stock Option Plan (ESOP) for its employees. ESOP
Plan will be operated through a trust in accordance with the SEBI (Share Based Employee
Benefits) Regulations, 2014. The company is willing to issue shares under ESOP scheme to
one of its whole time director, Irfan. Irfan holds 12% of the outstanding equity shares of the
company. In view of the above facts, answer the following questions :
(i) Can the company issue shares to its director, Irfan under ESOP scheme ?
(ii) Prepare a brief note on the process of implementation of ESOP scheme through Trust
route. (Dec 2020)

(i) A company can issue shares through employee stock option scheme (ESOP) to its
a. employees (India or outside India)
b. a director whether whole time director or not (excluding independent director)
c. an employee as defined in clauses (a) or (b) of a subsidiary, in India or Outside India or of a
holding company but excluding following:
i. An Employee who is a promoter or a person belongs to the promoter group ii. A director who
either himself or through his relative or through anybody corporate, directly or indirectly holds
more than 10% of the outstanding equity shares of the company.

In the given case, Irfan holds more than 10% of stake in Tango Trading Ltd. Hence, he is not
eligible to participate in the ESOP scheme.

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(ii) The process of implementation of ESOPs scheme through Trust Route is as under:
• The company creates an Employee Welfare Trust specifically for the purpose of running the
ESOP schemes.
• Company grants loan to the trust for subscribing its shares
• Company issues fresh shares to the trust and option to employees.
• Where the employees decide to exercise the option to acquire the shares, trust transfers the
shares in the name of the employees
• Trust repays the loan to the company from the proceeds on sale of shares to employee.

32. Diamond Company Ltd. entered into listing agreement on 21st May, 2018 as per SEBI (LODR)
Regulations, 2015 with Bombay Stock Exchange (BSE). The Company is planning to conduct
a Board Meeting of its Directors on 28th June, 2018 for consideration of its Annual Financial
Results. Whether the company needs to give prior intimation to the BSE ? Explain the matters
for which prior intimation of the Board Meeting shall be given to the BSE under SEBI
Regulations. (Dec 2020)

Prior Intimations (Regulation 29 of SEBI (LODR) Regulations, 2015)

Yes, Diamond Company Limited shall give prior intimation to BSE about its annual financial
results.

As per Regulation 29, the matters for which the prior intimation of the Board Meeting shall be
given to the BSE are as follows:
a) Financial Result viz. quarterly, half yearly or annual;
b) Proposal for Buy-back of Securities
c) Proposal for Voluntary delisting by the listed entity from the stock exchange(s)
d) Fund raising by way of FPO, Right Issue, ADR, GDR, QIP, FCCB, Preferential Issue, debt
issue or any other method and for determination of issue price. However, intimation shall also
be given in case of any annual general meeting or extraordinary general meeting or postal ballot
that is proposed to be held for obtaining shareholder approval for further fund raising indicating
type of issuance.
e) Declaration/recommendation of dividend
f) Proposal for declaration of Bonus securities etc.

33. Romeo International Limited, an Indian public limited company, is listed on BSE. On Friday i.e.
14th December, 2018 one of the shareholders of the Company, Ganesh, who was already
holding 30% stake in the company, made a public announcement for an open offer for the
acquisition of 13 crore equity shares (Face value `10 each), constituting 26% of the equity
share capital of the Romeo International Limited. The offer price per share according to
Takeover Regulations is arrived at `500 per share. Explain the following with reference to
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011:
(a) What is the time limit for depositing amount in escrow account and explain with the
relevant provisions, what amount should be deposited in escrow account in this case?
(b) Explain the forms of maintaining the escrow account. (Dec 2020)

a) The acquirer shall create an escrow account towards security for performance of his
obligations under SEBI (SAST) Regulations, 2011, not later than 2 working days prior to the
date of the detailed public statement of the open offer for acquiring shares.

In the given case the escrow account should be created on or before December 12, 2018. The
deposit in escrow account shall be calculated as below based on consideration payable under
the Open offer:
i. On the first `500 crores -an amount equal to 25% of the consideration

ii. On the balance consideration - An additional amount equal to 10% of the balance
consideration

Consideration payable in given case = 13 crore equity shares x `500 = `6500 crore

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Amount to be deposited in Escrow Account: (`500 crore x 25%) + (`6000 crore x 10%) = 125 +
600 = `725 Crore.

(b) The escrow account may be in the form of:

(a) Cash deposited with any scheduled commercial bank;
(b) Bank guarantee issued in favour of the manager to the open offer by any scheduled
commercial bank; or
(c) Deposit of frequently traded and freely transferable equity shares or other freely transferable
securities with appropriate margin.

34. The following is an extract of Balance Sheet of Alpha Ltd.:

Equity Shares Capital — 50,000 Equity Share of `10 each.
10% Debenture Capital — 20,000 Debenture of `10 each.

On 21st April, 2018, the Board of directors decided to buy-back 5,000 equity shares for which
they would call Extra-ordinary General Meeting. In the year 2016, the company has defaulted
in payment of interest on secured loan to Bank amounted to `25 crore, which was remedied
in the year 2017. Comment on the above situation. (Dec 2020)

As per SEBI (Buy-Back of Securities) Regulations, 2018, the Company shall not directly or
indirectly purchase its own shares or other specified securities 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.

However, the buy-back is not prohibited if the default is remedied and a period of three years
has lapsed after such default ceased to subsist.

In the given case, Alpha Ltd, defaulted the payment of interest on secured loan to Bank in the
year 2016. Although the company has made good the default in year 2017 but the statutory
period of three years has not lapsed. Hence, the company cannot proceed to buy-back the
shares.

35. Hope Ltd. makes an issue worth `125 crore to the public, out of which `20 crore was for sale
to existing shareholders. Explain the provisions regarding the utilisation of proceeds and
state whether any exception is available. (Dec 2020)

Regulations 41 and 137 of SEBI (ICDR) Regulations, 2018, prescribes the role of Monitoring
agency to track the end use of proceeds of IPO. As per Regulation ‘if the issue size excluding the
size of offer for sale by selling shareholders exceeds `100 crore, the issuer shall ensure that the
use of proceeds of the issue is monitored by a public financial institutions or by one of the
scheduled commercial banks named in the offer document as a banker to the issuer’.

In the given case, the issue exceeds `100 crore i.e `5 crore excluding `20 crore by selling
shareholders. Hence, a monitoring agency should be appointed to track the issue proceeds.
Further the monitoring agency shall submit its report to the issuer in the format specified in
the ICDR Regulations, 2018 on a quarterly basis, till at least 95% of the proceeds of the issue
excluding the proceeds raised for general corporate purposes, have been utilised. The Board of
Directors and the management of the issues shall provide their comments on the findings of the
monitoring agency. The issuer shall, within 45 days from the end of the each quarter, publicly
disseminate the report of the monitoring agency by uploading the same on its website as well
as submitting the same to the stock exchange(s) on which its equity shares are listed. However,
the above mentioned rule is not applicable if the issuer is a bank or a public financial institution
or an insurance company.

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36. Good Luck Finance Ltd., a listed company issued 20 lakh equity shares of `180 each. The
Company provided Green Shoe Option and Nishan was nominated as Stabilising Agent. On
the date of listing, Corona Virus threat spread across the globe. Consequently post listing,
the share price of the company fall to `150. From the above :
(i) Compute the quantum of shares that can be bought by Nishan.
(ii) State the provisions for balance of shares lying in the special account for Green Shoe
Option. (June 2021)

Green Shoe Option is a post listing price stabilising mechanism. Good Luck Finance Ltd. issued
20 lakh equity shares@`180 each. As per SEBI (ICDR) Regulations, 2018, the maximum number
of securities that can be borrowed for the purpose of allotment/ allocation of securities in excess
of issue size shall not be more than 15% of the issue size.

Hence, Nishan (Stabilising agent) can purchase 3,00,000 equity shares (15% of 20,00,000 equity
shares) to stabilise the price.

Having bought back all of the 300000 equity shares, these shares would be temporarily held in
a special depository account with the depository participant (Green Shoe Demat Account), and
would then be returned back to the lender shareholders, within a maximum period of two days
after the stabilisation period.

Any surplus lying in the Green Shoe Escrow Account would then be transferred to the Investor
Protection and Education Fund established by SEBI.

37. Karuna Ltd. made an Initial Public Offer (IPO) of equity shares in March, 2020 and was granted
listing on stock exchange. Soon, thereafter, the promoters of the company started
contemplating a change in the objects clause mentioned in the offer document. To give effect
to the same, the company convened an extra-ordinary general meeting of shareholders in
April 2020. Though the requisite resolution was passed by the company, there were,
nevertheless, the dissenting shareholders too. The promoters decided to provide an exit
opportunity to the dissenting shareholders. In the light of the above, answer the following :
(i) Who are the dissenting shareholders ?
(ii) What is the eligibility of shareholders for availing the exit offer ?
(iii) Enumerate the conditions required to be complied with to give effect to this recourse
which was availed by the promoters.
(iv) How the exit offer price will be determined ? (June 2021)

(i) “Dissenting Shareholders” mean those shareholders who have voted against the resolution
for change in Objects or variation in terms of a contract, referred to in the offer document of the
issuer.

(ii) Only those dissenting shareholders of the issuer who are holding shares as on the relevant
date shall be eligible to avail the exit offer.

(iii) Conditions for Exit Offer

The promoters or shareholders in control of Karuna Ltd. shall make the exit offer to the
dissenting shareholders, in cases only if a public issue has opened after April 1, 2014, if :
1. The proposal for change in objects or variation in terms of a contract, referred to in the offer
document is dissented by at least 10 per cent of the shareholders who voted in the general
meeting; and
2. The amount to be utilized for the objects for which the offer document was issued is less than
75 % of the amount raised (including the amount earmarked for general corporate purposes as
disclosed in the offer document).

(iv) The “exit price' payable to the dissenting shareholders shall be the highest of the following:

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(a) The volume-weighted average price paid or payable for acquisitions, whether by the
promoters or by any person acting in concert with them, during the fifty-two weeks immediately
preceding the relevant date;
(b) The highest price paid or payable for any acquisition, whether by the promoters or by any
person acting in concert with them, during the twenty six weeks immediately preceding the
relevant date;
(c) the volume-weighted average market price of such shares for a period of sixty trading days
immediately preceding the relevant date as traded on the recognised stock exchange where the
maximum volume of trading in the shares of the issuer are recorded during such period,
provided such shares are frequently traded;
(d) where the shares are not frequently traded, the price determined by the promoters or
shareholders having control and the lead manager(s) taking into account valuation parameters
including book value, comparable trading multiples, and such other parameters as are
customary for valuation of shares of such issuers.

38. Wadhwani Enterprises Limited, an unlisted company, has decided to bring an initial public
offer and filed a draft offer document with SEBI. The company is not able to correctly interpret
a circular issued by SEBI. The managing director of the Company wants to seek informal
guidance under SEBI Informal Guidance Scheme. Ramesh, director of the company is of a
view that since the company is not yet listed so company cannot seek informal guidance from
SEBI. Being a company secretary, advise on the following matters:
(i) Who can apply for informal guidance ? Whether company can apply for informal guidance
in the given situation ?
(ii) What are the matters on which informal guidance cannot be sought ? (June 2021)

(i) The following persons may make a request for informal Guidance under the SEBI (Informal
Guidance) Scheme, 2003:
a) Any intermediary registered with the SEBI;
b) Any listed company;
c) Any company which intends to get any of its securities listed and which has filed either a
listing application with any stock exchange or a draft offer document with the SEBI or the
Central Listing authority;
d) Any mutual fund trustee company or asset management company;
e) Any acquirer or prospective acquirer under the SEBI (Substantial Acquisition of Shares &
Takeovers) Regulations, 1997. [Now the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011]

In the given case, since Wadhwani Enterprises Limited is an unlisted company and filed draft
offer document with SEBI, therefore, it can apply to SEBI under informal guidance scheme.

(ii) With respect to following matter informal guidance cannot be sought:

a) Those which are general and those which do not completely and sufficiently describe the
factual situation;
b) Those which involve hypothetical situations;
c) Those requests in which the requestor has no direct or proximate interest;
d) Where the applicable legal provisions are not cited;
e) Where a no-action or interpretive letter has already been issued by that or any other
Department on a substantially similar question involving substantially similar facts, as that to
which the request relates;
f) Those cases in which investigation, enquiry or other enforcement action has already been
initiated;
g) Those cases where connected issues are pending before any Tribunal or Court and on issues
which are subjudice; and
h) Those cases where policy concerns require that the Department does not respond.

39. Actnow Edge Limited, an unlisted company, is in the process of expanding its business. For
expansion, it needs funds of `200 crore. For raising `200 crore, company has decided to bring

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 an initial public offer through book building mechanism. It has fixed a price band of `500 –
`600. Referring to provisions of SEBI (ICDR) Regulations, 2018, advise the company on the
following matters :
(i) What should be minimum application value and minimum number of equity shares in one
application ?
(ii) What will be minimum sum payable on application ?
(iii) What should be minimum time period for which issue should remain open for subscription
? (June 2021)

Application and Minimum Application Value (Regulations 47 & 143 of SEBI (ICDR)
Regulations, 2018]

The issuer shall stipulate in the offer document the minimum application size in terms of
number of specified securities which shall fall within the range of minimum application value
of ten thousand rupees to fifteen thousand rupees.

Thus, in the given case Actnow Edge Limited should fix the minimum number of shares in one
application in such a manner that minimum application value should not cross the limit of
`10,000 to `15,000. Hence, minimum number of shares in one application will be:

At lower level of price band: 20 Shares (`10,000/`500) & 30 Shares (`15,000/ `500)

At higher level of price band: 17 Shares (`10,000/`600) & 25 Shares (`15,000/ `600)

(ii) The minimum sum payable on application per specified security shall be at least twenty five
per cent of the issue price.

(iii) Period of Subscription [Regulations 46 & 142]

An IPO shall be kept open for at least three working days and not more than ten working days.

In case of a revision in the price band, the issuer shall extend the bidding (issue) period disclosed
in the red herring prospectus, for a minimum period of three working days.

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 three working days.

40. Referring to the SEBI Insider Trading Regulations, answer the following :
(a) What is ‘unpublished price sensitive information’ ?
(b) State with reasons whether the following information is price sensitive :
(i) RBI has increased its Statutory Liquidity Ratio (SLR) by 15 basis points.
(ii) The company is increasing its authorized share capital. (June 2021)

(a) Unpublished price sensitive information

“Unpublished price sensitive information” means any information, relating to a company or its
securities, directly or indirectly, that is not generally available which upon 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.

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(b) (i) RBI has increased its Statutory Liquidity Ratio (SLR) by 15 basis points. It is not an
unpublished price sensitive information as it does not relate to any of the events defined under
“Unpublished Price Sensitive Information”.

(ii) The company is increasing its authorized capital: It is unpublished price sensitive
information as it is related to change in capital structure which is defined under “Unpublished
Price Sensitive Information”.

41. PQR Limited, a listed company, is intending to make buy-back of its equity shares. Referring
to SEBI Buy-back Regulations, explain the following :
(i) The manner of deposit of amount in Escrow account.
(ii) How can an unregistered shareholder tender his shares for buy-back ?
(iii) What is time limit for completing buy-back process ? (June 2021)

(i) The company shall as and by way of security for performance of its obligations under the
SEBI (Buy back of Securities) Regulations, on or before the opening of the offer, deposit in an
escrow account such sum as specified under the 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 `100 crores 25 per cent of the consideration
payable;
Consideration exceeds `100 crores 25 per cent up to `100 crores and 10 per cent
thereafter.

(ii) The unregistered shareholder may also tender his shares for buy-back by submitting the
duly executed Transfer Deed for transfer of shares in his name, along with the offer form and
other relevant documents as required for transfer, if any.

(iii) Every buy back shall be completed within a period of one year from the date of passing of
the special resolution passed at the general meeting, or the resolution passed by the Board of
directors of the company, as the case may be.

42. Suzan Limited is in top 1000 listed companies. Referring to provisions of SEBI (LODR)
Regulations, 2015, the Board of directors seeks your advice as a company secretary
regarding the following two matters :
(i) Quorum in Board meeting
(ii) Maximum number of directorship in a listed entity by a director. (June 2021)

(i) 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. Thus, keeping in mind the above provisions, Suzan Limited is required to
comply with above provisions with respect to quorum in board meeting with effect from 1st
April, 2019.

(ii) SEBI (LODR) Regulations, 2015 provides that the directors of listed entities shall comply
with the following conditions with respect to the maximum number of directorships, including
any alternate directorships that can be held by them at any point of time :

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.

Further, 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. For the
purpose of this sub-regulation, the count for the number of listed entities on which a person is
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a director / independent director shall be only those whose equity shares are listed on a stock
exchange.

43. “The accounting treatment of an issue of sweat equity shares is different than the public offer
of shares.” Elucidate briefly. Is there any requirement of Auditor’s certificate after issue of
sweat equity shares ? When such shares are treated as part of managerial remuneration ?
(Dec 2021)

Accounting Treatment :
Where the sweat equity shares are issued for a non-cash consideration, such non cash
consideration shall be treated in the following manner in the books of account of the company:
1. where the non-cash consideration takes the form of a depreciable or amortizable asset, it
shall be carried to the balance sheet of the company in accordance with the relevant accounting
standards; or
2. where the above clause is not applicable, it shall be expensed as provided in the relevant
accounting standards.

Placing of Auditors Certificate before Annual General Meeting

In the General meeting subsequent to the issue of sweat equity, the Board of Directors shall
place before the shareholders, a certificate from the Secretarial auditor that the issue of sweat
equity shares has been made in accordance with the SEBI Regulations and in accordance with
the resolution passed by the company authorizing the issue of such Sweat Equity Shares.

Ceiling of Managerial Remuneration

The amount of sweat equity shares issued shall be treated as part of managerial remuneration
for the purpose of sections 197 of the Companies Act, 2013, if the following conditions are
fulfilled:
(i) the Sweat Equity shares are issued to any director or manager; and
(ii) they are issued for non-cash consideration, which does not take the form of an asset which
can be carried to the balance sheet of the company in accordance with the relevant accounting
standards.

44. Turnkey Ltd. is a listed company, manufacturing auto ancillary components. One of the
director of the company is a fugitive offender. The company wants to bring Further Public
Offer (FPO). You being the company secretary of the company, advise whether the company
can issue FPO. State the general conditions and the eligibility requirements for FPO under
SEBI Regulations. (Dec 2021)

As per Regulation 102 of the SEBI (ICDR) Regulations, 2018, a company shall not be eligible to
make a Further Public Offer where the director of the company is a fugitive offender. Therefore,
Turnkey Ltd. would not be able to issue FPO.

General Conditions and eligibility requirement for FPO as prescribed under Regulations 103
and 104 of the SEBI (ICDR) Regulations, 2018 are given below:

Eligibility requirements for FPO

An issuer may make a FPO if it has changed its name within the last one year and at least 50%
of the revenue in the preceding one full year has been earned from the activity suggested by the
new name.

If an issuer does not satisfy the above mentioned conditions, 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

An issuer making an FPO shall ensure that

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a) An application is made for listing of the specified securities to one or more of the recognised
stock exchanges and choose one of the exchanges as the designated stock exchange.
b) An agreement is entered into with a depository for dematerialisation of specified securities
already issued or proposed to be issued.
c) All the 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.
d) The issuer should make firm arrangements of finance through verifiable means towards 75%
of the stated means of finance excluding the amount to be raised through the proposed public
issue or through existing identifiable internal accruals.
e) The amount of General Corporate Purpose as mentioned in objects of the issue in the draft
offer document and the offer document shall not exceed twenty five percent of the amount being
raised by the issuer.

45. Sarvbhom Ltd. issued 2000 equity shares of `100 each on 1st May, 2019. The amount payable
was `30 on application and `70 on allotment of shares. The company had received
applications for 3000 equity shares and shares were allotted on pro-rata basis on 31st August,
2019. Dakshin, had applied for 120 shares on 15th May, 2019. The excess application money
was refunded to him on 29th February, 2020.
(i) Can Dakshin lodge the complaint to Ombudsman for interest on delayed refund of
application money ?
(ii) What is the procedure for filing a complaint ?
(iii) What is the duration for making the complaint to Ombudsman ? (Dec 2021)

(i) As per SEBI (Ombudsman) Regulations, 2003, Dakshin can lodge complaint for non-receipt
of interest on delayed refund of application monies.

(ii) Procedure for filing a complaint

Any person who has a grievance against a listed company or an intermediary relating to any of
the matters specified under the SEBI (Ombudsman) Regulations, 2003 may himself or through
his authorised representative or any investors association recognised by the SEBI, make a
complaint against a listed company or an intermediary to the Ombudsman within whose
jurisdiction the registered or corporate office of such listed company or intermediary is located.
If SEBI has not notified any Ombudsman for a particular locality or territorial jurisdiction, the
complainant may request the Ombudsman located at the Head Office of the SEBI for forwarding
his complaint to the Ombudsman of competent jurisdiction.

The complaint is required to be in writing duly signed by the complainant or his authorised
representative (not being a legal practitioner) in the Form specified in the Schedule to the
regulations and supported by documents, if any.

The Ombudsman may dismiss a complaint on any of the grounds specified under the
Regulations or when such complaint is frivolous in his opinion.

(iii) Duration for making the compliant to Ombudsman

The SEBI (Ombudsman) Regulations, 2003 prescribes that no complaint to the Ombudsman
shall lie –
(a) unless the complainant had, before making a complaint to the SEBI or the Ombudsman
concerned, made a written representation to the listed company or the intermediary named in
the complaint and the listed company or the intermediary, as the case may be, had rejected the
complaint or the complainant had not received any reply within a period of one month after the
listed company or intermediary concerned received his representation or the complainant is not
satisfied with the reply given to him by the listed company or an intermediary;

(b) unless the complaint is made within six months from the date of the receipt of
communication of rejection of his complaint by the complainant or within seven months after
the receipt of complaint by the listed company or intermediary under clause (a) above.

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46. X is a Managing Director of ABC Ltd. and awarded title of best CEO of the country. Four
leading listed companies invited him to join their Board as an Independent Director for sharing
his knowledge. Can X join as an Independent Director on the offer made by four listed entities
? Give your answer with reason. After superannuation, X is planning to join as an Independent
Director of ten listed companies. Do you agree with the planning of X ? (Dec 2021)

As per Regulation 17A of the SEBI (LODR) Regulations, 2015, 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.

Hence, X being the Managing Director of ABC Ltd., can join in only 3 listed companies as an
independent Director.

As per Regulation 17A of the SEBI (LODR) Regulations, 2015, 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.

Therefore, after retirement X cannot serve as an Independent Director in ten listed companies
and is restricted to only seven listed companies as stated above. Hence the planning of X is not
as per the Regulations on Corporate Governance.

47. Pinki Ltd. being a listed company has not complied the requirements of listing agreement with
the stock exchange. The stock exchange decided for compulsory delisting of the securities
from its trading platform. Answer the following :
(a) Whether once listed, stock exchange can go for compulsory delisting of securities of Pinki
Ltd. ?
(b) What are the provisions for constitution of panel ?
(c) What time period will be given for representation to Pinki Ltd. ? (Dec 2021) (Dec 2023)

(a) 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 SEBI (Delisting of Equity Shares) Regulations, 2021, a recognized stock exchange may,
by order, delist any equity shares of a company on any ground prescribed in the rules made
under section 21A of the Securities Contracts (Regulation) Act, 1956. Therefore, the stock
exchange as a penalizing measure for not complying with various requirements set out in the
Listing agreement within the time frames prescribed can go for compulsory delisting of securities
of Pinki Ltd.

(b) Constitution of Panel Regulation 22 (2) deals with the provisions related to constitution of
panel. 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 the investors;
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.

(c) Time period of making representation

SEBI (Delisting of Equity Shares) Regulations, 2021 provides that before passing a delisting
order the recognized stock exchange shall give a notice of the proposed delisting in one English
national daily with wide circulation and one regional language newspaper of the region where
the concerned recognized stock exchange is located and shall also display such notice on its
trading systems and website.

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A time period of not less than fifteen working days from the notice, be given to any person who
may be aggrieved by the proposed delisting within which he can make representations to the
recognised stock exchange which has issued a notice for the delisting.

48. The term internal control is generally linked to controls mechanism for financial and non-
financial processes of an entity. Is there any internal control process to prevent insider
trading under SEBI regulations ? You, being a Company Secretary of the company, suggest
your CEO about internal controls to ensure the compliance under the said regulation ? (Dec
2021)

Regulation 9A of the SEBI (Prohibition of Insider Trading) Regulations, 2015 provides that 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:
a) all employees who have access to unpublished price sensitive information are identified at
designated person;
b) all the unpublished price sensitive information shall be identified and its confidentiality shall
be maintained as per the requirements of these regulations;
c) adequate restrictions shall be placed on communication or procurement of unpublished price
sensitive information as required by these regulations;
d) 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;
e) all other relevant requirements specified under these regulations shall be complied with;
f) periodic process review to evaluate effectiveness of such internal controls.

49. Home Technology Ltd. has recently listed on the leading stock exchanges. Advise the
company on the compliance of corporate governance regulation for holding of maximum
number of directorship by a director of the company. If the company is having paid up capital
and reserve & surplus `8 crore & `12 crore respectively, are there any exceptions in the
compliances with the corporate governance under the SEBI Regulations ? (Dec 2021)

Maximum Number of Directorships

Regulation 17A of the SEBI (LODR) Regulations, 2015 provides that 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.

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.

Exceptions in the compliance with the corporate governance provisions

As per Regulation 15(2) of the SEBI (LODR) Regulations, 2015, the compliance with the
corporate governance provisions shall not apply, in respect of following –

A listed entity having:

• paid up equity share capital not exceeding rupees 10 crore and
• net worth not exceeding rupees 25 crore, as on the last day of the previous financial year.

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However, 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 V become applicable to a listed entity at a
later date, it shall ensure compliance with the same within six months from such date.

Home Technology Ltd. is having paid up share capital of rupees 8 crore and having net worth
(paid up capital plus + free reserve) of rupees 20 crore. Therefore, both paid up capital and net
worth are within the limit and hence the company is exempted with regards to compliance of
corporate governance provisions.

50. Answer the followings with reasons, with reference to SEBI Buyback Regulations, whether
these buy-back are as per the provisions of the regulations ?
(i) The company can directly or indirectly purchase its own shares through any subsidiary
including its own subsidiaries.
(ii) The company has made buy-back of shares out of the proceeds of an earlier issue of the
same kind of shares.
(iii) The Company Secretary of the company advised not to allow buy-back of shares unless
the consequent reduction of share capital is affected.
(iv) The company has prohibited from Buy-back whose default is remedied and a period of two
years has lapsed after such default ceased to subsist.
(v) The Board of directors has denied the offer of buy-back of shares for 16 percent of the paid
up capital and free reserves to be made from the open market. (Dec 2021)

(i) As per the conditions and requirements for buyback of shares provided under the SEBI
Buyback Regulations, the company shall not directly or indirectly purchase its own shares
through any subsidiary including its own subsidiaries. Therefore, this statement is not as per
the provisions of the SEBI Buyback Regulations.

(ii) As per the conditions and requirements for buyback of shares provided under the SEBI
Buyback Regulations, the Buyback shall not be made out of the proceeds of an earlier issue of
the same kind of shares or same kind of other specified securities of the company. Therefore,
this statement is not as per the provisions of the SEBI Buyback Regulations.

(iii) As per the conditions and requirements for buyback of shares provided under the SEBI
Buyback Regulations, a company shall not allow buyback of its shares unless the consequent
reduction of its share capital is affected. Therefore, this statement is as per the provisions of the
SEBI Buyback Regulations.

(iv) As per the conditions and requirements for buyback of shares provided under the SEBI
Buyback Regulations, the buy-back is not prohibited, if the default is remedied and a period of
three years has lapsed after such default ceased to subsist. Therefore, the company is prohibited
from Buyback whose default is remedied and a period of two years has lapsed after such default
ceased to subsist, therefore, this statement is as per the provisions of the SEBI Buyback
Regulations.

(v) As per the conditions and requirements for buyback of shares provided under the SEBI
Buyback Regulations, the buyback from open market shall be less than 15 percent of the paid
up capital and free reserves of the company, based on the standalone or consolidated financial
statements of the company whichever sets out a lower amount. Since the Board of Directors
has denied the offer of buyback of shares for 16 percent of the paid up capital and free reserves
to be made from the open market, therefore, this statement is as per the provisions of the SEBI
Buyback Regulations.

Please Note the amendment in this regard:

Provided that the buy-back from the open market through stock exchanges, based on the
standalone or consolidated financial statements of the company, whichever sets out a lower
amount, shall be less than:—
(i) 15% of the paid up capital and free reserves of the company till March 31, 2023;

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(ii) 10% of the paid up capital and free reserves of the company till March 31, 2024;
(iii) 5% of the paid up capital and free reserves of the company till March 31, 2025: Provided
further that buy-back from the open market through the stock exchange shall not be allowed
with effect from April 1, 2025.

So, if the question comes in exam regarding this, you have to take 10% as the limit and
calculate accordingly.

51. ABC Company Ltd. had issued 2000 equity shares of `80 each with attachable warrant on 20th
June, 2018. The warrant can be exchanged in equity in the proportion of 1 : 1. S, a shareholder
who was allotted 200 equity shares with attachable warrant on 20th June, 2018 wants to know
the warrant premium if the market value of warrant is `18 and exercise price is `70.
(i) Calculate the warrant premium for S.
(ii) What are the conditions of eligibility of ABC Company Ltd to issue Warrant?
(iii) When ABC Company can forfeit the warrant ? (Dec 2021)

(i) Minimum price of Warrant = (Current Market Price of equity share - Exercise Price of Warrant)
= (Rs.: 80-Rs.70) i.e. Rs. 10

Warrant Premium
= (Market Value of Warrant - Value of Warrant)
= Rs. 18- Rs. 10
= Rs. 8

For 200 Warrants of S, since Ratio is 1:1, the premium would be = 200 x Rs. 8 = Rs. 16000

(ii) An issuer shall be eligible to issue warrant in an initial public offer subject to the following:
a) the tenure of such warrants shall not exceed eighteen months from the date of their allotment
in the initial public offer,
b) a specified security may have one or more warrants attached to it,
c) the price or formula for determination of exercise price of the warrants shall be determined
upfront and disclosed in the offer document 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.

(iii) When warrant holder does not exercise the option to take equity shares against any of the
warrant held by the warrant older, within three months from the date of payment of
consideration, such consideration made in respect of such warrants shall be forfei ted by the
issuer.

52. X, a shareholder of a listed company holding 1,000 equity shares of `100 each on 1st January,
2019 in physical form, wants to transfer to another shareholder Y on 1st May, 2019. X is also
holding Commercial Paper & Certificate of Deposits of `50,000 & `20,000 respectively. As a
Company Secretary of the company, write a note on:
(i) Whether X can transfer his shares to Y in physical form ?
(ii) Are Commercial Paper & Certificate of Deposits available for dematerialisation at
Depository ? (Dec 2021)

(i) X cannot transfer his shares to Y in physical form. SEBI has amended relevant provisions of
SEBI (LODR) Regulations, 2015 to disallow listed companies from accepting request for transfer
of securities which are held in physical form, with effect from April 1, 2019. The shareholders
who continue to hold shares and other types of securities of listed companies in physical form
even after this date, will not be able to lodge the shares with company/ its RTA for further
transfer. They will need to convert them to demat form compulsorily if they wish to effect any
transfer.

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Since X wants to transfer his shares to another shareholder Y on 1st May, 2019 i.e. after 1st
April, 2019, therefore he would not be allowed to do so.

(ii) Yes, Commercial Papers and Certificates of Deposits irrespective of whether these
instruments are listed / unlisted / privately placed can be dematerialized with depository, if
they have been admitted with the depository.

53. Pritam Ltd. is in the list of top 100 listed companies; of which financial year closes on 31st
March, 2022. The company had its Annual General Meeting on September 10, 2022 and
provided e-voting facility to its shareholders.
(i) Whether the action of the Pritam Ltd. is tenable?
(ii) What is the requirement of proceedings of Annual General Meeting?
(iii) Can Pritam Ltd. provide the remote e-voting facility to its shareholders as per the Act?
(iv) What is the time period for submitting the required details to stock exchange? (5 marks)
(December 2022)

(i) As per Regulation 44(5) of SEBI LODR Regulations 2015, 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. As
Pritam Ltd is in the list of Top 100 Listed companies the above provision is applicable to them
and they should have held the AGM by 31 st August 2022 i.e within 5 months from end of
Financial Year. However, Pritam Ltd had held its AGM on 10 th September 2022, ehcnem the
Action of Pritam Ltd is not tenable and invalid.

(ii) Requirements of Proceedings of AGM are as under:

(a) The top 100 listed entities shall provide one-way live webcast of the proceedings of the annual
general meetings.
(b) The listed entity shall provide the facility of remote e-voting facility to its shareholders, in
respect of all shareholders' resolutions.
(c) The listed entity shall send proxy forms to holders of securities in all cases mentioning that
a holder may vote either for or against each resolution.

(iii) The e-voting facility to be provided to shareholders in terms of sub-regulation (1), shall be
provided in compliance with the conditions specified under the Companies (Management and
Administration) Rules, 2014, or amendments made thereto. Remote E-voting is allowed under
the said rules. Hence, Pritam Ltd can provide Remote E-voting facility.

(iv) The listed entity shall submit to the stock exchange, within two working days of conclusion
of its General Meeting, details regarding the voting results in the format specified by the Board.

54. Dr. Grace, aged 78 years, was appointed as non-executive director of PQR Ltd. (listed
company) by passing an ordinary resolution. Examine the validity of appointment of Dr. Grace
as a director of PQR Ltd. (5 marks) (December 2022)

As per Regulation 75 of SEBI LODR Regulations, 2015 No listed entity shall appoint a person
or continue the directorship of any person as a non-executive director who has attained the age
of seventy five 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.

In the Instant Case, Dr. Grace is aged 78 Years which is more than 75 Years. So, above provision
is applicable in this case and Company should have passed a Special Resolution for the
Appointment. However, the company has passed an Ordinary Resolution. Hen ce, the
Appointment of Dr. Grace as a director of PQR Ltd is not valid.

55. The Board of directors of Vijay Ltd., a listed entity proposes to issue sweat equity shares to
Ganesh, an employee belonging to the promoter’s group. Ganesh also participated in the

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 Shareholders’ resolution for allotment of sweat equity shares. By referring the relevant SEBI
Regulations, answer the followings:
(i) Can Ganesh participate in the resolution (Give reason)?
(ii) Briefly explain the provisions for issuing of sweat equity shares under SEBI (Share Based
Employee Benefits and Sweat Equity) Regulations, 2021.
(iii) When these regulations are exempted from enforcement in special cases? (5 marks)
(December 2022)

As per SEBI (SBEBSE) Regulations, 2021

The issue of sweat equity shares to employees who belong to promoter or promoter group shall
be approved by way of a resolution passed by a simple majority of the shareholders in general
meeting.

However, for passing such a resolution, voting through postal ballot and/or e-voting as specified
under Companies (Management and Administration) Rules, 2014 shall also be adopted.

Further, provided that the promoters/promoter group shall not participate in such resolution.

Applying the above provisions in the Instant Case, we can conclude the following:
(i) Promoters & Promoters Group cannot vote in such resolution. Hence, As Mr. Ganesh belongs
to Promoter Group, he cannot vote in such resolution.

(ii) A company whose equity shares are listed on a recognised stock exchange may issue sweat
equity shares in accordance with section 54 of the Companies Act, 2013 and these regulations
to its employees for their providing know-how or making available rights in the nature of
intellectual property rights or value additions, by whatever name called.

For the purposes of passing a special resolution under clause (a) of sub-section (1) of section 54
of the Companies Act, 2013), the explanatory statement to be annexed to the notice for the
general meeting pursuant to section 102 of the Companies Act, 2013 shall contain disclosures
as specified in the Schedule – II of these regulations.

A company shall not issue sweat equity shares for more than 15% of the existing paid-up equity
share capital in a year. However, the issuance of sweat equity shares in the company shall not
exceed 25% of the paid-up equity share capital of the company at any time.
(iii) The Board may exempt any person or class of persons from the operation of all or any of the
provisions of these regulations for a period as may be specified but not exceeding twelve months,
for furthering innovation relating to testing new products, processes, services, business models,
etc., in live environment of regulatory sandbox in the securities markets.

56. ABC Ltd. is a SEBI registered Collective Investment Management company. It has launched a
Collective Investment scheme viz. “Har Ghar Sapna” and collected money for acquiring land
and construction of houses. Due to sudden downfall of real estate market, only 15 investors
with a total subscription of ` 15 crore applied in the scheme. Whether the company can run
the scheme? Give answer with reference to the amended SEBI Regulations. (December 2022)

Each collective investment scheme shall immediately after the closure of the subscription list
comply with the following conditions, namely,-
(a) minimum subscription amount of rupees twenty crore;
(b) minimum twenty investors; and
(c) no person shall hold more than twenty-five percent of the assets under management of
scheme:

Provided that where the collective investment scheme fails to comply with this sub-regulation,
Collective Investment Management Company shall be liable to refund the application money to
the applicants.

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Applying the above provisions, it is clear that conditions above are not fulfilled as number of
investors are 15 i.e less than 20 & minimum subscription amount is 15 Crores i.e less than 20
Crores. Hence, ABC cannot run the scheme and shall be liable to refund the money.

57. Nikunj, an IT professional from reputed engineering college, was appointed as an

independent director of a listed company. Due to some health issues, he resigned from the
company eight months back. Now, the company desires to appoint him as an executive
director on the Board. Examine the validity of the proposed appointment. (4 marks)
(December 2022)

As per Regulation 25(11) of SEBI LODR Regulations, 2015:

No independent director, who resigns from a listed entity, shall be appointed as an executive /
whole time director on the board of the listed entity, its holding, subsidiary or associate company
or on the board of a company belonging to its promoter group, unless a period of one year has
elapsed from the date of resignation as an independent director.

In the instant case, only eight months have elapsed from the resignation of Nikunj. Hence, the
company can appoint Nikunj as an Executive Director only on the expiry of one year from the
date of resignation as an Independent Director.

58. A listed company has appointed Mihir as a director on the Board. The general meeting of the
company has already been held prior to his appointment. What approval is required to
regularise the appointment? What will be your answer, if the earlier appointment of Mihir as
director on the Board was rejected by the shareholders? (4 marks) (December 2022)

The listed entity shall ensure that approval of shareholders for appointment of a person on the
Board of Directors or as a manager is taken at the next general meeting or within a time period
of three months from the date of appointment, whichever is earlier:

Provided that the appointment or a re-appointment of a person, including as a managing director

or a whole-time director or a manager, who was earlier rejected by the shareholders at a general
meeting, shall be done only with the prior approval of the shareholders:

Provided further that the statement referred to under sub-section (1) of section 102 of the
Companies Act, 2013, annexed to the notice to the shareholders, for considering the appointment
or re-appointment of such a person earlier rejected by the shareholders shall contain a detailed
explanation and justification by the Nomination and Remuneration Committee and the Board of
directors for recommending such a person for appointment or re-appointment.

Hence, applying the above provisions,

(i) Approval of Shareholders will be required to regularise the appointment.
(ii) However, if the earlier appointment of Mihir as director on the board was rejected by
shareholders then Prior Approval of Shareholders is required. Hence, appointment will be valid
only if prior approval of shareholders is taken.

59. ABC Ltd. is a public company listed on stock exchange. The company declared a dividend in
the Annual General Meeting held on 1st May, 2020. However, the dividend was distributed on
5th June, 2020. One of the shareholders Jyoti made a complaint on SCORE platform on 5th
June, 2022. Answer the followings:
(a) Whether the action of ABC Ltd. is as per the Companies Act, 2013?
(b) Can Jyoti make a complaint to SCORES?
(c) What happens if investor fails to lodge complaint on SCORES within stipulated period? (4
marks) (December 2022)

(a) As per Companies Act, 2013 Dividend shall be paid within 30 days from the date of
declaration. Hence, ABC Ltd should have paid the dividend by 31 st May 2020. However, ABC ltd
has actually paid the dividend on 5 th June 2020. Hence, ABC Ltd has not complied with

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Companies Act, 2013 and hence, will be liable for action as laid down in Section 127 of
Companies Act, 2013.

(b) An investor may lodge a compliant on SCORES within 3 years from the date of cause of
complaint. If the Company fails to pay the declared dividend within 30 days i.e. 31.05.2020 as
the dividend was declared on 01.05.2020, the date of cause of complaint would be 31.05.2020
and a complaint can be lodged on SCORES within 3 years from 31.05.2020 i.e on or before
31.05.2023. Hence, Jyoti can lodge a complaint on 5 th June 2022.

(c) In case investor fails to lodge a complaint within the stipulated time of three years, he may
directly take up the complaint with the entity concerned or may approach appropriate court of
law.

60. Ankur traded in shares of Sitez Ltd., a listed company. The trading plan was approved by
compliance officer on May 19, 2022. Ankur comes to know on July 20, 2022 that this
transaction involve unpublished price sensitive information.
(i) What will be the impact on the transactions of Ankur?
(ii) What conditions are attached to the trading plan? (December 2022)

(i) If trading in shares by Ankur is done as per the Trading Plan approved by the Compliance
Officer then No need of Pre-Clearance of trade is required and trade shall be valid as it entered
in accordance with approved trading plan.

(ii) Conditions attached to the Trading Plan are as under:

Such trading plan shall:–
(i) not entail commencement of trading on behalf of the insider earlier than six months from
the public disclosure of the plan;

(ii) not entail trading for the period between the twentieth trading day prior to the last day of
any financial period for which results are required to be announced by the issuer of the
securities and the second trading day after the disclosure of such financial results;

(iii) entail trading for a period of not less than twelve months;

(iv) not entail overlap of any period for which another trading plan is already in existence;

(v) set out either the value of trades to be effected or the number of securities to be traded
along with the nature of the trade and the intervals at, or dates on which such trades shall
be effected; and

(vi) not entail trading in securities for market abuse.

61. Joshi Ltd. is a listed entity entered into a transaction with related party, namely Hosh Ltd., for
an amount of ` 59 crore and simultaneously made a payment of ` 10 crore for brand use. The
turnover of Joshi Ltd. is ` 480 crore on standalone basis and after considering consolidation
of subsidiary & associate is ` 610 crore. You, being a company secretary of the company,
advise on the following :
(i) Whether the transaction is a related party transaction or not?
(ii) Whether the payment made for brand uses is a related party transaction or not?
(iii) When transactions with related party are material in above both the cases?
(iv) What is omnibus approval of audit committee for all related party transactions? (8 marks)
(December 2022)

(i) Yes, transaction entered into by a Listed company with its related party regardless of the
price charged is a related party transaction.

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(ii) Yes, transaction entered into by a Listed company with its related party regardless of the
price charged is a related party transaction.

(iii)
(a) a transaction with a related party shall be considered material, if the transaction(s) to be
entered into individually or taken together with previous transactions during a financial year,
exceeds rupees one thousand crore or ten per cent of the annual consolidated turnover of the
listed entity as per the last audited financial statements of the listed entity, whichever is lower.

Total Related Party Transactions Amount = 59 + 10 = 69

% = 69/610 * 100 = 11.3%
As related party transactions are more than 10%, it will be considered as material.

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

Amount = 10 Crores
% = 10/610*100 = 1.6%

So, individually amount paid for brand use is less than 5%, hence, not material.

(iv) Audit committee may grant omnibus approval for related party transactions proposed to be
entered into by the listed entity subject to the following conditions, namely-

(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.

(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.

62. Answer with reference to SEBI Regulations:

(i) ABC Ltd., a leading software development company is having outstanding paid-up equity share
capital of ` 20 crore as on 31st March, 2021. On 20th April, 2021, it has issued sweat equity shares
of ` 2 crore to the eligible employees. To control the high attrition rate, it is planning to allot
further sweat equity shares of ` 2 crore during the year. Is it permissible under the law?

(ii) Can a company allot sweat equity shares to an employee working outside India, who has been
deputed outside India for last three years?

(iii) Himanshu, a non-executive director, approached the company for allotment of sweat equity
shares. Whether he is eligible?

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(iv) Whether the company is free to fix the price of sweat equity shares? (7 marks) (December
2022)
(i) A company shall not issue sweat equity shares for more than 15% of the existing paid up
equity share capital in a year. However, the issuance of sweat equity shares in the company
shall not exceed 25% of the paid up equity share capital of the company at any time.

Maximum Sweaty Equity that can be issued by ABC Ltd in a FY will be 15% of 20 Crores = 3
Crores. Company has already issued 2 Crore worth of Sweat Equity so, ABC can maximum
issue 1 Crore worth of Sweat Equity only in the Financial Year. Hence, 2 Crore worth of Sweat
Equity cannot be issued by ABC during the year.

(ii) The term ‘employee’ means,

(a) an employee of the company working in India or abroad; or
(b) a director of the company whether a whole time director or not.

Hence, Company can issue Sweat equity to employees working outside India.

(iii) The term ‘employee’ means,

(a) an employee of the company working in India or abroad; or
(b) a director of the company whether a whole time director or not.

Hence, Non Executive Director is eligible for Sweat Equity Shares.

(iv) The price of sweat equity shares shall be determined in accordance with the pricing
requirements stipulated for a preferential issue to a person other than a qualified institutional
buyer under the SEBI (ICDR) Regulations, 2018.
63. Whether these entities are eligible or not to make initial public offer? Answer with reasons in
accordance with the SEBI (ICDR) Regulations, 2018.

(i) The promoters’ group was earlier debarred from accessing the capital market by the SEBI and
the period of debarment is already over on the date of filing of the DRHP with the SEBI.

(ii) Recently, one of the promoter is declared as wilful fugitive offender.

(iii) The issuer has changed the name in the last one year and earned 40% of the revenue for the
preceding one full year from the activity in the new name.

(iv) The issuer has a net worth of one crore and fifty lakh rupees in each of the preceding three
years, calculated on a restated and consolidated basis.

(v) The issuer has an average operating profit of `10 crore during the three preceding years, with
operating profit in each of the preceding three years. (JUNE 23)

(i) The entity is eligible to make initial public offer as the period of debarment on the promoter
group, who were earlier debarred from accessing capital market by the SEBI, is already over as
on the date of filing of the draft offer document with the SEBI. [Regulation 5(1)(a) of SEBI (ICDR)
Regulations, 2018]

(ii) The entity is not eligible to make initial public offer if the issuer or any of its promoters or
directors is a wilful defaulter or a fraudulent borrower and a fugitive economic offender.
[Regulation 5(1)(c) and Regulation 5(1)(d) of SEBI (ICDR) Regulations, 2018]

(iii) The entity is not eligible to make initial public offer as the issuer has earned only 40% of the
revenue for the preceding one full year from the activity indicated by the new name. However,
as per requirement of the SEBI (ICDR) Regulations, 2018, an issuer shall be eligible to make an
initial public offer if issuer has changed its name within the last one year, at least 50% of the
revenue, calculated on a restated and consolidated basis, for the preceding one full year has

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been earned by it from the activity indicated by its new name. [Regulation 6(1)(d) of SEBI ( ICDR)
Regulations, 2018]

(iv) As per the requirement of the SEBI (ICDR) Regulations, 2018, an issuer shall be eligible to
make an initial public offer if the issuer has net worth of at least one crore in each of the
preceding three full years (of twelve months each), calculated on a restated and consolidated
basis.

In the given case, the issuer has a net worth of one crore and fifty lakh rupees in each of the
preceding three full years. Thus, the entity is eligible to make initial public offer. [Regulation
6(1)(c) of SEBI (ICDR) Regulations, 2018]

(v) As per the requirement of the SEBI (ICDR) Regulations, 2018, an issuer shall be eligible to
make an initial public offer, if it has an average operating profit of at least `15 crores, calculated
on a restated and consolidated basis, during the three preceding years (of twelve months each),
with operating profit in each of the three preceding years. However, in the given situation, the
issuer has an average operating profit of `10 crore. Therefore, the entity is not eligible to make
initial public offer. [Regulation 6(1)(b) of SEBI (ICDR) Regulations, 2018]

64. In light of SEBI Insider Trading Regulations, explain with reasons whether the following
information is deemed as price sensitive:

(i) Managing Director of ABC Ltd. met with an accident and was hospitalized.

(ii) EF Ltd. is under negotiation to enter into a foreign collaboration with a Korean company for
technical knowhow.

(iii) RBI has increased its repo rate by 25 basis points.

(iv) XY Ltd. is proposing for issue of bonus shares for its shareholders.

(v) The Chairman of RN Ltd. has submitted his resignation to the Board after reading a news
article proposing to sell a particular brand to another company by the promoters of the company.
(JUNE 23)

(i) The Managing Director of ABC Ltd. met with an accident and was hospitalised is not an
unpublished price sensitive information (UPSI), as it is an announcement of condition of the
Managing Director and it would not impact the market price of the shares.

(ii) EF Ltd. is under negotiation to enter into a foreign collaboration with a Korean company for
technical knowhow is an Unpublished price sensitive information, as it would materially affect
the price of the shares of the company.

(iii) RBI has increased its repo rate by 25 basis point is not a UPSI as it is announced by RBI
officially.

(iv) XY Ltd. is proposing for issue bonus shares for its shareholders is a UPSI as it would
materially affect the price of the shares of the company.

(v) The Chairman of RN Ltd. has submitted his resignation to the Board after reading a news
article proposing to sell a particular brand to another company by the promoters of the company
is a UPSI. While the news article is public information, the fact of resignation of the Chairman
is not and hence it is UPSI.

65. What do you mean by Disinvestment? What is the time limit within which the public
announcement is to be made in case of disinvestment? What are the automatic exemptions
under SEBI Takeover Regulations, 2011 for disinvestment? (JUNE 23)

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Disinvestment means the direct or indirect sale by the Central Government or any State
Government or by a government company, as the case may be, of shares or voting rights in, or
control over, a target company, which is a public sector undertaking.

As per the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, pursuant
to disinvestment the public announcement has to be made on the same day as the date of
executing the agreement for acquisition of shares or voting rights in or control over the target
company.

Regulations 8 and 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations
2011, contain exemptions in relation to disinvestment.

Regulation 8 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011,
states that:

1. the requirements of calculation of offer price determined as per clause 8 (2) (d) in case of
direct acquisition of shares or voting rights shall not apply in the case of disinvestment of a
public sector undertaking by the Central Government or a State Government, as the case may
be and that this shall apply only in case of a change in control in the public sector undertaking.

2. the requirements of calculation of offer price determined as per clause 8 (3)(e) in case of
indirect acquisition of shares or voting rights shall not apply in the case of disinvestment of a
public sector undertaking by the Central Government or a State Government, as the case may
be and that this shall apply only in case of a change in control in the public sector undertaking.

Regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011,
states that acquisitions at subsequent stages, by an acquirer who has made a public
announcement of an open offer for acquiring shares pursuant to an agreement of disinvestment,
as contemplated in such agreement be exempt from the obligation to make an open offer under
regulation 3 and regulation 4 subject to the following conditions:
1. both the acquirer and the seller are the same at all the stages of acquisition; and

2. full disclosures of all the subsequent stages of acquisition, if any, have been made in the
public announcement of the open offer and in the letter of offer.

66. RJS Ltd. is in the list of top 500 listed entities. P is a non-executive chairman of the company.
Q, R & T are the promoters of the company. P is related to the one of the promoter T. A is the
only woman director (executive director) in the Board. Further, the company is planning to
appoint C (aged 70 years) as a non-executive director. Answer the following with reference
to the SEBI (LODR) Regulations, 2015:

(i) Whether the company still requires to appoint another woman director?

(ii) What is your view for the requirement of independent directors of RJS Ltd.?

(iii) Who shall approve the related party transactions in the Audit Committee meeting of a listed
company?

(iv) Whether the appointment of C is valid ? (JUNE 23)

(i) As per regulation 17 of the SEBI (LODR) Regulations, 2015, the Board of directors of the top
500 listed entities shall have at least one independent woman director by April 1, 2019. In the
given situation, the company will be required to appoint one independent woman director as
RJS Ltd. in in the list of top 500 listed entities and has an executive woman director, who is
non independent.

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(ii) As per regulation 17 of the SEBI (LODR) Regulations, 2015, where the non-executive
chairperson is a promoter of the listed entity or is related to any promoter, at least half of the
board of directors of the listed entity shall consist of independent directors. In the given
situation, P is the non-executive chairman of RJS Ltd. and is related to one of the promoters.
Therefore RJS Ltd. will be required to appoint at least half of the board as independent directors.

(iii) As per the SEBI (LODR) Regulations, 2015, all related party transactions shall be approved
by only independent directors in the Audit Committee.

(iv) C can be appointed as a non-executive director of the company as his age is not beyond 75
years as prescribed under regulation 17(1A) of the SEBI (LODR) Regulations, 2015.

67. M is contemplating acquisition of PQR Limited, a listed entity. He presently holds 23% and his
sister, who is having common objective, holds 3%. Their combined holding is 26%. M, in view
of creeping acquisition limits, desires to acquire further 3% on the assumption that 5% is the
ceiling for such acquisition in every financial year. Will M be required to make open offer?
(JUNE 23)

As per regulation 3(1) of the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011, no acquirer shall acquire shares or voting rights in a target company which
taken together with shares or voting rights, if any, held by him and by persons acting in concert
with him in such target company, entitles them to exercise 25% or more of the voting rights in
such target company unless the acquirer makes a public announcement of an open offer for
acquiring shares of such target company in accordance with these regulations.

Further, in accordance with regulation 3(2), no acquirer, who together with persons acting in
concert with him, has acquired and holds shares or voting rights in a target company entitling
them to exercise 25% or more of the voting rights in the target company but less than the
maximum permissible non-public shareholding, shall acquire within any financial year
additional shares or voting rights in such target company entitling them to exercise more than
5% of the voting rights, unless the acquirer makes a public announcement of an open offer for
acquiring shares of such target company.

As per Regulation 3(3), acquisition of shares by any person, such that the individual
shareholding of such person acquiring shares exceed the stipulated threshold, 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 the aggregate shareholding with persons action in
concert.

In view of the above-mentioned provisions, though together they hold 26% and can avail 5%
ceiling but M on individual basis crossing the threshold of 25% or more since presently he holds
23% and further contemplates to acquire 3% more. Therefore, M will be required to make an
open offer.

68. The equity shares of ABC Limited have been delisted from the stock exchange. When can an
application be made for listing of equity shares of ABC Limited? (JUNE 23)

As per the provisions of the SEBI (Delisting of Equity Shares) Regulations, 2021, no application
for listing shall be made in respect of equity shares of a company which have been delisted
under Chapter III (Voluntary Delisting) or under chapter IV (Exit Opportunity), for a period of 3
years from the delisting and which have been delisted under Chapter V (Compulsory Delisting),
for a period of 10 years from the delisting, except the following:

❖ Whose equity shares have been delisted pursuant to a resolution plan under section 31 of
the Insolvency Code;

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❖ Whose equity shares are listed and traded on the innovators growth platform pursuant to
an Initial Public Offer and which is delisted from the said platform;

❖ Whose equity shares have been delisted in terms of regulation 35 (Delisting of equity shares
of small companies).

In case equity shares of the ABC Limited have been voluntarily delisted from the stock exchange
from one or more of the recognised stock exchanges or from all the recognised stock exchanges,
the application for listing shall not be made for a period of 3 years. In case of compulsory
delisting, the application for listing shall not be made for a period of 10 years.

69. Corporates Advisors Ltd. is a listed company. The stock exchange asked certain information
about shareholding pattern etc., which the company could not provide even after a further
opportunity was given to the company to furnish such information as the company did not
maintain the relevant records. What are the penalties leviable against the company under
Securities Contracts (Regulation) Act, 1956 ? Will your answer differ, if the information is
sought by the SEBI (state the relevant provision) ? (JUNE 23)

According to section 23A of the Securities Contracts (Regulation) Act, 1956, any person, who is
required under this Act or any rules made thereunder,—

(a) to furnish any information, document, books, returns or report to a recognised stock
exchange or to the SEBI, fails to furnish the same within the time specified therefor in the listing
agreement or conditions or bye-laws of the recognised stock exchange or the Act or rules made
thereunder, shall be liable to a penalty which shall not be less than `1 lakh but which may
extend to `1 lakh for each day during which such failure continues subject to a maximum of `1
crore for each such failure.

(b) to maintain books of account or records, as per the listing agreement or conditions, or bye -
laws of a recognised stock exchange, fails to maintain the same, shall be liable to a penalty
which shall not be less than `1 lakh but which may extend to `1 lakh for each day during which
such failure continues subject to a maximum of `1 crore.

The answer will not differ as the penalty provisions are same in both the cases in the present
scenario, if the information sought by stock exchange or SEBI.

70. PTM Ltd., a listed company has declared dividend to its registered shareholders on 1 st
January, 2021 but the company did not pay the dividend till 31st January, 2021.

(i) Whether the registered shareholder can lodge the complaint on SCORES Portal ? If yes, then
what is the timeline for lodging the complaint on SCORES ?

(ii) What happens if registered shareholders fail to lodge a complaint on SCORES within the
stipulated
period ?

(iii) Can the shareholder file complaint on SCORES portal without first approaching to the
company ? (JUNE 23)

(i) Yes, Registered shareholder can lodge the complaint to SCORES Portal if the Company fails
to pay the declared dividend within 30 days from the declaration of the dividend to all its
registered shareholder. The date of cause of complaint would be 31.01.2021 (as the dividend
was declared on 01.01.2021) and a complaint can be lodged on SCORES within 1 year from
31.01.2021.

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(ii)SEBI reserves its right to reject a complaint lodged on SCORES, if the date of cause of action
is more than one-year-old and/or the complainant has not taken up the complaint with the
concerned entity prior to the said date.

Securities and other laws provide important legal rights and remedies if investors have suffered
wrongdoing. Acting on their own, they can seek to resolve the complaint through the courts,
consumer courts, or arbitration. To take advantage of these laws, the complainant must take
legal action promptly or they may lose the right to recover funds. As per the "law of limitations,"
there are some time periods within which court proceedings should be initiated.

According to Companies Act, 2013, any person claiming to be entitled to any money transferred
to the Unpaid Dividend Account of the company may apply to the company for payment of the
money claimed. Also, any claimant of shares transferred to the Unpaid Dividend Account shall
be entitled to claim the transfer of shares from Investor Education and Protection Fund in
accordance with such procedure and on submission of such documents as may be prescribed.

(iii) The complainant may use SCORES to submit the complaint or grievance directly to the
listed companies / intermediaries / MIIs for resolution. Such a complaint is called a “Direct
Complaint” and shall be redressed by the entity within 30 days without any intervention of
SEBI, failing which
the complaint shall be registered on SCORES. Thereafter, SEBI shall take it up with the entity
concerned.

71. The financial information of a listed company as on 31st March, 2018 is as follows : Authorized
equity share capital `10 crore (1 crore shares of `10 each); Paidup equity share capital `5
crore; General reserve `3 crore; and Debenture redemption reserve `2 crore. The Board of
directors of your company passed resolution by circulation for buy-back of shares to the
extent of 9% of the company’s paid-up share capital and free reserves. You are required to
examine the validity of the proposal with reference to the provisions of the SEBI Buy-back
Regulations. (JUNE 23)

According to the regulation 5 of the SEBI (Buy-back of Securities) Regulations, 2018, the
company shall not authorize any buy-back (whether by way of tender offer or from open market
or odd lot) unless:
1. The buy-back is authorised by the company's articles;
2. A special resolution has been passed at a general meeting of the company authorizing the
buy-back.

However, such special resolution is not 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 authorized
by the board of directors by means of a resolution passed at its meeting.

In the given case, the company desired to buy-back of shares to the extent of 9% of paid-up
capital and free reserves by way of passing of board resolution through circulation. However, as
per the above-mentioned regulation, the board resolution should be passed at the meeting of
board of directors and not through circulation. Therefore, with reference to the above stated
provisions, the proposal of buy-back is not-valid.

72. Prikshit is appointed as an independent director on the Board of PQR Ltd. The Company has
issued ESOPs to Prikshit deeming him to be its employee. Answer the following:

(a) Whether Prikshit is entitled to receive the ESOPs (give reason) ?

(b) What would be your answer, if Prikshit is a non-executive director belongs to the promoters
group and holds 12% outstanding equity shares of the company? (JUNE 23)

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(a) In terms of the provisions of regulation 17(6)(d) of the SEBI (LODR) Regulations, 2015,
independent directors are not entitled to any stock option. In the given case, Prikshit who is an
independent director, is not entitled to receive the ESOPs.

(b) As per the definition of employees as provided under the SEBI (Share Based Employee
Benefits and Sweat Equity) Regulations, 2021, a non-executive director is eligible for ESOP but
he should not be belonging to the promoters group. Further, any director who holds more than
ten percent of the outstanding equity shares of the company is also not eligible for ESOP.

Hence, Parikshit is not an eligible employee under the regulations and therefore not eligible for
ESOP.

73. XYZ Limited is having three subsidiaries X Ltd., Y Ltd., and Z Ltd. The consolidated income of
XYZ Limited is `300 crore and net worth is `600 crore. The income and net worth of X Ltd., Y
Ltd., and Z Ltd. are as follows
Company Income (`) Net worth (`)
X Ltd. 10 crore 65 crore
Y Ltd. 45 crore 14 crore
Z Ltd. 10 crore 18 crore
Examine if there is any material subsidiary of XYZ Limited. (JUNE 23)

In terms of the provisions of regulation 16(1)(c) of the SEBI (LODR) Regulations, 2015, “material
subsidiary” shall mean a subsidiary, whose income or net worth exceeds 10% of the consolidated
income or net worth respectively, of the listed company and its subsidiaries in the immediately
preceding accounting year.

In the given case, 10% of consolidated income and net worth of XYZ Limited would be `30 crores
and ` 60 crores respectively.

• Hence X Limited since crossed threshold in terms of Net Worth, would be a material
subsidiary of XYZ Limited.

• Y Limited since crossed threshold in terms of income, would be a material subsidiary of XYZ
Limited.

• Z Limited since does not cross either of the threshold, would not be material subsidiary of
XYZ Limited.

74. NLR Ltd. approved buy-back proposal of 2,00,000 Equity Share in its Board meeting on 25th
April 2019. The record date was fixed on 25th June, 2019. The closing market price on NSE
as on 25th April, 2019 and 25th June, 2019 was ` 2640.40 and `2514.05 respectively.
Determine the number of equity shares which is eligible to be tendered by Small
Shareholders’ Category (rounded off to lower whole number). Calculate the maximum equity
share capital and number of equity shares that can be bought back. (JUNE 23)

As per regulation 2(i)(n) of the SEBI (Buy-Back of Securities) Regulations, 2018, “small
shareholder” means a shareholder of a company, who holds shares or other specified securities
whose market value, on the basis of closing price of shares or other specified securities, on the
recognized stock exchange in which highest trading volume in respect of such securities, as on
record date is not more than two lakh rupees.

The closing price on record date is `2514.05. The number of shares eligible for buy back under
small shareholder category will be `200000/`2514.05 = 79.55 shares.
79.55 shares rounded off to lower whole number i.e. 79 shares. Hence, equity shareholders
holding not more than 79 shares of NLR Ltd. shall be classified as Small Shareholders.

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In accordance with the provisions to the Regulation 6 of the SEBI (Buy-Back of Securities)
Regulations, 2018, a company may buy-back its shares or other specified securities from its
existing securities holders on a proportionate basis. 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.

In terms of the above mentioned provision, the total shares reserved for small shareholders
under the offer will be 200,000 x 15% = 30,000 shares.
Maximum Equity Share Capital = Number of Equity Shares for small shareholders x Closing
Market Price on Record Date
= 30,000 x `2514.05 = `7,54,21,500

75. David, General Manager (finance) of Suren Enterprises Ltd., was found to be indulging in
insider trading activities. As a result, the company terminated his services. The SEBI also took
cognizance of the matter and initiated proceedings against him under Insider Trading
Regulations. David pleaded that since his service had already been terminated, SEBI could
not initiate any proceedings against him. Suggest, what type of action can be taken by SEBI
against him ? (JUNE 23)

As per the SEBI (Prohibition of Insider Trading) Regulations, 2015, the definition "insider" means
any person who is a connected person or in possession of or having access to unpublished price
sensitive information.
Since David, General Manager (Finance) of the Suren Enterprises Ltd. was insider and found to
be indulging in insider trading activities when in employment of the company. Therefore, SEBI
has the right to initiate any proceedings against him.

Penalty for insider trading under section 15G of the SEBI Act, 1992
If any person violates provisions of the SEBI (Prohibition of Insider Trading) Regulations, 2015,
he shall be liable for penalty as specified under section 15G of the SEBI Act, 1992.

If any insider who-

(i) either on his own behalf or on behalf of any other person, deals in securities of a body
corporate listed on any stock exchange on the basis of any unpublished price sensitive
information; or

(ii) communicates any unpublished price sensitive information to any person, with or without
his request for such information except as required in the ordinary course of business or under
any law; or

(iii) counsels, or procures for any other person to deal in any securities of any body corporate
on the basis of unpublished price sensitive information.
shall be liable to a penalty which shall not be less than ten lakh rupees but which may extend
to twenty-five crore rupees or three time the amount of profits made out of insider trading,
whichever is higher.

Moreover, as per section 24 of the SEBI Act, 1992, if any person contravenes or attempts to
contravenes or abets the contravention of the provisions of the SEBI Act, 1992 or of any rules
or regulations made thereunder, 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.

Further, if any person fails to pay the penalty imposed by the adjudicating officer or SEBI or
fails to comply with any directions or orders, 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.

76. The financial data of a listed company Sun Rise Ltd. as on 31st March, 2021 is as follows:
Equity Share Capital (fully paid-up of face value of `10 each) `5, 00,000

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 10% Preference Share Capital (fully paid-up of `100 each) `1, 00,000
12% Debentures (`100 each) `2,00,000
Revaluation Reserve `50,000
General Reserve `2,00,000
Profit & Loss Account `2,00,000

The company wanted to place proposal before the Board for buy-back of its equity shares and
also simultaneously redeem the entire preference share capital. You, as a Company Secretary,
advise the Board on the following issues:

(i) Maximum limit (in amount) up to which shareholders can approve buy-back of shares.

(ii) Maximum number of shares that can be bought back and the maximum price that can be paid
per equity share bought back.

(iii) Generally, what should be the ratio of the aggregate of secured and unsecured debts owed
to the company after buy-back? (JUNE 23)

(i) According to regulation 4 of the SEBI (Buy-Back of Securities) Regulations, 2018, 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 the standalone or consolidated financial statements of the
company, whichever sets out a lower amount.

In the given situation, the maximum buy back limit will be:
Equity Share Capital = `5,00,000
10% Preference Share Capital = `1,00,000
General Reserve = `2,00,000
Profit & Loss Account = `2,00,000
Total = `10,00,0000

Maximum amount of buy back by Sun Rise Ltd. through special resolution:
`10,00,000 * 25% = ` 2,50,000

(ii) In respect of the number of equity shares bought back in any financial year, the maximum
limit shall be 25% and be construed with respect to the total paid-up equity share capital of the
company in that financial year.

Maximum number of equity shares that can be bought back:

(`5,00,000/`10 face value) *25% = 12,500 shares

Maximum price that can be paid per equity share bought back:
`2,50,000/12,500 shares = `20 per equity share

(iii) 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-

(i) 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

(ii) 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.

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77. What is Inflation rate ? How to calculate it ? M bought his morning coffee for `12 in 2019, but
now he is paying `16 in 2023. Calculate the inflation rate. (JUNE 23)

Inflation is a rise in prices, which can be translated as the decline of purchasing power over
time. Inflation rate is the measure of the increase or rate of increase in the general price of
selected goods and services over a determined period. Inflation can indicate a decline in the
purchasing power or value of a nation's currency and is typically recorded and reported as a
percentage.

Inflation rate is important because as the average cost of items increases, currency loses value
as it takes more and more funds to acquire the same goods and services as before. This
fluctuation in the value of any currency impacts the cost of living and the economy.

Calculation of Inflation Rate:

Inflation Rate Formula: (B – A)/A x 100

Where, A is the price paid in the previous year/ earlier year and B is the price paid in the current
year/later year.

In the given situation, M bought his morning coffee for `12 in 2019 and now he is paying `16
in 2023.

Inflation Rate = (`16 – `12)/ `12 x 100

= 33.33%

Therefore, the inflation rate for M’s cup of coffee in the year 2023 is 33.33% comparing the price
which M had paid in the year 2019.

78. Tata Aviation Ltd., having nation-wide terminals, is in the process of delisting its equity shares
from recognized stock exchange. As per the provision of the delisting regulation, the
company is providing exit opportunity to its public shareholder; so the company has got
approval from shareholders of the company on 18 th March, 2023. Following details are made
available to you by the company:
No. of equity shares outstanding are 43,48,33,000
Shares hold by promoters : 14,87,67,800
Shares hold by public shareholders : 28,60,65,200
Floor price : 90 per shares
Indicative price : 97 per share

You are required to calculate the amount to be deposited at the time of opening Escrow account
and mention the date of opening of Escrow account as per the provisions of the SEBI (Delisting
of Equity Shares) Regulations, 2021. (5 Marks) (Dec 23)

In the delisting offer, as per the provisions of the SEBI (Delisting of Equity Shares) Regulations,
2021, 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, 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.

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In the given question, Indicative price is higher than floor price. Hence, Indicative price shall be
considered while calculating total consideration. Therefore, amount to be deposited to the Bank
at the time of opening of escrow account is 25% of the total consideration.
= 25% of (28,60,65,200 × `97)
= `6,93,70,81,100

Based on the SEBI (Delisting of Equity Shares) Regulations, 2021 the acquirer is required to
open an escrow account not later than seven working days from the date of shareholders’
approval. The shareholders’ approval is obtained on 18th March, 2023 and hence, the escrow
account must be opened not later than 26th March 2023 (considering Sunday as one holiday
and ignoring other holidays as they are not provided in the question).

79. PQR Ltd. listed its shares in NSE. Its promoters hold 56.5% of paid-up equity share capital as
on 31st March, 2022. On 10th October, 2022, some of the promoters who were having
convertible warrants in the company, has converted their 12 lakh into equity shares.
Consequent to the conversion, the Promoters’ holdings increased by 3.95%. Prakash, one of
the promoters of the company was holding 16.5% of equity share capital in the company. He
proposed to gift 2% of equity shares of the company through transfer to his immediate
relative, Vipin.

Answer the following in the light of SEBI (SAST) Regulations, 2011.

(i) Whether the proposed transfer trigger an obligation upon Vipin for open offer?
(ii) Would the transaction be covered under creeping acquisition?
(iii) Would the promoters be permitted to avail any exemption under the regulations? (Dec 23)

Under Regulation 3 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,
2011, no acquirer, who together with persons acting in concert with him, has acquired and
holds shares or voting rights in a target company entitling them to exercise twenty-five per cent
or more of the voting rights in the target company but less than the maximum permissible non-
public shareholding, shall acquire within any financial year additional shares or voting rights
in such target company entitling them to exercise more than five per cent of the voting rights,
unless the acquirer makes a public announcement of an open offer for acquiring shares of such
target company in accordance with these regulations.

(i) and (ii): By virtue of conversion of warrants into shares, the promoter shareholding in the
company has already enhanced by 3.95%. A further transfer of shares(gift) constituting 2 % of
the equity share capital of the company to an immediate relative in the same financial year
would increase the gross acquisition of shares by the promoter group in excess of 5 % threshold
under regulation 3(2) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,
2011. Therefore, the requirement to make an open offer is triggered in the given case unless
promoters fulfil the conditions for exemption under Regulation 10 of the SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011. In other words, the transactions
including the proposed transfer would be considered for the purpose of calculating the creeping
acquisition limit of 5 %.

(iii) Regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,
2011provides that he acquisitions shall be exempt from the obligation to make an open offer
under regulation 3 on acquisition pursuant to inter se transfer of shares amongst qualifying
immediate relatives or among persons named as promoters in the shareholding pattern filed by
the target company for not less than 3 years prior to the proposed acquisition. In the given
situation, the transfer would qualify as interse transfer between immediate relatives under the
Regulation 10 and so it is exempt from the requirement of making an open offer provided that
acquirer shall, within twenty-one working days of the date of acquisition, submit a report in
such form as may be specified along with supporting documents to the SEBI.

80. Comment on the following in light of SEBI (Collective Investment Schemes) Regulations, 1999:
(i) Can a collective investment scheme provide guaranteed returns?

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(ii) What is the offer period for the CIS?
(iii) State the period for issue of Unit Certificates by a Collective Investment Management
Company?
(iv) What is the penal interest payable by the person registered under a Collective Investment
Scheme on his failure to refund the amount within the specified period to the applicant investor.
(Dec 23)

(i) The Collective Investment Scheme is prohibited to provide guaranteed assured returns, as
per the SEBI (Collective Investment Schemes) Regulations, 1999. However, the indicative return
may be indicated in the offer document only, if the same is assessed by the appraising agency
and expressed in monetary terms.

(ii) Collective investment scheme shall not be open for subscription for more than fifteen days.
However, collective investment scheme may be kept open for subscription for a maximum of
another fifteen days subject to issuance of public notice by the Colle ctive Investment
Management Company before the expiry of initial fifteen days.

(iii) SEBI (Collective Investment Schemes) (Amendment) Regulations, 2022 had dispensed the
requirement of unit certificates. It now requires that the Collective Investment Management
Company shall issue to the applicant, whose application has been accepted, the units only in
dematerialized form within a period of five working days from the date of closure of the
subscription list.

(iv) The Collective Investment Management Company shall refund the application money to the
applicants, if the collective investment scheme fails to receive the minimum subscription
amount. In the event of failure to refund the amounts within the specified period, the Collective
Investment Management Company shall pay interest to the applicants at a rate of 15% per
annum on the expiry of five working days from the date of closure of the subscription list.

81. Samrudhi Enterprises Ltd. established a Trust. The Trust holds some shares of the company
obtained by it for the purpose of implementation of Share Based Employee Benefit Scheme in
the company. Answer the following in the light of SEBI (Share Based Employee Benefits and
Sweat Equity) Regulations, 2021:
(i) In what manner the shares held by the Trust will be disclosed to the stock exchange?
(ii) Can shares held by the Trust be included in the category of public holding? (Dec 2023)

Regulation 3(9) of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations,
2021 provides the manner of disclosing shares held by the Trust. It is prescribed that for the
purpose of disclosures to the recognised stock exchange, the shareholding of the trust shall be
shown as “non-promoter and non-public” shareholding. The shares held by the trust shall not
form part of the public shareholding which needs to be maintained at a minimum of twenty five
per cent as prescribed under the Securities Contracts (Regulation) Rules, 1957. Accordingly,
(i) Shares held by the Trust of Samrudhi Enterprises Ltd. are required to be shown as "non -
promoter and non-public shareholding" while disclosing the shareholding pattern to the stock
exchange.

(ii) Shares held by the Trust of Samrudhi Enterprises Ltd. shall not form part of the public
shareholding which needs to be maintained at a minimum of 25% as prescribed under the
Securities Contracts (Regulation) Rules, 1957.

82. Comment on the following:

(i) Can a Debenture Trustee act for issue of debentures of an associate?
(ii) Is appointment of Debenture Trustee compulsory?
(iii) Can a debenture issue be transferred? If so, when can a debenture trustee relinquish his
assignment?
(iv) Is there any registration fee to be paid by the Debenture Trustee? (Dec 2023)

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(i) A debenture trustee cannot act for issue of debentures of an associate.

(ii) Debenture Trustee appointment is compulsory in the following cases:

• Section 71(5) of the Companies Act, 2013, stipulate that no company shall issue a
prospectus or make an offer or invitation to the public or to its members exceeding 500 for
the subscription of its debentures, unless the company has, before such issue or offer,
appointed one or more debenture trustees and the conditions governing the appointment of
such trustees shall be such as may be prescribed.

• SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 states that the
issuer shall appoint a debenture trustee in case of an issue of debt securities.

• SEBI (ICDR) Regulations, 2018, provides that an issuer making an initial public offer of
convertible debt instruments shall also appoint at least one debenture trustee in accordance
with the provisions of the Companies Act, 2013 and the SEBI (Debenture Trustees)
Regulations, 1993.

(iii) Yes, a debenture issue can be transferred. A debenture trustee can relinquish its
assignments in respect of the debenture issue of any body corporate only when another
debenture trustee is appointed in its place by the body corporate.

(iv) Fees for the initial as well as permanent registration is to be paid by the applicant for
Debenture Trustee. The break-up of fee is given below:
Type Fees prescribed in Tenure (years)
Debenture Trustee
Regulations
Initial Registration (at the `20,00,000/- 5
time of grant of certificate
of registration)
Continuing fees `9,00,000/- After completion of initial
period of 5 years, for every
three years.

83. State with reasons whether the companies are allowed to make public issue under SEBI
(ICDR) Regulations, 2018.
(a) Jain, a promoter of XY Ltd. is categorized as a wilful defaulter by SBI in accordance with the
guidelines issued by the RBI. The company requires funds for its business expansion and plans
to make IPO.

(b) Sinha is one of the Board of Directors of VG Garments Ltd., against whom a warrant for arrest
in relation to a Scheduled offence has been issued by the Court. Sinha left India to keep off
criminal prosecution and refused to return to India. (Dec 2023)

(a) As per the Regulations of 5(1) of the SEBI (ICDR) Regulations, 2018, an issuer shall not be
eligible to make an initial public offer if the issuer or any of its promoters or directors is a wilful
defaulter or a fraudulent borrower. In the given case, Jain, one of the promoters of XY Ltd. is
categorized as a wilful defaulter by SBI in accordance with the guidelines issued by the RBI.
Hence, XY Ltd. cannot proceed to IPO for its business expansion.

(b) Further, an issuer shall not be eligible to make an initial public offer if any of its promoters
or directors is a fugitive economic offender. Sinha, the director of VG Garments Ltd., against
whom a warrant for arrest was issued by the Court and he left India to keep off criminal
prosecution and refused to return to India. Hence, Mr. Sinha being fugitive economic offender,
his company is not permitted to make a public issue under the SEBI (ICDR) Regulations, 2018.

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84. State with reasons whether the following persons can be appointed as ‘Trustee’ of Joe
Pharma Ltd., a listed company, which has proposed to implement Share Based Employee
Benefit Schemes:
(a) Excellent Consultants Ltd. is holding 9% of paid-up capital in the company.
(b) Karnatak Bank Securities Ltd. has been one of the leading promoters of the company. (Dec
2023)

In accordance with Regulation 3(4) of the SEBI (Share Based Employee Benefits and Sweat
Equity) Regulations, 2021:
(a) any person shall not be appointed as a trustee of the trust if such person, beneficially holds
10% or more of the paid-up share capital or the voting rights of the company. In the given case,
Excellent Consultants Ltd. is holding 9%, which is less than 10% of the paid-up capital of the
company. So, Excellent Consultants Ltd. can be appointed as a Trustee.

(b) any person shall not be appointed as trustee if he is a director, key managerial personnel or
promoter of the company or its group company including its holding, subsidiary or associate
company or any relative of such director, key managerial personnel or promoter. Karnatak Bank
Securities Ltd. has been one of the leading promoters of the Joe Pharma Ltd. and hence, cannot
be appointed as Trustee.

85. Morgan Care Limited (“MCL”) is a public limited company, which has its equity shares listed
on both BSE Limited and National Stock Exchange of India Limited. Carlton Price Private
Limited (“CPPL”) is a part of the promoter group of MCL since it is closely held by certain
promoters of MCL. However, currently CPPL neither holds any equity shares in MCL nor has
any role in the management of MCL. The ‘Promoter and Promoter Group’ of MCL collectively
hold 65.44% of the total paid-up capital of CPPL, as on date. Being a public listed company,
MCL has issued a ‘Code of practice and procedures for fair disclosure of unpublished price
sensitive information (“UPSI”) and code of’ conduct to regulate, monitor and report trading
by insiders of MCL in accordance with the SEBI (Prohibition of Insider Trading Regulations),
2015. CPPL now intends to acquire 50,000 equity shares, constituting the thresholds
stipulated by the board of directors of MCL for trading by designated persons. In view of the
above facts, answer the following questions:

(i) What category of persons are required to obtain a pre-clearance from the compliance officer
of a listed entity prior to trading?
(ii) Will CPPL be required to obtain a pre-clearance from the compliance officer of MCL for the
Proposed Acquisition?
(iii) Does the compliance officer have discretionary powers under the SEBI (PIT Regulations) to
reject a pre-clearance request on any reason it deems fit?
(iv) Is the compliance officer required to consider certain factors while approving or rejecting an
application seeking pre-clearance for a proposed transaction?
(v) Is there any provision in the SEBI (PIT Regulations) that provides for the examination of acts
of a compliance officer? (Dec 2023)

(i) 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. Further, Regulation 9 of the SEBI (Prohibition of Insider
Trading) Regulations, 2015 (PIT Regulations) states that board of directors or such other
analogous authority shall in consultation with the compliance officer specify the designated
persons to be covered by the code of conduct on the basis of their role and function in the
organisation.

(ii) CPPL will be required to obtain a pre-clearance from the compliance officer of MCL for the
Proposed Acquisition only if it is designated as a 'designated person' by the board of directors of
MCL, in consultation with the compliance officer.

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(iii) The compliance officer, under the provisions of the PIT Regulations, is entrusted with
ensuring adherence to the PIT Regulations. A compliance officer is not empowered to make any
decision based on subjective criteria or reject an application for pre-clearance of a transaction
for any ground other than those pertaining to PIT Regulations.

(iv) The compliance officer is required to approve or reject a request for preclearance after
necessary assessment limited to the PIT Regulations and the Code of Conduct of the company.
Clause 8 of Schedule B states that 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. He shall also have regard to whether
any such declaration is reasonably capable of being rendered inaccurate.

(v) Regulation 2(1)(c) of the PIT Regulations lays down that the compliance officer acts under the
overall supervision of the board of directors of the listed company or the head of the organization,
as the case may be. Additionally, Clause 1 of Schedule B of the PIT Regulations also requires
the compliance officer to report to the board of directors and provide reports to the Chairman of
the audit committee or board of directors at such frequency as may be stipulated by the board
of directors, but not less than once in a year. Hence, any act of the compliance officer may be
referred to the board of directors and the audit committee for examination with the extant laws.

86. Mukharjee holds certain securities on 31st March, 2022, issued in his favour under the
“Collective Investment Scheme (CIS)”, for consideration, Mukharjee transferred the said
securities in favour of another person. One month after the date on which the income on these
securities become due, the transferee lodged the instrument of transfer. Decide in the light
of the provisions of the Securities Contracts (Regulation) Act, 1956.
(i) Whether in the given case, Mukharjee is entitled to receive and retain the income on these
securities for the financial year ended 31st March, 2022?
(ii) What would be your answer in case the transferee lodged the instrument of transfer 10
days after the date on which the income on these securities became due? (Dec 2023)

Section 27A (1) of the Securities Contracts (Regulation) Act, 1956 provides that it shall be lawful
for the holder of any securities, being units or other instruments issued by the collective
investment scheme, whose name appears on the books of the collective investment scheme
issuing the said security to receive and retain any income in respect of units or other
instruments issued by the collective investment scheme declared by the collective investment
scheme in respect thereof for any year, though the said security, being units or other
instruments issued by the collective investment scheme, has already been transferred by him
for consideration, unless the transferee who claims the income in respect of units or other
instruments issued by the collective investment scheme from the transfer or has lodged the
security and all other documents relating to the transfer which may be required by the collective
investment scheme with the collective investment scheme for being registered in his name within
fifteen days of the date on which the income in respect of units or other instruments issued by
the collective investment scheme became due.

In view of the above-

(i) Mr. Mukharjee is entitled to retain the income received by him as the transferee has lodged
an instrument for transfer one month after the date on which the income became due.

(ii) The answer in the second case would differ. The holder i.e. Mr. Mukharjee, cannot receive
and retain the income since the instrument for transfer was lodged with the company within
the statutory period of 15 days by the transferee. Accordingly, the transferee would be entitled
to receive the income on these securities. However, section 27A(1) will not affect the right of
transferee to enforce his rights, if any, against the transferor or any other person if the CIS
refuses to register, the transfer of the security in the name of the transferee.

87. Discuss the compliance requirement under the SEBI (LODR) Regulations, 2015 pertaining to
Risk Management Committee. Examine the validity of the agenda, ‘RNG Ltd. intends to pass

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 ordinary resolution in relation to appointment of independent director’ with respect to
Regulation 25 of SEBI (LODR) Regulations, 2015. Whether the appointment of X, as an
alternate director is valid at the place of independent director Y? (Dec 2023)

The provisions for Risk Management Committee are covered under the Regulation 21 of the
SEBI (LODR) Regulations, 2015 and provided as under:

(1) The board of directors shall constitute a Risk Management Committee.

(2) The Risk Management Committee shall have minimum three members with majority of them
being members of the board of directors, including at least One Independent Director and in
case of a listed entity having outstanding SR equity shares, at least two thirds of the Risk
Management Committee shall comprise Independent Directors.

(3) The Chairperson of the Risk management committee shall be a member of the board of
directors and senior executives of the listed entity may be members of the committee.

(3A) The risk management committee shall meet at least twice in a year.

(3B) The quorum for a meeting of the Risk Management Committee shall be either two members
or one third of the members of the committee, whichever is higher, including at least one
member of the board of directors in attendance.

(3C) The meetings of the risk management committee shall be conducted in such a manner that
on a continuous basis not more than 180 days shall elapse between any two consecutive
meetings.

(4) The Board of Directors shall define the role and responsibility of the Risk Management
Committee and may delegate monitoring 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. The role and responsibilities of the Risk Management Committee shall
mandatorily include the performance of functions specified in Part D of Schedule II.

(5) The provisions of this regulation shall be applicable to:

i the top 1000 listed entities, determined on the basis of market capitalization as at the end of
the immediately preceding financial year, and, ii a high value debt listed entity.

(6) The Risk Management Committee shall have powers to seek information from any employee,
obtain outside legal or other professional advice and secure attendance of outsiders with
relevant expertise, if it considers necessary.

RNG Ltd. intends to pass an ordinary resolution in relation to appointment of independent

director. As per the Regulation 25 (2A) of the SEBI (LODR) Regulations, 2015, any appointment
or reappointment or removal of an independent director shall be subject to the approval of
shareholders through special resolution in a general meeting. Hence, appointment of
independent director is not valid under the SEBI (LODR) Regulations, 2015 unless passed by
way of special resolution.

With effect from 1st October, 2018, no person shall be appointed or continued as an Alternate
director for an independent director of a listed company. In the given case, X is intended to be
appointed as Alternate director at the place of independent director Y, which is not valid.

88. ‘‘The complaints related to trade, settlement and deficiency in services resulting into any
financial loss to an investor, if not resolved amicably by the stock exchange, shall be referred
to the Investor Grievance Redressal Committee (IGRC)’’. Explain the procedure for handling
of complaints by IGRC as per SEBI circular. (JUNE 22)

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Handling of complaints by Investor Grievance Redressal Committee (IGRC) In order to further
strengthen the Investor Grievance Redressal Mechanism, the SEBI vide its circular dated 6th
November, 2020 specified that for Complaints related to trade, settlement and ‘deficiency in
services’, resulting into any financial loss, the stock exchange shall resolve the complaint on its
own as per the time lines prescribed. However, if complaint is not resolved amicably, the same
shall be referred to the IGRC, after recording the reasons in writing by the Chief Regulatory
Officer of the Stock Exchange or any other officer of the Stock Exchange authorized in this
behalf by the Managing Director.
i. IGRC shall have a time of 15 working days to amicably resolve the investor complaint through
conciliation process. If IGRC needs additional information, then IGRC may request the Stock
Exchange to provide the same before the initiation of the conciliation process. In such case,
where additional information is sought, the timeline for resolution of the complaint by IGRC
shall not exceed 30 working days.
ii. IGRC shall not dispose the complaint citing “Lack of Information and complexity of the case”.
The IGRC shall give its recommendation to Stock Exchange.
iii. IGRC shall decide claim value admissible to the complainant, upon conclusion of the
proceedings of IGRC. In case claim is admissible to the complainant, Stock Exchanges shall
block the admissible claim value from the deposit of the member as specified in this regard.
iv. Expenses of IGRC shall be borne by the respective Stock Exchange and no fees shall be
charged to the complainant/member.
v. The Stock Exchange shall organize regular training program for IGRC members in
consultation with National Institute of Securities Markets (“NISM”). The cost of such program
shall be borne by Investor Service Fund (“ISF”) of the Stock Exchange.

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 NUMERICAL QUESTIONS

WEIGHTAGE OF NUMBERICAL QUESTION IN PAST PAPERS

DECEMBER 2018 10 MARKS
JUNE 2019 14 MARKS
DECEMBER 2019 5 MARKS
DECEMBER 2020 9 MARKS
JUNE 2021 18 MARKS
DECEMBER 2021 12 MARKS
JUNE 2022 10 MARKS
DECEMBER 2022 10 MARKS
JUNE 23 15 MARKS
DEC 2023 18 MARKS

MUTUAL FUNDS
1. A mutual fund has a NAV of ` 11.50 at the beginning of the year. At the end of the year NAV
increases to ` 12.10. Meanwhile the fund distributes ` 0.80 as dividend and ` 0.70 as capital
gains.
(i) What is the fund’s return during the year?
(ii) Had these distributions been re-invested at an average NAV of ` 11.80, what is the return
for 200 units ? (5 marks) (December 2018)

(a) Return for the year (all changes on a per unit basis):
Change in Price (12.10 – 11.50) ` 0.60
Dividends received ` 0.80
Capital gains distributions ` 0.70
Total return ` 2.10
Holding period return 𝑅𝑠. 2.10
= = 18.26%
𝑅𝑠. 11.50

(b) When all dividends and capital gains distributions are reinvested into additional units of the
fund (` 11.80/unit):
Dividends and capital gains per unit: ` 0.80 + ` 0.70 = ` 1.50
Total amount received from 200 units: ` 1.50 X 200 = ` 300.00
Additional units added: ` 300/` 11.80 = 25.42 units
Value of 225.42 units held at end of year: 225.42 units X ` 12.10 = ` 2,727.58/-
Price paid for 200 units at beginning of year 200 units X ` 11.50 = ` 2,300 /-
Thus, the Holding Period Return would be:

(𝑁𝑜. 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑎𝑡 𝑒𝑛𝑑 𝑜𝑓 𝑃𝑒𝑟𝑖𝑜𝑑 × 𝐸𝑛𝑑𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒) − (𝑁𝑜. 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑎𝑡 𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑔 𝑜𝑓 𝑃𝑒𝑟𝑖𝑜𝑑 × 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑃𝑟𝑖𝑒)
=
𝑁𝑜. 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑎𝑡 𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝑜𝑓 𝑃𝑒𝑟𝑖𝑜𝑑 × 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑃𝑟𝑖𝑐𝑒

𝑅𝑠. 2727.58 − 𝑅𝑠. 2300 𝑅𝑠. 427.58

𝐻. 𝑃. 𝑅. = = = 18.59%
𝑅𝑠. 2300 𝑅𝑠. 2300
2. A Mutual Fund having 300 units has shown Net Asset Value (NAV) of ` 8.75 and ` 9.45 at the
beginning and at the end of the year respectively. The Mutual Fund has given two options:
(i) Pay ` 0.75 per unit as dividend and ` 0.60 per unit as capital appreciation; or
(ii) These distributions are to be reinvested at an average NAV of ` 8.65 per unit.
What difference it would make in terms of return available and which option is preferable?
(June 2019)
(i) Return for the year (all changes on a per unit basis):
Change in Price (9.45-8.75) ` 0.70
Dividends received ` 0.75
Capital gains distributions ` 0.60
Total return ` 2.05

122 | P a g e
 Holding period return 𝑅𝑠. 2.05
= = 23.43%
𝑅𝑠. 8.75

(ii) When all dividends and capital gains distributions are reinvested into additional units of the
fund (` 8.65/unit):
Dividends and capital gains per unit: ` 0.75 + ` 0.60 = ` 1.35
Total amount received from 300 units: ` 1.35 X 300 = ` 405.00
Additional units added: ` 405/` 8.65 = 46.82 units
Value of 346.82 units held at end of year: 346.82 units X ` 9.45 = ` 3,277.45
Price paid for 300 units at beginning of year 300 units X ` 8.75 = ` 2,625
Thus, the Holding Period Return would be:

(𝑁𝑜. 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑎𝑡 𝑒𝑛𝑑 𝑜𝑓 𝑃𝑒𝑟𝑖𝑜𝑑 × 𝐸𝑛𝑑𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒) − (𝑁𝑜. 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑎𝑡 𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑔 𝑜𝑓 𝑃𝑒𝑟𝑖𝑜𝑑 × 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑃𝑟𝑖𝑐𝑒)
=
𝑁𝑜. 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑎𝑡 𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝑜𝑓 𝑃𝑒𝑟𝑖𝑜𝑑 × 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑃𝑟𝑖𝑐𝑒

𝑅𝑠. 3277.45 − 𝑅𝑠. 2625 𝑅𝑠. 652.45

𝐻. 𝑃. 𝑅. = = = 24.86%
𝑅𝑠. 2625 𝑅𝑠. 2625

As the return in reinvestment option is higher, reinvestment option is preferable.

3. A Mutual fund has shown Net Asset Value (NAV) of ` 11.60 at the commencement of the year.
At the end of the year NAV increases to ` 12.50. Meanwhile, the Fund distributes ` 0.75 as
dividend and ` 0.85 as capital gains.
(i) Calculate the fund’s return during the year.
(ii) Had these distributions been re-invested at an average NAV of ` 12.20, what is the return
for 400 units? (5 marks) (December 2019)

(i) Returns for the year

(All changes on a Per -Unit Basis)
Change in Price: `12.50 – `11.60 = `0.90
Dividends received: `0.75
Capital gains distribution `0.85
Total reward `2.50
𝑅𝑠.2.50
Holding period reward: 𝑅𝑠.11.60 × 100 = 21.55%

(ii) When all dividends and capital gains distributions are re-invested into additional units of
the fund @ (`12.20/unit)
Dividend + Capital Gains per unit
= `0.75 + `0.85 = `1.60
Total received from 400 units = `1.60 x 400 = `640

Additional Units Acquired

= `640/`12.20 = 52.46 Units.
Total No. of Units = 400 units + 52.46 units
= 452.46 units.

Value of 452.46 units held at the end of the year

= 452.46 units x ` 12.50 = `5655.75

Price Paid for 400 Units at the beginning of the year

= 400 units x `11.60 = `4640

Holding Period Reward

` (5655.75 – 4640) = `1015.75

𝑅𝑠.1015.75
Holding Period Reward = × 100 = 21.90%
𝑅𝑠.4640

123 | P a g e
4. The information relating to one Equity Oriented Mutual Fund is given below:
As on As on
2 nd January, 2019 3rd January, 2019
(` in thousand)
Market Value of Fund’s Portfolio (`) 19,300 19,800
Receivables (`) 200 200
Other Accrued Income (`) 150 150
Accrued Expenses (`) 50 50
Other Payables (`) 100 100
Units of Mutual Fund 5,00,000 5,00,000

Face value per unit is ` 10.

You are required to calculate:
(i) NAV of the fund on 2nd January, 2019 and 3rd January, 2019.
(ii) Ramesh invested ` 1,95,000 in this Fund on 2nd January, 2019 at 02:00 PM, through Internet
Banking Payment System. Calculate the number of mutual fund units allotted to him. Assume that
there is no transaction cost. (5 marks) (December 2020)

(i) NAV of the scheme: (` in thousands)

(a) Calculation of Total Assets. 2nd Jan 2019 3rd Jan 2019
Market value of portfolio funds 19,300 19,800
Receivables 200 200
Other Accrued Income 150 150
(A) 19,650 20,150
(b) Calculation of Total Liabilities:
Other payables 100 100
Accrued expenses 50 50
(B) 150 150
(c) Calculation of Net Assets (A – B) 19,500 20,000
(d) Number of Units (Number) 5,00,000 5,00,000
(e) NAV per Unit (C/D) 39 per unit 40 per unit

(ii) Number of units allotted = 1,95,000 / 39 = 5,000 Units

5. R is holding 2000 units of a equity-oriented scheme of a mutual fund and 1000 units of a debt
scheme of a mutual fund. On 7th June, 2020 he is interested to redeem these units. Prevailing
net asset value (NAV) of these units are as under :
Date Net Asset Value (NAV)
Equity – oriented scheme (in `) Debt scheme (in `)
6th June 45 35
7th June 46 34
8th June 47 33
He makes an application for redemption of above units on 7th June, 2020 at 2:30 pm. Based on
given information answer the following: (June 2021)

(i) What do you mean by cut-off time ? What are the cut-off time for equity oriented & Debt funds
(except liquid funds) ?

The cut-off time determines the Net Asset Value (NAV) on which an investor buy or sell the units
of a mutual fund scheme. Simply, the allotment and redemption of NAV depends on the time of
submitting application and/or money with the fund house for purchase or sale. This time is
called cut-off time in the mutual fund world.
Net Asset Value (NAV) Cut-off Timelines
Type of Transaction Before/After Cut-Off Time Applicable NAV
Equity – oriented & Debt funds (except liquid funds)

124 | P a g e
 Purchase & Switch – 3 pm Before Same day NAV
in (Value < ` 2 After Next Business day
Lakhs) NAV
Purchase & Switch – 3 pm Before After NAC of the business
in (Value > ` 2 day on which funds
Lakhs) are available for
utilization
Redemption & Switch 3 pm Before Same day NAV
– Out After Next Business day
NAV

(ii) What will be the applicable NAV in his case ?

In the given case, since application is submitted before 3 pm so same day NAV (i.e. the NAV on
which application for redemption has been submitted) will be applicable. Thus,
In case of equity oriented scheme = `46 will be applicable NAV
In case of debt scheme = `34 will be applicable NAV

(iii) What will be applicable NAV if application for redemption is made at 3:15 pm ?
If application for redemption is submitted at 3:15 pm after 3 pm then next day NAV will be
applicable. Thus,
In case of equity oriented scheme = `47 will be applicable NAV
In case of debt scheme = `33 will be applicable NAV

6. Rakesh has invested `20,000 in PQR Mutual Fund with entry load 1%. Find out the Net Asset
Value if the number of units purchased was 100. (5 Marks) (December 2021)

Step - 1
Let NAV of 1 unit = X
Therefore, purchase Price of 1 unit = NAV + Entry Load (1%)
= X+ (.01X) = 1.01 X

Step - 2
Amount Investment - `20,000; No. of unit purchased – 100
Purchase price of 1 unit= Amount invested/No of unit purchased
= 20,000/100 = 200

From Step 1 and 2

1.01X=200
X = 200/1.01= ` 198.02

(ii) Pritam is holding SALORA Mutual Fund units. He sold all the units at a NAV of `120 with exit
load of 1%. He received `52,000. Find the number of units sold by Pritam. (December 2021)

Given- NAV=` 120

Exit Load – 1%
Total Amount Received = `52,000
Now Selling Price of 1 unit = NAV – Exit Load
= 120 - {(1/100) x 120} = 118.80
No. of unit Sold = 52,000/118.80 = 437.71 unit

7. Grow India Ltd. has recently launched a Mutual Fund Scheme with the name ‘GI Equity Multi
Cap Scheme’ with following details:
Size of the Scheme ` 200 lakh
Face value of the unit ` 20
Number of the outstanding units 20 lakh
Market value of the fund’s investments receivables ` 360 lakh
Accrued Income ` 2 lakh
125 | P a g e
 Receivables ` 2 lakh
Liabilities ` 1 lakh
Accrued expenses ` 1 lakh
(ii) Find out the NAV in the present case. (2 Marks) (June 2022)

(ii) NAV= Net Assets of the Scheme ÷ No. of units Outstanding

NAV = (Investment + Recoverable + Accrued Income – Liabilities – Accrued exp)/No of units
NAV = [(360 + 2 + 2) – (1 + 1)] ÷ 20 = ` 18.1/ Unit

8. Fortune Mutual Fund launched a special scheme, the details of which are given below:
NAV ` 14 per unit
Redemption price ` 13.50 per unit
Offer Price ` 14.75 per unit
You are required to compute:
(i) Back End Load
(ii) Front End Load. (5 marks) (DECEMBER 2022)

(i) Back End Load:

Redemption Price = NAV / (1+Back End Load)
13.50 = 14(1+ Back End Load)
Back End Load = (14/13.50) – 1 = 1.0370 – 1 = 0.0370 i.e 3.7%

(ii) Front End Load:

Public Offer Price = NAV /(1- Front End Load)
Front End Load = 1- (NAV/POP)
Front End Load = 1 – (14/14.75)
Front End Load = 1 – 0.949 = 0.051 i.e 5.1%

9.
(i) Daksh is planning to invest in Systematic Investment Plan (SIP) of a mutual fund with a fixed
sum of `20,000 on 2nd of every month for four months. The NAV on these dates are `30.76, `42.18,
`38.15 and `40.25 respectively. The entry load was 1.75% throughout the period. Find the
average buy price including the amount of entry load.

(ii) X has made an investment of `50,000 to buy 5000 units of Philip mutual fund on 4th April, 2021.
He decided to sell the units on 14th November, 2021 at NAV of `20.60. The exit load was 2.25%.
Find the sale value & gain made in the transaction. (JUNE 23)

Month NAV (in `) Entry load (in Total Price (in No. of Unit –
(a) `) 1.75% `) (c) = (a) + (b) 20,000/Total
(b) Price (c)
1 30.76 0.5383 31.2983 639.0123
2 42.18 0.7381 42.9181 466.0038
3 38.15 0.6676 38.8176 515.2302
4 40.25 0.7043 40.9543 488.3492
2108.5955
Average Price = Total Amount/Total No. of Unit
= ` 80,000/2108.5955 = ` 37.9399 or ` 37.94
(ii) No. of Unit - 5000, Purchase Cost ` 50,000; NAV on the date of sale ` 20.60.
Exit Load = 2.25% of ` 20.60 = ` 0.4635
= ` 20.60 - ` 0.4635 = ` 20.1365
Sales Value = 5,000 x ` 20.1365 = ` 1,00,682.5
Gain = ` 1,00,682.5 - ` 50,000 = ` 50,682

10. Edelweiss Mutual Fund’s portfolio related information are as below:

Stock No. of Shares Price in (`)

126 | P a g e
 Reliance 1,10,000 1,548.24
Tata 2,57,000 548.65
Suzlon 5,05,000 329.51
Wipro 4,75,000 913.67
Richard 3,20,000 517.29

The fund does not involved borrowed money, but is accrued management fee with the portfolio
manager is `25,00,000. The number of units outstanding is 8,65,63,000. You are required to
compute the value of the portfolio and NAV. (Dec 23)

Answer :
Stock No. of Shares Price in (`) Total Price in (`)
Reliance 1, 10,000 1548.24 17,03,06,400
Tata 2,57,000 548.65 14,10,03,050
Suzlon 5,05,000 329.51 16,64,02,55
Wipro 4,75,000 913.67 43,39,93,250
Richard 3,20,000 517.29 16,55,32,800
Value of Portfolio 1,07,72,38,050

NAV per unit = (Investment + Recoverable + Accrued Income – Liabilities – Accrued

expenses) / No. of units

`1,07,72,38,050-`25,00,000
NAV=
8,65,63,000

`1,07,47,38,050
=
8,65,63,000

NAV = `12.415 per unit

127 | P a g e
 OPTIONS
11. Naman had executed following trades on Gama Ltd. stock :
(i) Purchased one 3-month call option with a premium of ` 25 at an exercise price of ` 530.
(ii) Purchased one 3-month put option with a premium of ` 5 at an exercise price of ` 430. The
lot size is 100 share per lot and the current price of Gama Ltd. stock is ` 500. Determine
Naman’s profit or loss, if the price of Gama Ltd. stock after 3 months is :
(a) ` 500
(b) ` 350. (December 2018)

(i) Total premium paid on purchasing a call and put option:

= (`25 per share x 100 shares) + (`5 per share x 100 shares)

In this case, Naman neither exercises the call option nor the put option, as both will result in a
loss for him.
Ending value: ` - 3000 + Nil gain i.e. Net Loss : `3000

(ii) The price of stock is below the exercise price of the call, the call will not be exercised but put
is valuable and is exercised.

Total premium paid : `3000 is calculated above

Ending value : ` - 3000 + [(`430 - `350) x 100 shares Net Gain : ` 5000

12. What are the Option contracts? You are required to compute the profit/loss for each investors
in below option contracts:
(i) Mr. X writes a call option to purchase share at an exercise price of
` 60 for a premium of ` 12 per share. The share price rises to ` 62 by the time the option
expires.
(ii) Mr. Y buys a put option at an exercise price of ` 80 for a premium of
` 8.50 per share. The share price falls to ` 60 by the time of option expires.
(iii) Mr. Z writes a put option at an exercise price of ` 80 for a premium of ` 11 per share.
The price of the share rises to ` 96 by the time the option expires.
(iv) Mr. XY writes a put option with an exercise price of ` 70 for a premium of ` 8 per share.
The price falls to ` 48 by the time the option expires. (June 2019)

Options Contract give its holder the right, but not the obligation, take or make delivery on or
before a specified date at a stated price. But this option is given to only one party in the
transaction while the other party has an obligation to take or make delivery. Since the other
party has an obligation and a risk associated with making the good the obligation, he receives
a payment for that. This payment is called as option premium.

(i) Profit or Loss = Premium received – (Exercise Price – Market Price)

= 12 – (60-62)
= 10

Call option buyer will exercise the option as Exercise Price is lower than market price.

(ii) Profit or Loss = Exercise Price – Market Price - Premium

= 80 – 60 – 8.50
= 11.50

(iii) Profit or Loss = Premium received

= 11

Put Option buyer will not exercise the option as Market Price is more than the Exercise Price.

(iv) Profit or Loss = (Premium received + Market price) – Exercise Price)

= (8 + 48) – 70
128 | P a g e
 = -14 Loss
Put Option buyer will exercise the option as Exercise Price is more than the Market Price.

13. The Nifty Index was trading at 11,025 on 1 st February, 2019 on NSE. The put option of 10,800
with expiry date of 28th February, 2019 was available at ` 50 per lot and the call option of
11,300 with same expiry date was available at ` 30 per lot. The size of one lot of Nifty is 75.

Ganesh who is regular trader in stock market purchased 2 lots of put options of 10,800 and
one lot of call option of 11,300. On 22nd February, 2019, the Nifty Index was trading at 10,850.
Ganesh decided to square off all these transaction. At the time of squaring off, the call option
of 10,800 could be sold at ` 80 and put option could be sold at ` 5.

Calculate the Net gain/ loss from this transaction considering the transaction charges
including brokerage is fixed at ` 100 per lot (buy or sale). (5 marks) (December 2020)

Computation of Profit & Loss for Ganesh

Sales Proceeds (in `) (in `)
Put Option: 5 × 2 × 75 750
Call Option: 80 × 1 × 75 6,000 6,750

Cost of Options
Put Option: 50 × 2 × 75 7,500
Call Option: 30 × 1 × 75 2,250 - 9,750

Gross Loss - 3,000

+ Transaction Cost - 600
Net Loss - 3,600

14. Akshay buys 500 shares of PQR Limited @ ` 210 per share on the stock exchange platform. In
order to hedge the position, he sells 300 futures of PQR Limited @ ` 195 each. Due to fall in
the share and futures price by 5% and 3% respectively on next day, Akshay closes his position
by counter transactions. Find out his profit or loss. (3 marks) (June 2021)

Profit or loss in case of buying 500 shares of PQR Ltd.

Buying Cost = 500 x ` 210 = ` 1,05,000
Selling price = 500 x [` 210 – (5% of ` 210)] = ` 99,750
Loss= (` 1,05,000 – ` 99,750) = ` 5,250

Profit or Loss in case of Future 300 shares of PQR Ltd.

Selling Value= 300 x ` 195 = ` 58,500
Buying Value = 300 x [` 195 – (3% of ` 195)] = ` 56,745
Profit = (` 58,500 – ` 56745) = ` 1,755
Net Loss = ` 5,250 –` 1,755 = ` 3,495

15. Eknath, a risk averse investor is planning to take advantage of market rumour that in the
upcoming budget, the Government is likely to announce some economic package including
production linked incentive (PLI) scheme for auto industries. As he does not like to take higher
risk; he purchases one call and put option contract (Lot size 1000 shares) of a leading auto
component manufacturing company at a premium of ` 5 and ` 4 respectively with strike price
of ` 105. In the budget, no PLI scheme was declared and the price of stock fell to ` 90.
(i) Ascertain the net loss/profit.
(ii) What would be your answer, if the stock price escalates to ` 120 as Government slashed
GST rate on vehicles? (5 marks) (June 2022)

(i) Call option will not be exercised but Put Option will be exercised.
Profit or Loss = {-5 + [(105 – 90) – 4]} × 1,000 = ` 6,000 Profit

129 | P a g e
(ii) Call Option will be exercised but put option will not be exercised. But net effect will be same
as the difference is same i.e 15 in both the cases. 105 & 90 in first scenario & 120 & 105 in the
second scenario.

Profit or Loss = {[(120 – 105)-5] + (-4)} × 1,000 = ` 6,000 Profit

16. Tarun purchases the following European Call options of TCS. He also purchases the following
European put option of ACC. What decision he would take on expiry if TCS closes at ` 835 and
ACC closes at ` 565, spot prices? Ignore premium paid.
(i) TCS 830 Call
(ii) ACC 510 Put
(iii) TCS 840 Call
(iv) ACC 520 Put. (5 Marks) (DECEMBER 2022)

(i) As Exercise price is less than Spot Price, Tarun will Exercise the TCS 830 Call Option.

(ii) As Exercise price is less than Spot Price, Tarun will Lapse the ACC 510 Put Option.

(iii) As Exercise price is more than Spot Price, Tarun will Lapse the TCS 840 Call Option.

(iv) As Exercise price is less than Spot Price, Tarun will Lapse the ACC 520 Put Option.

17. R purchases the following European Call option of Emkey Tech Ltd. and European Put option
of Giganet Ltd. What decision he would take on expiry, if the share price of Emkey closes at
`1100 and Giganet closes at ` 590 in the following circumstances ? (Ignore any premium paid).
(a) Emkey : 1050 Call
(b) Giganet : 525 Put
(c) Emkey : 1120 Call
(d) Giganet : 580 Put.

Mr. R has purchased European options. He can exercise them only on expiry. He would exercise
a call option only if the share price (S = 1100) is greater than the strike price. It should be noted
that the call options are right to buy the underlying, therefore he would act as under:
Exercise Emkey @ 1050 call (1100 > 1050), by doing so, he makes a gain of `50.

Not exercise Emkey @1120 Call (1100 < 1120). This is because he can buy stocks cheaper at
`1100 in the market rather than exercising at `1120.

He would exercise a put option only if the stock price (S=590) is less than the strike Price. It is
the right to sell the underlying. Therefore, he would act as under:

Not exercise Giganet @525 Put (590 > 525)

Not exercise Giganet @580 Put (590 > 580)

This is because he can sell stocks at a higher rate of `590 in the market rather than exercising
the puts at lower rates.

18. Roshivee wants to invest in the share of blue chip companies. However, due to the expected
outbreak of war between two countries, an investment advisor suggested him to invest
through option contract. He expects that the price of shares will go down in near future.
(a) What option contract (put or call option) he should buy?

(b) If the present futures contract of Maxwell Ltd. are traded at `100 and put option involves, a
cost of 1.5% (one and a half) based on the strike price. During the month, the war was declared

130 | P a g e
and the price of the share went down to `97. What will be the gain or loss on `1, 50,000 option
contracts? (JUNE 23)

a) To protect against downward movement of share price, he should buy the put option.

(b) Gain on option: = (1.00-0.97) * `1, 50,000 = `4,500

Premium paid = 1.5% of `1, 50,000 = `2,250
Net gain = `4,500 — `2,250 = `2,250

19. The option contracts are given below; you are required to compute profit or loss to each
investor:
(i) Ravi writes a call option to buy share at an exercise price of `70 for a premium of `11 per share.
The share price rises to `73 by the time the option expires.
(ii) Narain buys a put option at an exercise price of `78 for a premium of `7 per share. The share
price falls to `66 by the time the option expires. (Dec 2023)

(i)
Ravi writes call option
Exercise price `70
Actual price on the date of exercise `73
Action taken by the writer Exercise the option
Gross pay off by option writer to `3
buyer (`73 – `70)
Premium received `11
Net pay off `8
Hence, Ravi will have a profit of `8 per share.

(ii)
Narain buys Put option
Actual price on exercise date `66
Exercise price `78
Action taken by the buyer of option Exercise the option
Gross Pay off to Narain ( ₹78- ₹66) `12
Premium paid `7
Net pay off / profit to Narain `5
Net profit to Narain from the transaction will be `5 per share.

20. Aggarwal purchases 10,000 shares of AB Ltd. at `20. He obtains a complete hedge of shorting
400 Nifty at `1,200 each. He closes out his position at the closing price of the next day at which
point the share of AB Ltd. dropped 2.3% and the Nifty future dropped 2%. Calculate the overall
profit or loss. (Dec 2023)

(i) Calculation of Profit/loss on cash market

Value of Shares Purchased(A) = 10,000 × `20 = `2,00,000
Value of Shares by next day(B) =10,000 × [`20- (2.3% of `20) i.e. `0.46] = `1,95,400
Therefore, Loss in cash market (C) (A-B) = `4,600
Calculation of Profit/loss on Future market
Value of Future sold (D) = 400 Nifty @ `1200 each = `4,80,000
Value of Future next day (E) = 400 × [`1200-(2% of `1200) = `470,400
i.e. `24]
Profit in Future Market (F) (D-E) = `9,600
Therefore, net profit to Aggarwal is (`9600-`4600) (F - C) = `5,000

131 | P a g e
 ENTERPRISE VALUE (SAST)
21. From the following information, calculate the Enterprise Value of E Ltd.: Balance Sheet of E
Ltd. as on 31st March, 2018
Liabilities Amount (` Assets Amount
Lakh) (` Lakh)
Share Capital (Face Value ` 2) Non-Current Assets 2,550
952
Reserves & Surplus 48 Current Assets:
Minority Interest 115 Cash & Cash Equivalent 102
Short-term Borrowings 2,860 Other Current Assets 1,323
3,975 3,975
Current Market Price Per Share is ` 96. (4 marks)

Enterprise value means the value calculated as market capitalization of a company plus debt,
minority interest and preferred shares, minus total cash and cash equivalents.
Enterprise Value = Market capitalization + Debt + Minority Interest and Preferred Shares - Total
Cash and Cash Equivalents
Enterprise Value = (96 * 952/2) + 2860 + 115 – 102
= 48,569 Lakhs

22. What do you mean by Enterprise value under SEBI Takeover code ? From the given
information, calculate the Enterprise value of KRS Ltd. :
a. Outstanding equity share capital ` 1,600 lakh (par value per share ` 2)
b. Market price per share on closing date (equity share) : ` 125
c. Reserves & Surplus ` 195 lakh, Minority interest ` 275 lakh, Preference share capital ` 4,200
lakh, Cash-in-hand ` 72 lakh, Cash equivalent ` 63 lakh, Other current assets ` 1,965 lakh. (5
marks) (June 2021)

Enterprise value
As per SEBI Takeover Regulations, Enterprise value means the value calculated as market
capitalization of a company plus debt, minority interest and preferred shares, minus total cash
and cash equivalents.

Calculation of Enterprise value of KRS Ltd.

Enterprise Value = Market capitalization+ Debt+ Minority Interest + Preferred Shares- Total
Cash and Cash Equivalents

Number of equity shares= ` 1,600 lakh / ` 2 i.e. 800 lakh

Market Capitalization = 800 lakh x ` 125 i.e. ` 1,00,000 lakh
Enterprise Value = ` 1,00,000 lakh + ` 275 lakh + ` 4,200 lakh – (` 72 lakh + ` 63 lakh)
Enterprise Value = ` 1,04,340 lakh

23. Compute the Enterprise value from the following information of XYZ Ltd., if the current market
price per share is `93:
Liabilities (` in lakh) Assets (` in lakh)
Share capital (Face value `2) 840 Non-current assets 2,490
Reserves and surplus 56 Current Assets 900
Minority interest 110 Cash and cash equivalent 96
Short-term debt 2,280
Long-term debt 200
3,486 3,486
(Dec 2023)

Enterprise value means the value calculated as market capitalization of a company plus debt,
minority interest and preferred shares, minus total cash and cash equivalents.

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Enterprise value = Market capitalization + Debt + Minority interest + preferred shares − total
cash and cash equivalent

Calculation of Enterprise value of XYZ Ltd. is as under:

Market capitalization = `840 lakh/ `2 × `93 per share = `39,060 lakh
Enterprise value = Market capitalization + Debt + Minority interest + preferred stock − total cash
and cash equivalent
Enterprise value = `39,060 + `2280 + `200+ `110 - `96 = `41,554 lakh

SHARE WARRANTS
24. Govind Ltd. proposes to issue 20 lakh share warrants to its promoters. The share warrant
gives an option to buy shares at a predetermined price. The price trend of the Company’s
share in the stock market is given below:
• Closing price on the relevant date: ` 250.
• The average weekly high and low of the closing price during the 26 weeks preceding to the
relevant date: ` 275.
• The average weekly high and low of the closing price during the 2 weeks preceding to the
relevant date: ` 280.

You are required to:

(a) Identify the minimum price at which share warrants should be issued; and
(b) Calculate the amount payable by the promoters at the time of allotment of the warrants. (4
marks) (December 2020)

(a)
The pre-determined price of warrant conversion in such cases cannot be less than either:
1) The average of the weekly high and low of the closing prices of the related shares quoted on
the stock exchange during the six months preceding the relevant date

OR

2) The average of the weekly highs and lows of the closing prices of the related shares quoted
on a stock exchange during the two weeks preceding the relevant date;

Applying the above provisions to given situation, minimum price of warrants shall be ` 280.

(b)
As per SEBI Regulations, 25% of Warrant price is to be paid up front. So, in the given case,
promoters will have to pay amount given below:
20,00,000 * 280 * 25% = ` 14,00,00,000/-

25. ABC Company Ltd. had issued 2000 equity shares of `80 each with attachable warrant on 20th
June, 2018. The warrant can be exchanged in equity in the proportion of 1:1. S, a shareholder
who was allotted 200 equity shares with attachable warrant on 20th June, 2018 wants to know
the warrant premium if the market value of warrant is `18 and exercise price is `70. Calculate
the warrant premium for S. (2 Marks) (December 2021)

Minimum price of Warrant = (Current Market Price of equity share - Exercise Price of Warrant)
= (`: 80-`70) i.e. ` 10

Warrant Premium = (Market Value of Warrant - Value of Warrant)

= ` 18- ` 10 = ` 8
For 200 Warrants of S, since Ratio is 1:1, the premium would be = 200 x ` 8 = ` 16000

CUT OFF PRICE (BOOK BUILDING)

ABC Limited, a public company, has come with public issue of 15,00,000 equity shares through a
book building process. The price band is ` 500 - ` 600. The following table shows demand of
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securities at various price levels. What should be the cut-off price as per book building
mechanism?
Bid Price (`) Number of Investors Demand (Number of Shares)
520 25 8,50,000
530 10 4,00,000
535 15 2,00,000
545 4 4,00,000
560 6 1,00,000
575 5 2,00,000
585 3 1,10,000
590 3 1,40,000
595 3 3,50,000
600 1 7,00,000
Total 75 34,50,000
(5 marks) (June 2021)

Cut off price:

Cut off price is the highest price at which demand for securities is fulfilled. Simply, it is the
highest price at which all shares offered can be sold by the company. All those investors who
have submitted their bid at price equal to or above the cut off price are known as successful
bidder and they are entitled for the allotment of shares as per method prescribed in SEBI (ICDR)
Regulation, 2018.

In the given question, we calculate cut off price as under:

Total number of Equity Shares for public issue: 15,00,000
Price Band: `500 - `600

Firstly, we have to arrange the demand for shares on the basis of price in descending order and
cumulative demand has been calculated.
S. No. Demand (Number Cumulative Bid Price (in `)
of Shares) Demand
1. 7,00,000 7,00,000 600
2. 3,50,000 10,50,000 595
3. 1,40,000 11,90,000 590
4. 1,10,000 13,00,000 585
5. 2,00,000 15,00,000 575
6. 1,00,000 16,00,000 560
7. 4,00,000 20,00,000 545
8. 2,00,000 22,00,000 535
9. 4,00,000 26,00,000 530
10. 8,50,000 34,50,000 520
From the above table it is clear that the demand is fulfilled at a price of `575, so cut off price
will be `575. Bids that are at or above the issue price only qualify for share allotment.

All those investors who have applied at `575 and above shall be eligible for allotment.

CONVERTIBLE BONDS
26. Aruna Steel Ltd. issued Bonds with the following terms :
Issue price of the Bond : ` 1000
Coupon rate : 3%
Maturity : 5 years
Convertible into equity shares @ ` 500 per share
Ivan had purchased 20 bonds. At the time of maturity, the market price of the equity shares was
` 400. What are the options available to Ivan on the maturity date and which option he should
prefer? (5 marks) (June 2021)

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Ivan purchased 20 bonds @`1000 per bond
Total amount invested `20,000. He will get interest for 5 years on the date of maturity.
After five years, he has the following options:

i. He may claim redemption and get the bonds converted into fully paid equity shares@ 500
each. Thus on conversion, he will get 40 equity shares (`20000 / `500)

ii. As the equity shares are also traded in stock exchange, he may buy from market at the
prevailing market price of `400. Therefore, from the maturity proceed of `20000, he can buy 50
equity shares (`20000/`400) from the market.

It is clear from the above two options; Ivan should choose option (ii) as he will get more equity
share than conversion from company.

27. Suppose B. Co. Ltd. issues bonds with following terms :

Issue price of Bond ` 2000
Coupon rate 2% with maturity period of 2 years
Convertible into equity shares @ ` 100 per share
Y has subscribed for 5 bonds and made an investment of ` 10,000. On maturity date, investor will
have an option to either claim full redemption amount or convert the Bonds into equity @ ` 100
per share. The quoted share price on maturity date is ` 150. If he goes for conversion how many
shares Y will get ? Will it be fair enough if he opts for redemption value ? Calculate which option
is best suitable to Y ? (5 marks) (December 2021)

Issue Price per Bond is = `2000/-

Coupon rate = 2%
Maturity period =2 years
Convertible into equity per share will be @ ` 100/

Option-I:
Y the investor has subscribed for 5 bonds. The total investment made by him will be ` 10,000/-
He is entitled to get interest @2% p.a.

The interest will be ` 400 (` 10,000*2% for 2 years)

Thus his total investment for 2 years period becomes ` 10,400/- and the conversion price of
equity on maturity will be ` 100/-

Therefore, he will get 104 equity shares i.e. 10,400/100

Option-II:
If the Equity shares are quoted at ` 150/- per share on maturity date, then Y will get 104 x `
150
= ` 15,600.

Therefore, Y can opt for conversion of Bonds in to Equity shares rather than accepting the
maturity redemption value of ` 10,400/

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 BUY BACK
28. An extract of Balance Sheet of Airrath Aviation Ltd., comprises of:
Equity Share Capital ` 30,00,000 of ` 50 each
12% Preference Share Capital ` 5,00,000 of ` 500 each
14% Debenture capital ` 15,00,000 of ` 500 each
(i) Ascertain the maximum equity share capital and the number of equity shares that can be
bought back in the present case. (3 Marks) (June 2022)

(i)
Maximum equity share capital that can be bought back = ` 30,00,000 × 25% = ` 7,50,000
Maximum Number of Equity Shares that can be bought back = ` 7,50,000 ÷ 50 = 15,000 Equity
Shares
Please Note: Reserves & Surplus is not given in the question.

29. The following information is available from the audited balance sheet of SZ Ltd. (` in lakh)
Equity Share capital (3,000 lakh share of `10 each) 30,000
Share Premium A/c 3,000
General Reserve 10,000
Secured Loans 40,000
Unsecured Loans 22,000
Compute the maximum limit up to which buy-back is permitted in the financial year 2022-23. (Dec
2023)

In accordance with Regulation 4 of the SEBI (Buy-Back of Securities) Regulations, 2018 the
maximum limit of any buy-back shall be twenty-five per cent or less of the aggregate of paid-up
capital and free reserves of the company, based on the standalone or consolidated financial
statements of the company, whichever sets out a lower amount. In respect of the number of
equity shares bought back in any financial year, the maximum limit shall be twenty-five per
cent and be construed with respect to the total paid-up equity share capital of the company in
that financial year.

Further, Section 68 of the Companies Act, 2013 provides that the buy-back is twenty-five per
cent or less of the aggregate of paid-up capital and free reserves of the company. Provided that
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.

Therefore, the buy-back of equity shares in any financial year should not exceed 25% of its
total paid up equity capital in that financial year (`30,000 lakh × 25% = `7,500 Lakh).

Further, Section 68 of the Companies Act, 2013 provides that 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.

In case buyback of shares is done out of free reserves and securities premium, a company is
required transfer a sum equal to the nominal value of the shares buyback to Capital Redemption
Reserve (‘CRR’). Thus, shareholders' fund after buyback would also include CRR. Therefore,
X is to be deducted from free reserve as well.

Let the amount of buy-back be 'x

(secured + unsecured debts) / (paid up capital + Free Reserves) ≤2
`62000 /[`30000 - x + (`3000 + `10000 - x )] <=2
`62000 / (`43000 - 2x) = 2
`62000 = 86000 - 4x
- `24000= -4x

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x = `6000

From the above two situations, the maximum limit upto which buy-back is permitted in the
financial year 2022-23 is `6000 lakhs.

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 LODR COMPLIANCE CALENDER FOR COMPANIES LISTED ON MAIN BOARD

The Listed entity shall comply with the following compliances under the Listing Regulations:-
– One Time Compliances
– Quarterly Compliances
– Half yearly Compliances
– Yearly Compliances
– Event based Compliances

ONE-TIME COMPLIANCES
The following are the one time compliances:-
Regulation Compliance 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 the listed entity
register with SEBI as Category II share transfer agent in case of share transfer
facility in house.

9 The listed entity shall have a policy for preservation of documents, approved
by its Board of Directors.

Constitution – Audit Committee (Regulation 18)

of – Nomination and Remuneration Committee (Regulation 19)
Committees – Stakeholders Relationship Committee (Regulation 20)
– Risk Management Committee (Regulation 21)

QUARTERLY COMPLIANCES (Dec 2018)

Regulation Compliance Time
13(3) The listed entity shall file with the within 21 days from end of
recognised stock exchange, a statement quarter
giving the number of investor complaints
pending at the beginning of the quarter,
those received during the quarter, disposed
of during the quarter and those remaining
unresolved at the end of the quarter

27(2) The listed entity shall submit a quarterly within 15 days from end of
compliance report on corporate governance quarter
in the format as specified by SEBI from time
to time to the recognized stock exchange(s)

31(1)(B) The listed entity shall submit to the stock within 21 days from end of
exchange(s) a statement showing holding of quarter
securities and shareholding pattern
separately for each class of securities, in the
format specified by SEBI from time to time

32(1) The listed entity shall submit to the stock Quarterly Basis till such time
exchange a statement of deviation or the issue proceeds have been
variation fully utilized or the purpose for
which these proceeds were
raised has been achieved.
32(6) Monitoring Agency Report Where the listed entity has
appointed a monitoring agency
to monitor utilisation of

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33(3) The listed entity shall submit quarterly and
year-to-date financial results to the stock
exchange
proceeds of a public or rights
issue, the listed entity shall
submit to the stock exchange(s)
any comments or report received
from the monitoring agency
within forty-five days of end of
each quarter, other than the last
quarter

HALF YEARLY COMPLIANCES:

Regulation Compliance Time
7(3) The listed entity shall submit a compliance certificate to Within one month
the exchange, duly signed by both the compliance officer of end of each half
of the listed entity and the authorised representative of of the financial
the share transfer agent year.

14 The listed entity shall pay all such fees or charges, as within 30 days of
applicable, to the recognised stock exchange(s), in the the end of financial
manner specified by SEBI or the recognised Stock year
Exchange (s)
23(9) The listed entity shall submit to the stock exchange, within 30 days
disclosures of related party on consolidated basis from the date of
publication of its
standalone and
consolidated
financial results
for the half year
33(3) The listed entity shall also submit as part of its standalone half-yearly basis
or consolidated financial results for the half year a
statement of assets and liabilities and a statement of cash
flows by way of a notes

YEARLY COMPLIANCES
Regulation Compliance Time
14 The listed entity shall pay all such fees or charges, as within 30 days of
applicable, to the recognised stock exchange(s), in the the end of financial
manner specified by SEBI or the recognised stock year
Exchange (s).

33(3) The listed entity shall submit annual audited standalone within 60 days
financial results with audit report and Statement on from the end of the
Impact of Audit Qualifications applicable only for audit financial year
report with modified opinion to the stock exchange

34 The listed entity shall submit the annual report to the within twenty one
stock exchange working days of it
being approved
and adopted in the
annual general
meeting

EVENT BASED COMPLIANCES:

Regulation Compliance Test
7(5) The listed entity shall intimate the appointment of Within 7 days of
Share Transfer Agent, to the stock exchange(s) Agreement with RTA

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 28(1) The listed entity shall obtain In-principle approval Prior to issuance of
from recognised stock exchange Security

29(1)(a) Prior Intimations of Board Meeting for financial At least 5 clear days in
read with Result viz. quarterly, half yearly or annual, to the advance (excluding the
29(2) stock exchange(s) date of the intimation
and the date of the
meeting)

29(1)(b) to Prior Intimations of Board Meeting for Buyback, At least 2 working days
(f) read Voluntary delisting , Fund raising by way of FPO, in advance
with 29(2) Rights Issue, ADR, GDR, QIP, FCCB, Preferential
issue, debt issue or any other method, Declaration/
recommendation of dividend, issue of convertible
securities 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) Prior Intimations of Board Meeting for alteration in At least 11 clear

nature of Securities, alteration in the date on which working days in
interest on debentures/bonds/redemption amount, Advance
etc. shall be payable to the stock exchange(s)

30(6) Disclosure of Price Sensitive Information to the stock Not later than twenty
exchange(s) four hours as per Part A
of Schedule III
31(1)(a) The listed entity shall submit to the stock One day prior to listing
exchange(s) a statement showing holding of of Securities
securities and shareholding pattern separately for
each class of securities prior to listing of securities

31(1)(c) The listed entity shall submit to the stock One day prior to listing
exchange(s) a statement showing holding of of Securities
securities and shareholding pattern separately for
each class of securities in case of Capital
Restructuring

31A(8) Disclosure of material events in case for within 24 hours from

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

37(1) The listed entity shall file draft Scheme of Prior approval before
Arrangement to the stock exchange(s) filing with Court

39(2) The listed entity shall issue certificates receipts or within 30 days from the
advices, as applicable, of subdivision, split, date of such Lodgement
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
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 39(3) Information relating loss of securities: Within 2 days of getting
The listed entity shall submit information with information
respect to loss of share certificates and issue of the
duplicate certificates to the stock exchange

40(3) Registering the transfer of securities: within 15 days from the

The listed entity shall register transfers of its date of such receipt of
securities in the name of the transferee(s) and issue request for transfer.
certificates or receipts or advices, as applicable, of
transfers; or issue any valid objection or intimation
to the transferee or transferor, as the case may be,

Transmission request: In case securities held

The listed entity shall proceed the transmission in Dematerialised
request for securities held in dematerialization mode Mode, within 7 days
and physical mode after receipt of the
documents
In case of Physical
Mode, within 21 days
after receipt of the
documents

42(2) The listed entity shall intimate the record date or date In case of Right Issue,
of closure of transfer books to all the stock at least 3 working days
exchange(s) specifying the purpose of the record date in advance (excluding
where it is listed or where stock derivatives are the date of intimation
available on the stock of the listed entity or where and record date)
listed entity’s stock form part of an index on which
derivatives are available. The listed entity shall Other than Right Issue,
intimate the following events: at least 7 working days
(a)declaration of dividend in advance (excluding
(b)issue of right or bonus shares the date of intimation
(c)issue of shares for conversion of debentures or any and record date)
other convertible security
(d)shares arising out of rights attached to debentures
or any other convertible security (e)corporate actions
like mergers, demergers, 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 Distribution Policy by the top 1000 listed To formulate a dividend
entities based on market capitalization (calculated as distribution policy
on March 31 of every financial year) which shall be disclosed
on the website of the
listed entity and a web-
link shall also be
provided in their annual
reports.

44(3) The listed entity shall submit to the stock exchange Within 48 Hours of
details regarding voting results by Shareholders conclusion of its
General Meeting

141 | P a g e
 46 The listed entity shall maintain a functional website within 2 working days
containing the basic information about the listed from the date of change
entity and update any change in the content of its in content
website.

REGULATIONS APPLICABLE ON TOP 1000 AND TOP 2000 LISTED ENTITIES

TOP 1000 TOP 2000
• for the top 1000 listed entities based on market • the top 2000 listed
capitalization: Business Responsibility Report; entities (with effect from
describing the initiatives taken by them environmental, April 1, 2020) shall
social and governance perspective (Annual report) comprise of not less than
(Regulation 34) six directors;
(Regulation 17)
• The Board of directors of the top 1000 listed entities
shall have at least one independent woman director • The Quorum for every
by April 1, 2020; (Regulation 17) meeting of Board of
Directors of the top 2000
• Regulation 21 relating to Risk management committee listed entities with
shall be applicable to top 1000 listed entities, determined effect from April 1, 2020
on the basis of market capitalisation, as at the end of the shall be one-third of its
immediate previous financial year; total strength or three
directors, whichever is
• The top 1000 listed entities based on market capitalization higher, including at least
(calculated as on March 31 of every financial year) shall one independent
formulate a dividend distribution policy which shall director; (Regulation 17)
be disclosed in their annual reports and on their websites.
(Regulation 43A)

• With effect from January 1, 2022, the top 1000 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. (Regulation 25)

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 IMPORTANT DEFINITIONS

1. NOMINATED INVESTOR (ICDR)

“Nominated investor” means a qualified institutional buyer or private equity fund, who enters
into an agreement with the lead manager(s) to subscribe to an issue, made in accordance with
Chapter IX, in case of under-subscription or to receive or deliver the specified securities in the
market-making process in such an issue;

Explanation: “private equity fund” means a fund registered with any regulatory authority or a
fund established by any person registered with any regulatory authority;

2. QUALIFIED INSTITUTIONAL BUYER

Qualified Institutional Buyer means:
(i) Mutual fund, venture capital fund investor registered with the Board;
(ii) A foreign institutional investor and sub – account (other than a sub – account which is a
foreign corporate or foreign individual), registered with the Board;
(iii) A public financial institution as defined in section 2 (72) of the Companies Act, 2013;
(iv) A scheduled commercial bank;
(v) A multilateral and bilateral development financial institution;
(vi) A State industrial development corporation;
(vii) Insurance company registered with the Insurance Regulatory & Development Authority;
(viii) A provident fund with minimum corpus of ` 25 crore;
(ix) A pension fund with minimum corpus of ` 25 crore;
(x) National Investment Fund set up by resolution of the GOI published in the Gazette;
(xi) Insurance funds set up and managed by army, navy or air force of the Union of India;
(xii) Insurance funds set up and managed by the Department of Posts, India.
(xiii) Systematically Important NBFC;

3. ANGEL INVESTOR
‘Angel Investor’ means any person who proposes to invest in an angel fund and satisfies one of
the following conditions, namely,
(a) an individual investor who has net tangible assets of at least two crore rupees excluding
value of his principal residence, and who:
• has early stage investment experience, or
• has experience as a serial entrepreneur, or
• is a senior management professional with at least ten years of experience.
(b) a body corporate with a net worth of at least ten crore rupees; or
(c) an Alternative Investment Fund registered under SEBI AIF Regulations or a Venture Capital
Fund registered under the SEBI (Venture Capital Funds) Regulations, 1996.

4. DESIGNATED SECURITIES AS PER LODR 2015

As per the SEBI Listing Regulations, 2015, “designated securities” means any of the following
securities –
• Specified Securities listed on Main Board, SME Exchange or Innovators Growth Platform:
Specified securities means ‘equity shares’ and ‘convertible securities’ as defined under clause
(eee) of sub-regulation (1) of regulation 2 of the SEBI (ICDR) Regulations, 2018.
• Non – Convertible Securities
• Indian Depository Receipts: ‘Indian depository receipts’ means Indian depository receipts as
defined in sub-section (48) of section 2 of the Companies Act, 2013.
• Securitized Debt Instruments: ‘Securitized debt instruments’ as defined in the SEBI (Public
Offer and Listing of Securitized Debt Instruments) Regulations, 2008.
• Units issued by mutual funds;
• Security Receipts;
• Any other securities as may be specified by SEBI.

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5. 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;
(v) Units or any such instrument issued to investors under any mutual fund scheme;
(vi) Units or any other instrument issued by any pooled investment vehicle;
(vii) any certificate or instrument issued to an investor by any issuer being a Special Purpose
Distinct Entity (SPDE) 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 Central Government to be securities;
In exercise of the powers conferred by sub-clause (iia) of clause (h) of section 2 of the SCRA,
1956, the CG declares “zero coupon zero principal instruments” as securities for the purposes
of the said Act.

“Zero coupon zero principal instrument” means an instrument issued by a Not for Profit
Organisation which shall be registered with Social Stock Exchange segment of a recognised
Stock Exchange in accordance with the regulations made by the SEBI. (MCA Notification dated
15.07.2022)

(x) Rights or interest in securities.

6. SPOT DELIVERY CONTRACTS

A spot delivery contract means a contract which provides for:
(i) 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 therefore through the post being excluding from the
computation of the period aforesaid if the parties to the contract do not reside in the same town
or locality;

(ii) Transfer of the securities by depository from account of beneficial owner to account of
another beneficial owner when such securities are dealt with by a depository.

7. STOCK EXCHANGE
Stock Exchange means:
(i) Anybody of individuals, whether incorporated or not, constituted before corporatization and
demutualization under Sections 4A and 4B, or

(ii) A body corporate incorporated under the Companies Act, 2013 whether under a scheme of
corporatization or otherwise,
for the purpose of assisting, regulating or controlling the business of buying, selling or dealing
in securities.

8. DERIVATIVE (June 2022)

Derivative includes:
(a) a security derived from a debt instrument, share, loan, whether secured or unsecured, risk
instrument or contract for differences or any other form of security;
(b) a contract which derives its value from the prices or index of prices, of underlying securities;
(c) commodity derivatives;
(d) such other instruments as may be declared by the Central Government to be derivatives.
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9. COMMODITY DERIVATIVES
Commodity Derivatives means a contract:
(i) for the delivery of such goods, as may be notified by the Central Government in the Official
Gazette, and which is not a ready delivery contract; or

(ii) for differences, which derives its value from the prices or indices of prices of such underlying
goods or activities, services, rights, interest and events, as may be notified by the Central
Government, in consultation with SEBI, but does not includes securities as referred to in sub-
clauses (A) and (B) above.

10. ENTERPRISE VALUE

Enterprise Value means the value calculated as market capitalization of a company plus debt,
minority interest and preferred shares, minus total cash and cash equivalents.

Enterprise Value = Market capitalization + Debt + Minority Interest and Preferred Shares – Total
Cash and Cash Equivalents

11.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.

provided that 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.

12. WILFUL DEFAULTER

Wilful defaulter means any person who is categorized 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;

13. FUGITIVE ECONOMIC OFFENDER

“Fugitive economic offender” shall mean an individual who is declared a fugitive economic
offender under section 12 of the fugitive economic offenders act, 2018;

14. SMALL SHAREHOLDER

“small shareholder” means a shareholder of a company, who holds shares or other specified
securities whose market value, on the basis of closing price of shares or other specified
securities, on the recognized stock exchange in which highest trading volume in respect of
such securities, as on record date is not more than two lakh rupee;

15. EMPLOYEE (SHARE BASED EMPLOYEE BENEFITS)

“Employee”, except in relation to issue of sweat equity shares, means, —
(i) an employee as designated by the company, who is exclusively working in India or outside
India; or

(ii) a director of the company, whether a whole time director or not, including a nonexecutive
director who is not a promoter or member of the promoter group, but excluding an independent
director; or

(iii) an employee as defined in sub-clauses (i) or (ii), of a group company including subsidiary or
its associate company, in India or outside India, or of a holding company of the company, but
does not include—

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(a) an employee who is a promoter or a person belonging to the promoter group; or
(b) a director who, either himself or through his relative or through any body corporate, directly
or indirectly, holds more than ten per cent of the outstanding equity shares of the company.

16. EMPLOYEE (SWEAT EQUITY SHARES)

The term ‘employee’ means,
(i) an employee of the company working in India or abroad; or
(ii) a director of the company whether a whole time director or not.

17. INSIDER TRADING

Insider Trading means:
(a) An act of subscribing, buying, selling, dealing or agreeing to subscribe, buy, sell or deal in
any securities, by any director or key managerial personnel or any other officer of a company
either as principal or agent if such director or key managerial personnel or any other officer of
the company is reasonably expected to have access to any non – public price sensitive
information in respect of securities of company; or

(b) An act of counseling about procuring or communicating directly or indirectly any non – public
price – sensitive information to any person;

18. INSIDER
Insider means any person who is:
(a) A connected person; or
(b) In possession of or having access to unpublished price sensitive information;

19. CONNECTED PERSON

“Connected person” means, -
(i) Any person who is or has during the 6 months prior to the concerned act been associated
with a company, directly or indirectly, in any capacity including by reason of frequent
communication with its officers or by being in any contractual, fiduciary or employment
relationship or by being 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, that allows such person, directly or indirectly, access to unpublished
price sensitive information or is reasonably expected to allow such access.

(ii) Without prejudice to the generally of the foregoing, the persons falling within the following
categories shall be deemed to be connected person unless the contrary is established, -
(a) An immediate relative of connected persons specified in clause (i); or
(b) A holding company or associate company or subsidiary company; or
(c) An intermediary as specified in section 12 of the Act or an employee or director thereof; or
(d) An investment company, trustee company, asset management company or an employee of
director thereof; or
(e) An official of a stock exchange or of clearing house or corporation; or
(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 recognized or authorized by the
Board; 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 10%
of the holding or interest.

20. UNPUBLISHED PRICE SENSITIVE INFORMATION

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Means any information, relating to a company or its securities, directly or indirectly, that is not
generally available which upon 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;

21. POOLED INVESTMENT VEHICLE

“pooled investment vehicle” means a fund established in India in the form of a trust or otherwise,
such as mutual fund, alternative investment fund, collective investment scheme or a business
trust as defined in sub-section (13A) of section 2 of the Income tax Act, 1961 and registered
with the SEBI, or such other fund, which raises or collects monies from investors and invests
such funds in accordance with such regulations as may be made by the SEBI in this behalf;

22. NET WORTH

“Net worth” means the aggregate value of the paid-up share capital and all reserves created out
of the profits and securities premium account and debit or credit balance of profit and loss
account, after deducting the aggregate value of the accumulated losses, deferred expenditure
and miscellaneous expenditure not written off, as per the audited balance sheet, but does not
include reserves created out of revaluation of assets, write-back of depreciation and
amalgamation;

23. MAINSTREAM MEDIA

Mainstream media shall include print or electronic mode of the following:
i. Newspapers registered with the Registrar of Newspapers for India;
ii. News channels permitted by Ministry of Information and Broadcasting under Government of
India;
iii. Content published by the publisher of news and current affairs content as defined under the
Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021;
and
iv. Newspapers or news channels or news and current affairs content similarly registered or
permitted or regulated, as the case may be, in jurisdictions outside India.

24. LIQUID NETWORTH

Liquid networth means the networth deployed in liquid assets which are unencumbered and
shall include cash, money market instruments, Government Securities, Treasury bills, Repo on
Government securities and any other like instruments as specified by the Board from time to
time.

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 ELIGIBILITY CRITERIA

1. ELIGIBILITY CRITERIA FOR AN IPO (REGULATION 6 OF ICDR 2018)

(1) An Issuer can make an initial public offering (IPO) of equity shares, only if it fulfills the
following conditions:-

The Company has:

(i) Net tangible assets of at least `3 crore in each of the preceding 3 full financial years (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
made firm commitments to utilize such excess monetary assets in its business or project. Further,
the limit of 50% on monetary assets shall not be applicable in case the public offer is made entirely
through offer for sale.

(ii) The company has a minimum average pre-tax operating profit of ` 15 Crores, calculated on
a restated and consolidated basis, in each of these preceding 3 years;

(iii) The Company has a Net worth of at least ` 1 crore in each of the preceding 3 full years,
calculated on a restated and consolidated basis;

(iv) In case of change of name of the Company within the last one year, at least 50% of the
revenue, calculated on restated & consolidated basis, for the preceding 1 full year is being
earned by the company from the activity suggested by the new name

ALTERNATIVE ROUTE FOR PUBLIC ISSUE:

(2) If a company does not satisfy the above conditions for the purpose to access the primary
Market, it has to comply with the following conditions:-
If the public issue is made through the book – building process and the issuer undertakes to
allot, at least 75% of the net offer to public, to qualified institutional buyers and to refund full
subscription money if it fails to make the said minimum allotment to qualified institutional
buyers.

In case of IPOs under Regulation 6(2), if QIBs does not subscribe to allocated 75% of the net
offer to public the issue will fail and the issuer company will have to refund full subscription
money even though on overall basis the issue may have been oversubscribed. Therefore, in these
cases, 75% subscription from QIBs is must irrespective of subscription by retail investors and
non-retail investors.

2. CONDITIONS OF PEFERENTIAL ISSUE (REGULATION 160A)

A listed issuer making a preferential issue of specified securities shall ensure that:
a) all equity shares allotted by way of preferential issue shall be made fully paid up at the time
of the allotment;

b) a special resolution has been passed by its shareholders;

c) all equity shares held by the proposed allottees in the issuer are in dematerialised form;

d) 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 the SEBI (LODR), 2015, as amended, and any circular or notification issued by
the Board thereunder;

e) the issuer has obtained the PAN of the proposed allottees, except those allottees which may
be exempt from specifying their Permanent Account Number for transacting in the securities
market by the Board.

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3. ELIGIBILITY CRITERIA FOR QUALIFIED INSTITUTIONAL PLACEMENT
(1) A listed issuer may make a QIP of eligible securities if it satisfies the following conditions:
a) a special resolution approving the QIP has been passed by its shareholders, and the special
resolution shall, among other relevant matters, specify that the allotment is proposed to be
made through QIP;

Provided that no shareholders’ resolution will be required in case the QIP is through an offer for
sale by promoters or promoter group for compliance with minimum public shareholding
requirements specified in the Securities Contracts (Regulation) Rules, 1957;

Provided further that allotment pursuant to the special resolution referred to in this clause (a) of
regulation 172 shall be completed within a period of 365 days from the date of passing of the
resolution.

b) the equity shares of the same class, which are proposed to be allotted through QIP or
pursuant to conversion or exchange of eligible securities offered through QIP, have been listed
on a stock exchange for a period of at least one year prior to the date of issuance of notice to its
shareholders for convening the meeting to pass the special resolution:

Explanation: For the purpose of clause (b), “equity shares of the same class” shall mean equity
shares which rank pari-passu in relation to rights as to dividend, voting or otherwise.

c) An issuer shall be eligible to make a QIP if any of its promoters or directors is not a fugitive
economic offender.

(2) All eligible securities issued through a QIP shall be listed on the recognized stock exchange
where the equity shares of the issuer are listed.

(3) The issuer shall not make any subsequent QIP until the expiry of six months from the date
of the prior qualified institutions placement made pursuant to one or more special resolutions.

4. ELIGIBILITY CRITERIA FOR IPO BY SMALL & MEDIUM ENTERPRISES

(1) An issuer shall be eligible to make an initial public offer only if its post-issue paid-up capital
is less than or equal to ` 10 crores.

(2) An issuer, whose post issue face value capital is more than ten crore ` and upto ` 25 Crores,
may also issue specified securities in accordance with provisions of this Chapter.

(3) An issuer may make an initial public offer, if it satisfies track record and/or other eligibility
conditions of the SME Exchange(s) on which the specified securities are proposed to be listed.

Provided that In case of an issuer which had been a partnership firm or a limited liability
partnership, the track record of operating profit of the partnership firm or the limited liability
partnership shall be considered only if the financial statements of the partnership business for
the period during which the issuer was a partnership firm or a limited liability partnership,
conform to and are revised in the format prescribed for companies under the Companies Act,
2013 and also comply with the following:
a) adequate disclosures are made in the financial statements as required to be made by the
issuer as per Schedule III of the Companies Act, 2013;

b) the financial statements are duly certified by auditors, who have subjected themselves to the
peer review process of the Institute of Chartered Accountants of India (ICAI) and hold a valid
certificate issued by the Peer Review Board‘ of the ICAI, stating that:
(i) the accounts and the disclosures made are in accordance with the provisions of Schedule III
of the Companies Act, 2013;
(ii) the accounting standards prescribed under the Companies Act, 2013 have been followed;
(iii) the financial statements present a true and fair view of the firm‘s accounts;
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Provided further that 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 in the first proviso are complied with.

5. ELIGIBILITY CRITERIA FOR IPO ON INNOVATORS GROWTH PLATFORM (REG 283)

(1) An issuer which is intensive in the use of technology, information technology,
intellectual property, data analytics, bio-technology or nano-technology to provide
products, services or business platforms with substantial value addition shall be eligible
for listing on the innovators growth platform, provided that as on the date of filing of draft
information document or draft offer document with the Board, as the case may be, 25% of the
pre-issue capital of the Issuer Company for at least a period of One year, should have been held
by:
I. Qualified Institutional Buyers;

II. Omitted

III. IGP Investors for the purpose of Innovators Growth Platform;

IV. The following regulated entities:

a. Foreign Portfolio Investor;

b. An entity meeting all the following criteria:

i. It is a pooled investment fund with minimum assets under management of 150 million
USD;

ii. It is registered with a financial sector regulator in the jurisdiction of which it is a

resident;

iii. It is resident of a country whose securities market regulator is a signatory to the

International Organization of Securities Commission’s Multilateral Memorandum of
Understanding (Appendix A Signatories) or a signatory to Bilateral Memorandum of
Understanding with the Board;

iv. It is not resident in a country identified in the public statement of Financial Action Task
Force as:
a)a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of
Terrorism deficiencies to which counter measures apply; or
b)a jurisdiction that has not made sufficient progress in addressing the deficiencies
or has not committed to an action plan developed with the Financial Action Task Force
to address the deficiencies.

Explanation:
(a)The following entities shall be eligible to be considered as IGP investors for the purpose of
innovators growth platform:
(i)any individual with total gross income of 50 lakhs rupees annually and who has minimum
liquid net worth of 5 crore rupees; or
(ii)any body corporate with net worth of 25 crore rupees.
(iii) Any Family Trust with Networth of 25 Crores;

(b) Pre-issue capital held by promoters/promoter groups, even if they are registered as
Innovators Growth Platform Investors, shall not be considered for the 25% pre -issue
capital eligibility requirement specified under sub-regulation (1) of regulation 283.

(c)For the purpose of accreditation: The persons /corporate bodies who wish to get accreditation
for the purpose of innovators growth platform, shall approach the stock exchanges or

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depositories and follow the procedures prescribed by the Board and / or such stock exchange
or depository for the purpose of accreditation as an IGP Investor, from time to time.

(2) An issuer shall be eligible for listing on the institutional trading platform if none of
the promoters or directors of the issuer company is a fugitive economic offender.

6. CONDITIONS FOR MIGRATION FROM IGP TO MAIN BOARD (REG 292)

(1) A company shall be eligible to trade under the regular category of the main board of the stock
exchanges, subject to fulfilment of the conditions of the stock exchanges, if any, and the
fulfilment of the following conditions:
(a) It has listed its specified securities for a minimum period of one year on the Innovators
Growth Platform of a recognised stock exchange;
(b) It has minimum of 200 shareholders, at the time of making the application for trading under
the regular category;
(c) The company, any of its promoters, promoter group or directors are not debarred from
accessing the capital market by the Board;
(d) None of the promoters or directors of the company is a promoter or director of any other
company which is debarred from accessing the capital market by the Board;
(e) The company or any of its promoters or directors is not a wilful defaulter; and
(f) None of the promoters or directors of the Company is a fugitive economic offender.

(2) A company shall be eligible to trade under the regular category of the main board of the stock
exchanges, only if:
(a) it has net tangible assets of at least ` 3 crores, calculated on a consolidated basis, in each of
the preceding three full years (of twelve months each), of which not more than 50% are held in
monetary assets;
(b) it has an average operating profit of at least fifteen crore `, calculated on a consolidated
basis, during the preceding 3 years (of twelve months each), with operating profit in each of
these preceding 3 years;
(c) it has a net worth of at least one crore ` in each of the preceding three full years (of twelve
months each), calculated on a consolidated basis; and
(d) in case it has changed its name within the last one year, at least 50% of the revenue,
calculated on a consolidated basis, for the preceding one full year has been earned by it from
the activity indicated by its new name.

(3) A company not satisfying the conditions laid down under sub-regulation (2) of regulation
292, shall, at the time of applying to trade under the regular category, have 50% of its capital,
as on date of application for migration, held by Qualified Institutional Buyers.

7. ELIGIBILITY CRITERIA FOR REGISTRATION OF ALTERNATE INVESTMENT FUNDS

For the purpose of the grant of certificate to an applicant, the Board shall consider the
following conditions for eligibility, namely,—(a)the memorandum of association in case of a
company; or the Trust Deed in case of a Trust; or the Partnership deed in case of a limited
liability partnership permits it to carry on the activity of an Alternative Investment Fund;

(b)the applicant is prohibited by its memorandum and articles of association or trust deed or
partnership deed from making an invitation to the public to subscribe to its securities;

(c)in case the applicant is a Trust, the instrument of trust is in the form of a deed and has been
duly registered under the provisions of the Registration Act, 1908;

(d)in case the applicant is a limited liability partnership, the partnership is duly
incorporated and the partnership deed has been duly filed with the Registrar under the
provisions of the Limited Liability Partnership Act, 2008;

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(e)in case the applicant is a body corporate, it is set up or established under the laws of the
Central or State Legislature and is permitted to carry on the activities of an Alternative
Investment Fund;

(f)the applicant, Sponsor and Manager are fit and proper persons based on the criteria specified
in Schedule II of the Securities and Exchange Board of India (Intermediaries)
Regulations, 2008;

(g)The key investment team of the Manager of Alternative Investment Fund has –
(i)adequate experience, with at least one key personnel having not less than five years of
experience in advising or managing pools of capital or in fund or asset or wealth or portfolio
management or in the business of buying, selling and dealing of securities or other financial
assets; and

(ii)at least one key personnel with professional qualification in finance, accountancy, business
management, commerce, economics, capital market or banking from a university or an
institution recognized by the Central Government or any State Government or a foreign
university, or a CFA charter from the CFA institute or any other qualification as may be
specified by the Board:

Provided that the requirements of experience and professional qualification as specified in

regulation 4(g)(i) and 4(g)(ii) may also be fulfilled by the same key personnel.

(h)the Manager or Sponsor has the necessary infrastructure and manpower to effectively
discharge its activities;

(i)the applicant has clearly described at the time of registration the investment objective,
the targeted investors, proposed corpus, investment style or strategy and proposed tenure of
the fund or scheme;

(j)whether the applicant or any entity established by the Sponsor or Manager has earlier
been refused registration by the Board.

8. ELIGIBILITY CRITERIA FOR PUBLIC ISSUE OF NON-CONVERTIBLE SECURITIES

(1) No issuer shall make an issue of non-convertible securities if as on the date of filing of draft
offer document or offer document:
(a) the issuer, any of its promoters, promoter group or directors are debarred from accessing
the securities market or dealing in securities by the Board;
(b) any of the promoters or directors of the issuer is a promoter or director of another company
which is debarred from accessing the securities market or dealing in securities by the Board;
(c) the issuer or any of its promoters or directors is a wilful defaulter;
(d) any of the promoters or whole-time directors of the issuer is a promoter or whole-time
director of another company which is a wilful defaulter;
(e) any of its promoters or directors is a fugitive economic offender; or
(f) any fine or penalties levied by the Board /Stock Exchanges is pending to be paid by the
issuer at the time of filing the offer document:

(2) No issuer shall make a public issue of non-convertible securities if as on the date of filing of
draft offer document or offer document, the issuer is in default of payment of interest or
repayment of principal amount in respect of non-convertible securities, if any, for a period of
more than six months.

9. ELIGIBILITY CRITERIA FOR PRIVATE PLACEMENT OF NON-CONVERTIBLE SECURITIES

(This can be asked for Debt Securities or NCRPS or Non- Convertible Securities, Answer will be
same for all)

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(1) Where the issuer has disclosed the intention to seek listing of debt securities and non-
convertible redeemable preference shares issued on private placement basis, the issuer shall
forward the listing application along with the disclosures as per this regulation to the stock
exchange(s) within such days as may be specified by the Board from the date of closure of the
issue.

(2) The issuer shall file the following documents along with the listing application to the stock
exchange and with the debenture trustee (in case of debt securities):
(a) Placement Memorandum;
(b) Memorandum of Association and Articles of Association;
(c) Copy of the requisite board/ committee resolutions authorizing the borrowing and list of
authorised signatories for the allotment of securities;
(d) Copy of last three years Annual Reports;
(e) Statement containing particulars of, dates of, and parties to all material contracts and
agreements;
(f) An undertaking from the issuer stating that the necessary documents for creation of the
charge, wherever applicable, including the Trust Deed has been 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 such securities have been proposed to be listed;
(g) In case of debt securities, an undertaking that permission / consent from the prior creditor
for a second or pari passu charge being created, wherever applicable, in favour of the debenture
trustee to the proposed issue has been obtained; and
(h) Any other particulars or documents that the recognized stock exchange may call for as it
deems fit:

Provided that issuers desirous of issuing debt securities on private placement basis who are in
existence for less than three years may provide Annual Reports pertaining to the years of
existence.

(3) Debenture trustee shall submit a due diligence certificate to the stock exchange in the format
as specified in Schedule IV of these regulations.

(4) The stock exchange(s) shall list the debt securities only upon receipt of the due diligence
certificate from the debenture trustee as per format specified by the Board.

10. ELIGIBILITY FOR REGISTRATION AS DEPOSITORY AS PER DEPOSITORIES ACT

Any company or institution must:
(a) Be formed and registered as a company under the Act;
(b) Be registered with SEBI as a depository;
(c) Have framed by – laws with the previous approval of SEBI;
(d) Have one or more participants;
(e) Have adequate systems and safeguards to prevent manipulation of the records;
(f) Comply with the Depositories Act, 1996 & SEBI (Depositories & Participants) Regulations,
1996;
(g) Meet all the eligibility criteria.

11. ELIGIBILITY CRITERIA FOR IPO OF INDIAN DEPOSITORY RECEIPTS

An issuer shall be eligible to make an issue of IDRs only if:
a) the issuing company is listed in its home country for at least 3 forty-five immediately
preceding years;
b) the issuer is not prohibited to issue securities by any regulatory body;
c) the issuer has a track record of compliance with the securities market regulations in its
home country;
d) any of its promoters or directors is not a fugitive economic offender.

Explanation: For the purpose of this regulation, the term “home country” means the country
where the issuer is incorporated and listed.
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12. ELIGIBILITY CRITERIA FOR REGISTRATION AS A MUTUAL FUND
For the purpose of grant of a certificate of registration, the applicant has to fulfil the following
namely –
• The sponsor should have a sound track record and general reputation of fairness and
integrity in all his business transactions.

Explanation:
For the purposes of this clause “sound track record” shall mean the sponsor should, —
(i) be carrying on business in financial services for a period of not less than five years; and
(ii) ensure that the networth is positive in all the immediately preceding five years; and
(iii) ensure that the positive liquid networth is more than the proposed capital contribution
of the sponsor in the asset management company and ensure that in case of change in
control of the existing asset management company due to acquisition of shares, the positive
liquid net worth of the sponsor or funds tied up by the sponsor is to the extent of aggregate
par value or market value of the shares proposed to be acquired, whichever is higher; and
(iv) have net profit after providing for depreciation, interest and tax in each of the immediately
preceding five years; and
(v) have average net annual profit after depreciation, interest and tax during the immediately
preceding five years of at least rupees ten crore:

Provided that if the requirements specified under Explanation to clause (a) are not fulfilled,
the sponsor shall,-
(i)adequately capitalize the asset management company such that the net worth of the asset
management company is not less than rupees one hundred fifty crore; and
(ii)ensure that the initial shareholding equivalent to capital contributed to the asset
management company to the extent of not less than rupees one hundred fifty crore is locked-
in for a period of five years; and
(iii)appoint experienced personnel in asset management company such that the total
combined experience of Chief Executive Officer, Chief Operating Officer, Chief Risk Officer,
Chief Compliance Officer and Chief Investment Officer should be at least thirty years; and
(iv)ensure that in case of acquisition of existing asset management company, the sponsor
shall have minimum positive liquid net worth equal to incremental capitalization required to
ensure minimum capitalization of the asset management company and the positive liquid
net worth of the sponsor or the funds tied up by the sponsor are to the extent of aggregate
par value or market value of the shares proposed to be acquired, whichever is higher; and
(v)ensure that in case of acquisition of stake in an existing asset management company, the
shareholding equivalent to at least rupees one hundred fifty crore shall be locked in for five
years; and
(vi)ensure that other conditions in this regard as may be specified by the Board from time to
time are adhered to: Provided further that a private equity fund or a pooled investment
vehicle or a pooled investment fund may also be permitted to sponsor mutual funds subject
to such other conditions as may be specified by the Board from time to time

• The applicant is a fit and proper person

• In the case of an existing mutual fund, such fund is in the form of a trust and the trust deed
has been approved by the Board the sponsor has contributed or contributes at least 40% to
the net worth of the asset management company.
However, any person who holds 40% or more of the net worth of an asset management
company shall be deemed to be a sponsor and will be required to fulfil the eligibility criteria
specified in their regulations.
• The sponsor or any of its directors or the principal officer to be employed by the mutual fund
should not have been guilty of fraud or has not been convicted of an offence involving moral
turpitude or has not been found guilty of any economic offence.
• Appointment of trustees to act as trustees for the mutual fund in accordance with the
provisions of the regulations appointment of asset management company to manage the
mutual fund and operate the scheme of such funds in accordance with the provisions of
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 these regulations appointment of custodian in order to keep custody of the securities or
goods or gold and gold related instrument or other assets of the mutual fund held in terms
of these regulations, and provide such other custodial services as may be authorised by the
trustees.

13. ELIGIBILITY CRITERIA FOR APPOINTMENT OF ASSET MANAGEMENT COMPANY

• in case the asset management company is an existing asset management company it has a
sound track record, general reputation and fairness in transactions;
• the asset management company is a fit and proper person;
• the directors of the asset management company are persons having adequate professional
experience in finance and financial services related filed and not found guilty of moral
turpitude or convicted of any economic offence or violation of any securities laws;
• the key personnel of the asset management company have not been found guilty of moral
turpitude or convicted of economic offence or violation of securities laws or worked for any
asset management company or mutual fund or any intermediary during the period when its
registration has been suspended or cancelled at any time by the Board;
• the board of directors of such asset management company has at least 50% directors, who
are not associate of, or associated in any manner with, the sponsor or any of its subsidiaries
or the trustees;
• the Chairman of the asset management company is not a trustee of any mutual fund;
• the asset management company has a net worth of not less than ` 50 crore;

14. REQUIREMENTS FOR REGISTRATION FOR A NOT FOR PROFIT ORGANISATION WITH A STOCIAL STOCK EXCHANGE
(1) A Not for Profit Organization shall mandatorily seek registration with a Social Stock Exchange
before it raises funds through a Social Stock Exchange:

Provided that a Not for Profit Organization may choose to register on a Social Stock Exchange and
not raise funds through it.

(2) The minimum requirements for registration of a Not for Profit Organization on a Social Stock
Exchange shall be specified by the Board from time to time.

(3) The Social Stock Exchange may specify the eligibility requirements for registration of a Not
for Profit Organization in addition to the minimum requirements specified by the Board.

15. DISQUALIFICATIONS FROM BEING APPOINTED AS TRUSTEE OF MUTUAL FUND

(1) A mutual fund shall appoint trustees in accordance with these regulations.

(2) No person shall be eligible to be appointed as a trustee unless—

(a) he is a person of ability, integrity and standing; and
(b) has not been found guilty of moral turpitude; and
(c) has not been convicted of any economic offence or violation of any securities laws; and
(d) has furnished particulars as specified in Form C.

(3) No asset management company and no director (including independent director), officer or
employee of an asset management company shall be eligible to be appointed as a trustee of any
mutual fund.

(4) No person who is appointed as a trustee of a mutual fund shall be eligible to be appointed
as a trustee of any other mutual fund.

(5) Two-thirds of the trustees shall be independent persons and shall not be associated with
the sponsors or be associated with them in any manner whatsoever.

(6) In case a company is appointed as a trustee then its directors can act as trustees of any
other trust provided that the object of the trust is not in conflict with the object of the mutual
fund.
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(7) In case a company is appointed as the trustee of a mutual fund, the Chairperson of the board
of directors of that trustee company shall be an independent director:

Provided that a trustee company, already appointed as the trustee of a mutual fund shall comply
with this sub-regulation within a period as may be specified by the Board from time to time.

16. CONDITIONS FOR BONUS ISSUE

(i) Issue of bonus must be authorized by the articles of the company.
(ii) it has received approval from the stock exchanges for listing and trading of all the securities,
excluding options granted to employees pursuant to an employee stock option scheme and
convertibles securities, issued by the issuer prior to the issuance of bonus shares.
(iii) The Company should not have defaulted in the payment of any interest or principal in respect of
its fixed deposits, debt securities issued by it.
(iv) The company should not have defaulted in the payment of its statutory dues to the employees
such as contribution to provident fund, gratuity and bonus.
(v) If there are any partly paid – up shares outstanding on the date of allotment, these shares should
be made fully paid – up before the bonus issue is made.
(vi) any of its promoters or directors is not a Fugitive Economic Offender.

17. CONDITIONS FOR APPOINTMENT OF CUSTODIAN BY MUTUAL FUND

• The mutual fund shall appoint a Custodian to carry out the custodial services for the schemes
of the fund and sent intimation of the same to the Board within 15 days of the appointment of
the Custodian.
• However, in case of a gold exchange traded fund scheme, the assets of the scheme being gold or
gold related instruments may be kept in the custody of a custodian registered with the SEBI.
• However, in case of a real estate mutual fund scheme, the title deed of real estate assets held by
it may be kept in the custody of a custodian registered with the SEBI.
• The mutual fund shall enter into a custodian agreement with the custodian, which shall contain
the clauses which are necessary for the efficient and orderly conduct of the affairs of the
custodian.
• However, the agreement, the service contract, terms and appointment of the custodian shall be
entered into with the prior approval of the trustees.

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 PROCEDURES

1. PROCEDURE OF MAKING A RIGHT ISSUE

The various steps involved for issue of rights share are enumerated below:
• Check whether the rights issue is within the authorised share capital of the company. If not,
steps should be taken to increase the authorised share capital.
• Notify the stock exchange concerned the date of Board Meeting at which the rights issue is
proposed to be considered at least 2 days in advance of the meeting.
• Convene the Board meeting and place before it the proposal for rights issue
• Immediately after the Board Meeting notify the concerned Stock Exchanges about particulars
of Board of Directors decision.
• Appoint a merchant banker and file a draft letter of Offer with SEBI
• Obtain Observations an incorporate the same in the Letter offer
• Convene another Board Meeting which shall decide on the following matters:
o Quantum of issue and the proportion of rights shares.
o Alteration of share capital, if necessary, and offering shares to persons other than
existing holders of shares in terms of Section 62 of the Companies Act, 2013.
o Fixation of record date.
o Appointment of merchant bankers and underwriters (if necessary).
o Approval of draft letter of offer or authorisation of managing director/ company
secretary to finalise the letter of offer in consultation with the managers to the issue,
the stock exchange and SEBI.
• Rights issue shall be kept open for at least 7 days and not more than 30 days
• File a copy of the letter of offer with the stock exchange where the shares of the company are
listed and obtain the In-principle approval for listing of equity shares to be issued under the
proposed Rights Issue.
• Despatch letters of offer and the Composite Application Form to shareholders by registered
post.
• Check that an advertisement giving date of completion of despatch of letter of offer has been
released in at least an English National Daily, one Hindi National Paper and a Regional
Language Daily where registered office of the issuer company is situated and that the
shareholder can apply on plain paper if he does not receive the application form.
• The advertisement should state that applications of shareholders who apply both on plain
paper and also in a composite application form are liable to be rejected.
• Make arrangement with bankers for acceptance of share application forms.
• Finalise the allotment in consultation with Stock Exchange.
• Convene Board Meeting and make allotment of shares.
• Make an application to the Stock Exchange(s) where the company’s shares are listed for
permission of listing of new shares.

2. PROCEDURE FOR ISSUANCE OF SWEAT EQUITY SHARES

• To decide before convening a Board Meeting, the number of shares, their current market
price and consideration, if any, and the class or classes of directors or employees to whom
such of Sweat Equity Shares are proposed to be issued.

• To convene a Board Meeting to consider the proposal of issue of Sweat Equity Shares and to
fix up the date, time, place and agenda for the General Meeting

• If the sweat equity shares are to be issued by a Listed Company to its promoters the approval
of the shareholders shall be obtained by way of a simple majority in the general meeting and
through postal ballot. Further, the promoters shall also not participate in the voting process
of such a resolution. Each transaction shall be voted by a separate resolution

• Hold the General Meeting and pass the Special Resolution by three fourths majority and file
a copy of the Special Resolution with the ROC.

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• It should be noted that the company cannot issue sweat equity shares for more than 15% of
the existing paid up share capital in a year or shares of the issue value of Rs. 5 crores,
whichever is higher, provided that the issuance of sweat equity shares in the Company shall
not exceed 25% of the paid up equity capital of the Company at any time.

• Provided further that a startup company, as defined in notification number G.S.R. 127(E),
dated the 19th February, 2019 issued by the Department for Promotion of Industry and
Internal Trade, Ministry of Commerce and Industry, Government of India, may issue sweat
equity shares not exceeding fifty percent of its paid up capital upto ten years from the date
of its incorporation or registration.

• The sweat equity shares to be issued to the directors and employees shall be locked in/non-
transferable for a period of 3 years from the date of allotment

• The sweat equity shares to be issued shall be valued at a price determined by a registered
valuer as the fair price giving justification of such valuation. The valuation of intellectual
property rights or of know how or value additions for which sweat equity shares are to be
issued shall be carried out by a registered valuer who shall provide a proper report addressed
to the Board of Directors with justification for such valuation.

• To allot the shares within 15 days of the passing of the resolution and file the PAS -3 with
the ROC within 30 days of the allotment.

• In case of a listed company, to apply to the stock exchange and obtain necessary listing and
trading approval for the shares so allotted.

• In case of an issue of sweat equity by a listed company, in the General meeting subsequent
to the issue of sweat equity, the Board of Directors shall place before the shareholders, a
certificate from the auditors of the Company that the issue of sweat equity shares has been
made in accordance with the Regulations and in accordance with the resolution passed by
the Company authorizing the issue of such Sweat Equity Shares.

• In case of issue of sweat equity shares by a listed company, the Sweat Equity shares shall
be locked in for a period of 3 years from the date of allotment.

3. PROCEDURE FOR ISSUANCE OF EMPLOYEE STOCK OPTIONS BY LISTED COMPANY

Question: Your Board of directors is contemplating to take-up the agenda to issue ESOS in next
meeting. Being a Company Secretary, advise your Board of directors about brief procedure for
issuing of securities under SEBI Employees Stock Option Scheme (ESOS) by a listed Company.
(June 2019)
• Hold a Board Meeting to consider and approve ESOP and formation of Compensation
Committee;

• Compensation committee shall plan draft the scheme of ESOP;

• Hold Board meeting to adopt the final scheme, appoint the Merchant banker and approve
the notice of the General meeting for shareholders’ approval;

• Hold General Meeting for approval of shareholders;

• Make an application to the stock exchange for obtaining in-principal approval of the stock
exchange;

• Issue of letter of grant of option to the eligible employees along with the letter of acceptance
of option;

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• On receipt of letter of acceptance of option along with upfront payment (if any), from the
employee issue the option certificates;

• After expiry of vesting period, not less than one year the options shall vest in the employee.

• At that time, the Company shall issue a letter of vesting along with the letter of exercise of
options;

• Receipt to letter of exercise from the employee;

• Hold a Board Meeting at the suitable Interval during the exercise period for allotment of
shares on options exercised by the optioness;

• Dispatch of letter of allotment along with the share certificates or credit the shares so allotted
with the Depositories;

• Make an application to the Stock exchange for listing of the Shares so allotted; and

• Receipt of Listing of the shares from the Stock exchange.

4. PROCEDURE FOR REDRESSAL OF GRIEVANCE USING SCORES PLATFORM (Dec 2019)

(a) Investors who wish to lodge a complaint on SCORES are requested to register themselves on
www.scores.gov.in by clicking on “Register here” While filing the registration form, details like
Name of the investor, PAN, Contact details, Email id, Aadhaar card number (optional), KYC ID
(optional) etc. may be provided for effective communication and speedy redressal of the
grievances. Upon successful registration, a unique user id and a password shall be
communicated to the investor through an acknowledgement email / SMS.

(b) An investor shall use login credentials for lodging complaint on SCORES (''Login for registered
user" section).

(c) The complainant may use SCORES to submit the grievance directly to companies/
intermediaries and the complaint shall be forwarded to the entity for resolution. The entity is
required to redress the grievance within 30 days, failing which the complaint shall be registered
in SCORES

(d) Presently, the limitation period for filing an arbitration reference with stock exchanges is
three year. In line with the same and in order to enhance case, speed & accuracy in redressal
of investor grievance, the investor may lodge a complaint on SCORES within three years from
the date of cause of complaint, where;
a. Investor has approached the listed company or registered intermediary for redressal of the
complaint and,
b. The concerned listed company or registered intermediary rejected the complaint or,
c. The complainant does not receive any communication from the listed company or
intermediary concerned or,
d. The complainant is not satisfied with the reply given to him or redressal action taken by the
listed company or an intermediary.

To enhance investor satisfaction on complaint redressal, SEBI has already put in place a
‘Complaint Review facility’ under SCORES wherein an investor if unsatisfied with the redressal
may within 15 days from the date of closure of his complaint in SCORES opt for review of the
complaint and the complaint shall be escalated.

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5. PROCEDURE OF APPEAL TO SECURITIES APPELLATE TRIBUNAL (SAT) AGAINST ORDER PASSED BY SEBI (Dec 2019)

In order to afford proper appellate remedies, SEBI Act, 1992 provides for the establishment of
the Securities Appellate Tribunals (SAT) to consider appeals against the SEBI’s orders, or
penalties.

Section 15T and 15U of SEBI Act, 1992 deal with the appeal procedure and powers of Securities
Appellate Tribunal.
Every appeal shall be filed within a period of 45 days from the date on which a copy of the order
made by the SEBI or the Adjudicating Officer the Insurance Regulatory and Development
Authority or the Pension Fund Regulatory and Development Authority, as the case may be, is
received by him and it shall be in such form and be accompanied by such fee as prescribed.

The Securities Appellate Tribunal may entertain an appeal after the expiry of the said period of
45 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 Appellate Tribunal shall send a copy of every order made by it to the SEBI or the
Insurance Regulatory and Development Authority or the Pension Fund Regulatory and
Development Authority, as the case may be, 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.

Section 15U of SEBI Act, 1992 lays down 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.

Alternatively, as per Section 29 read with sections 15T and 15U of SEBI Act, 1992, the Central
Government has made the Securities Appellate Tribunal (Procedure), Rules, 2000 shall also be
followed.

6. PROCEDURE FOR DELISTING WHERE NO EXIT OPPORTUNITY IS REQUIRED

(1) Any company desirous of delisting its equity shares under the provisions of regulation 5 of
these regulations shall –
(a) obtain the prior approval of its Board of Directors;
(b) make an application to the relevant recognised stock exchange(s) for delisting its equity
shares;
(c) issue a public notice of the proposed delisting from the relevant stock exchange(s) 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 stock exchange(s) is located;
(d) disclose the fact of delisting in its first annual report post delisting.

(2) The public notice issued under clause (c) of sub-regulation (1) shall mention the name(s) of
the recognised stock exchange(s) from which the equity shares of the company are intended to
be delisted, the reasons for such delisting and the fact of continuation of listing of equity shares
on the recognised stock exchange(s) having nationwide trading terminals.

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(3) An application for delisting made under clause (b) of sub-regulation (1) shall be disposed of
by the recognised stock exchange(s) within a period not exceeding 30 working days from the
date of receipt of such application that is complete in all respects.

7. PROCEDURE FOR PUBLIC ISSUANCE OF ZERO COUPON ZERO PRINCIPAL INSTRUMENTS BY A NOT FOR PROFIT
ORGANISATION
(1) A Not for Profit Organization shall file the draft fund raising document with the Social Stock
Exchange where it is registered along with the fees as specified by the Social Stock Exchange
and an application seeking in-principle approval for listing of its Zero Coupon Zero Principal
Instruments on the Social Stock Exchange:

Provided that Social Stock Exchange shall specify the details to be incorporated in the fund raising
document:

Provided further that the Board shall specify the minimum disclosure requirements in respect of
the fund raising document from time to time.

(2) The draft fund raising document shall be made available on the website of the Social Stock
Exchange and the Not for Profit Organization for a period of at least 21 days for public
comments.

(3) The Social Stock Exchange shall provide its observation on the draft fund raising document
to the Not for Profit Organization, within 30 days from the filing of the draft fund raising
document or receipt of clarification, if any, sought by the Social Stock Exchange from Not for
Profit Organization, whichever is later.

(4) The Not for Profit Organization shall incorporate the observations of the Social Stock
Exchange in draft fund raising document and file the final fund raising document with the Social
Stock Exchange prior to opening the issue.

8. PROCEDURE FOR VOLUNTARY DELISTING FROM FEW STOCK EXCHANGES SUBJECT TO LISTING AT ATLEAST ONE
STOCK EXCHANGE HAVING NATION WIDE TRADING TERMINALS

As per Regulations 6 of SEBI (Delisting of Equity Shares) Regulations 2018, A company may
delist its equity shares from one or more recognised stock exchanges where they are listed and
continue their listing on one or more other recognised stock exchanges, subject to the provisions
of these regulations and subject to the following – (a) If after the proposed delisting from anyone
or more recognised stock exchanges, the equity shares would remain listed on any recognised
stock exchange which has nationwide trading terminals, no exit opportunity needs to be given
to the public shareholders.

As per Regulations 7 of SEBI (Delisting of Equity Shares) Regulations 2018, the procedure for
delisting in the present situation is as follows:
– Convene a Board Meeting [Regulation 7(1)(a)] : The proposed delisting shall be approved by
a resolution of the board of directors of the company in its meeting.

– Public notice [Regulation 7(1)(b)] The company to give a public notice of the proposed deli-
sting in at least one English national daily with wide circulation, one Hindi national daily with
wide circulation and one regional language newspaper of the region where the concerned
recognized stock exchanges are located.

– Details shall mention in Public notice [Regulation 7(2)] (a) The names of the recognized
stock exchanges from where the equity shares of the company are intended to be delisted. (b)
The reasons for such delisting. (c) The fact of continuation of listing of equity shares on
recognized stock exchange having nation wide trading terminals.

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 – Application to the concerned recognized stock exchange. [Regulation 7 (1)(c)] The
company shall make an application to the concerned recognized stock exchange for delisting its
equity shares.

– Delisting order by the Exchange [Regulation 7(3)] The recognized stock exchange shall
dispose of the Application of the delisting complete in all respects within a period not exceeding
thirty working days from the date of receipt of such application.

– Disclosure in the Annual report [Regulation 7(1)(d)] In the first Annual report which will be
prepared after the delisting, include the names of the recognised stock exchanges from where
the company got voluntary delisted during that year and the reason of the delisting there from.

9. PROCEDURE FOR DEMATERIALIZATION (JUNE 2023)

Procedure for Dematerialization:
✓ Investor open account with Depository Participant.
✓ Fills dematerialization request form (DRF) for registered shares along with share certificate.
✓ Investor lodges DRF and certificates with Depository Participant.
✓ Depository Participant intimates the Depository.
✓ Depository intimates Registrar/Issuer.
✓ Depository Participant sends certificates and DRF to Registrar/Issuer- Registrar/ Issuer
confirms demat to Depository.
✓ Depository credits investor account.

10. PROCEDURE FOR LAUNCHING OF SCHEMES BY ASSET MANAGEMENT COMPANIES

PROCEDURE FOR LAUNCHING OF SCHEMES:
• No scheme shall be launched by the AMC unless such scheme is approved by the trustees and a
copy of the offer document has been filed with the SEBI.
• The offer documents shall contain adequate disclosures to enable the investors to make informed
decisions.
• The sponsor or AMC shall invest not less than 1% of the amount which would be raised in the
new fund offer or fifty lakh rupees, whichever is less, and such investment shall not be redeemed
unless the scheme is wound up.
• The mutual fund, which intends to list units of its scheme on the recognised stock exchange(s),
shall obtain ‘in-principle’ approval from recognised stock exchange(s).
• Every mutual fund desirous of listing units of its schemes on a recognised stock exchange shall
execute an agreement with such stock exchange.
• The listing of close-ended schemes is mandatory.
• Units of a close-ended scheme can be converted into an open-ended scheme if the offer document
of such scheme discloses the option and the period of such conversion or the unitholders are
provided with an option to redeem their units in full.
• Units of close-ended scheme may be rolled over in the case of those unitholders who express their
consent in writing and the unitholders who do not opt for the roll over or have not given written
consent shall be allowed to redeem their holdings in full at NAV based price.
• A close-ended scheme shall be wound up on redemption date, unless it is rolled over, or if 75%
of the unit-holders of a scheme pass a resolution for winding up of the scheme; if the trustees on
the happening of any event require the scheme to be wound up; or if SEBI, so directs in the
interest of investors.

11. IMPLEMENTATION OF THE SHARE BASED EMPLOYEE BENEFIT SCHEME THROUGH A TRUST (SBEB)
1. A company may implement schemes either directly or by setting up an irrevocable trust(s).

However, if the scheme is to be implemented through a trust the same has to be decided upfront at the
time of taking approval of the shareholders for setting up the schemes. However, if the scheme involves
secondary acquisition or gift or both, then it is mandatory for the company to implement such scheme(s)
through a trust(s).

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2. A company may implement several schemes as permitted under these regulations through a single
trust. However, such a trust shall keep and maintain proper books of accounts, records and
documents for each such scheme so as to explain its transactions and to disclose at any point of
time the financial position of each scheme and in particular give a true and fair view of the state of
affairs of each scheme.

3. SEBI may specify the minimum provisions to be included in the trust deed under which the trust
is formed, and such trust deed and any modifications thereto shall be mandatorily filed with the
stock exchange in India where the shares of the company are listed.

4. Any person can be appointed as a trustee of the trust, except in cases where such person—
i. is a director, key managerial personnel or promoter of the company or its group company including
its holding, subsidiary or associate company or any relative of such director, key managerial
personnel or promoter; or
ii. beneficially holds 10% or more of the paid-up share capital or the voting rights of the company:

Provided that where individual(s) or “one person company” as defined under the Companies Act,
2013 is appointed as trustee(s), there shall be a minimum of two such trustees, and in case a
corporate entity is appointed as a trustee, then it may be the sole trustee.

5. The trustees of a trust, which is governed under these regulations, shall not vote in respect of the
shares held by such trust, so as to avoid any misuse arising out of exercising such voting rights.

6. The trustee should ensure that appropriate approval from the shareholders has been obtained by
the company in order to enable the trust to implement the scheme(s) and undertake secondary
acquisition for the purposes of the scheme(s).

7. The trust shall not deal in derivatives, and shall undertake only delivery based transactions for
the purposes of secondary acquisition as permitted by these regulations.

8. The company may lend monies to the trust on appropriate terms and conditions to acquire the
shares either through new issue or secondary acquisition, for the purposes of implementation of the
scheme(s).

9. For the purposes of disclosures to the stock exchange, the shareholding of the trust shall be
shown as ‘non-promoter and non-public’ shareholding.

Explanation: Shares held by the trust shall not form part of the public shareholding which needs to
be maintained at a minimum of 25% as prescribed under Securities Contracts (Regulation) Rules, 1957.

10. Secondary acquisition in a financial year by the trust shall not exceed 2% of the paid up equity
capital as at the end of the previous financial year.

11. The total number of shares under secondary acquisition held by the trust shall at no time exceed
the limits prescribed in the Regulations, as a percentage of the paid up equity capital as at the end
of the financial year immediately prior to the year in which the shareholder approval is obtained for
such secondary acquisition.

12. The un-appropriated inventory of shares which are not backed by grants, acquired through
secondary acquisition by the trust under Part A, Part B or Part C of these regulations, shall be

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appropriated within a reasonable period which shall not extend beyond the end of the subsequent
financial year.

However, if such trust(s) existing as on the date of notification of these regulations are not able to
appropriate the un-appropriated inventory within one year of such notification, the same shall be
disclosed to the stock exchange(s) at the end of such period and then the same shall be sold on the
recognized stock exchange(s) where shares of the company are listed, within a period of 5 years from
the date of notification of these regulations.

13. The trust shall be required to hold the shares acquired through secondary acquisition for a
minimum period of six months except where they are required to be transferred in the circumstances
enumerated in this regulation, whether off market or on the platform of stock exchange.

14. The trust shall be permitted to undertake off-market transfer of shares only under the following
circumstances:
• transfer to the employees pursuant to scheme(s);
• when participating in open offer under SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011, or when participating in buy-back, delisting or any other exit offered by the
company generally to its shareholders.

15. The trust shall not become a mechanism for trading in shares and hence shall not sell the
shares in secondary market except under the following circumstances:
• to enable the employee to fund the payment of the exercise price, the amount necessary to meet
his/her tax obligations and other related expenses pursuant to exercise of options granted under
the ESOS;
• on vesting or exercise, as the case may be, of SAR under the scheme as prescribed in these
regulations;
• in case of emergency for implementing the schemes covered under Part D and Part E of Chapter
III of SEBI (SBEBSE) Regulations, and for this purpose
o the trustee shall record the reasons for such sale; and
o money so realised on sale of shares shall be utilised within a definite time period as stipulated
under the scheme or trust deed.
• participation in buy-back or open offers or delisting offers or any other exit offered by the
company generally to its shareholders, if required;
• for repaying the loan, if the un-appropriated inventory of shares held by the trust is not
appropriated within the timeline as provided above.
• winding up of the scheme(s); and
• based on approval granted by SEBI to an applicant, for the reasons recorded in writing in respect
of the schemes covered in these regulations, upon payment of a non-refundable fee of ` one lakh
along with the application by way of direct credit in the bank account through NEFT/RTGS/
IMPS or any other mode allowed by RBI or by way of a banker’s cheque or demand draft payable
at Mumbai in favour of SEBI.

16. The trust shall be required to make disclosures and comply with the other requirements
applicable to insiders or promoters under the SEBI (Prohibition of Insider Trading) Regulations,
2015.

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 ROLE OF COMPANY SECRETARY UNDER DIFFERENT REGULATIONS

1. ROLE OF COMPANY SECRETARY IN DELISTING REGULATIONS

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
25 shareholders is in compliance with the applicable provisions of securities laws including
compliance with these regulations.

The SEBI has widen 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.

2. ROLE OF COMPANY SECRETARY IN DEPOSITORY SYSTEM

• Right to Legal Representation (Section 23C): In case of any decision of the SEBI, the
aggrieved entity/company (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 SAT.
• Internal Audit of DPs: The two Depository Service Provides in India viz. NSDL & CDSL have
allowed CS in whole time practice to undertake internal audit of the operations of DPs.
• Reconciliation of Share Capital Audit: CS is authorized to issue quarterly certificate with
regard to reconciliation of the total issued capital, listed capital and capital held by
depositories in dematerialized for, details of changes in share capital during the quarter, and
in-principle approval obtained by the issuer from all the stock exchanges where it is listed
in respect of such further issued capital under SEBI (Depositories and participants)
Regulations, 2018.
• Concurrent Audit of DPs: Practicing CS is authorized to carry out concurrent audit of DP
which covers audit of the process of demat account opening, control and verification of DIS.

3. ROLE OF COMPANY SECRETARY UNDER INSIDER TRADING REGULATIONS

The company secretary shall: (only important points are given from Exam point of View)
1. Ensure compliance with SEBI (PIT) 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 company and submit to the Stock
exchanges.
3. Frame a 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.
4. Receive initial disclosures from every Promoter, KMP and director or every person on
appointment as KMP or Director or becoming a Promoter or member of Promoter Group shall
disclose its shareholdings in the prescribed form within 30 days from these regulations taking
effect or 7 days of such appointment or becoming a promoter or member of PG.
5. Receive from every Promoter, designated persons and director, continual disclosures of the
number of securities acquired or disposed of and changes therein, if the value of the securities
traded exceeds ` 10 lakh with single or series of transaction in any calendar quarter in the
prescribed form within 2 trading days of receipts of disclosure or from becoming aware of such
information.
6. Pre-Clear the trade pursuant to the request received from the designated persons and also
monitor trading in accordance with the regulations.

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7. Ensure that no trading shall between 20th Day prior to closure of financial period and 2nd Trading
day after the disclosure of financial results.
8. Approve the trading plan and after the approval of trading plan, as compliance officer shall notify
the plan to stock exchanges on which the securities are listed.
9. Maintain records, as a compliance officer, of all the declarations given by directors/designated
employees in the appropriate form for a minimum period of 3 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. Maintain a list of all information termed as Price Sensitive Information.
15. Maintain a record of names of files containing confidential information deemed to be price
sensitive information and persons in charge of the same.
16. Ensure that the “Trading Window” is closed at the time of:
a) Declaration of Financial results (Quarterly, half-yearly and annual)
b) Declaration of Dividends (Interim and final)
c) Issue of securities by way of Public/right/bonus, etc
d) Any major expansion plans or executive of new projects
e) Amalgamation, mergers, takeovers and buy back.
f) Disposal of whole or substantially whole of the undertaking
g) Any change in policies, plans or operations of the company
17. Maintain a structured digital database of names of person and entities with whom UPSI are
shared along with their PAN and other details.
18. Serve due notices to maintain confidentiality for every such person with whom information
are shares for legitimate purposes.
19. Educate the employees, board of directors regarding the provisions of the regulations and
amendments from time to time for their better understanding and compliances.

4. ROLE OF COMPANY SECRETARY UNDER BUY BACK REGULATIONS

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.

5. ROLE OF COMPANY SECRETARY UNDER ICDR 2018

Certification by PCS 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.

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 the public issue & 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-ordinating 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 Exchanges.
• Ensuring compliance with the regulations relating to ICDR.

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• The company secretary shall also ensure compliance with the rules and provisions related to the
internal audit, certifications and other applicable rules.

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 GENERAL ROLE & RESPONSIBILITY OF INTERMEDIARIES

COMMON POINTS IN GENERAL OBLIGATIONS & RESPONSIBILITIES

• Every _____________shall abide by the Code of Conduct.
• Every ______________shall appoint a compliance officer who shall be responsible for
monitoring compliance of the Act, Rules and Regulations, Notifications, Guidelines,
instructions, etc issued by SEBI or the CG and for redressal of investor’s grievances.
• Every _____________shall keep and maintain the books of accounts, records and documents
as prescribed.
• The _____________shall preserve the books of accounts and other records and documents for
a minimum period of ____years.
• Every ______________shall furnish the information to the SEBI when required.

1. GENERAL OBLIGATION & REPSONSIBLITIES OF MERCHANT BANKER

• No Merchant Banker shall carry on any business other than that in the Securities Market.
• Every Merchant Banker shall furnish to SEBI half yearly unaudited financial results.
• The Merchant Banker shall preserve the books of accounts and other records and documents
for a minimum period of 5 years.

2. GENERAL OBLIGATIONS & RESPONSIBILITIES OF REGISTRAR & TRANSFER AGENT

• Registrar to an issue shall not act as such registrar for any issue of securities in which he
or it is an associate of the body corporate issuing the securities.
• The registrar to an issue and share transfer agent shall preserve the books of accounts and
other records and documents maintained for a minimum period of 8 years.

3. GENERAL OBLIGATIONS & RESPONSIBILITIES OF BANKER TO AN ISSUE

• Every banker to an issue shall enter into an agreement with the body corporate for whom it
is acting as banker to an issue.
• Every banker to an issue shall inform the SEBI forthwith if any disciplinary action is taken
by the Reserve Bank against the banker to an issue only in relation to issue payment work.

4. GENERAL OBLIGATIONS & RESPONSIBILITIES OF STOCK BROKER

• Every stock broker shall preserve the books of account and other records maintained for a
minimum period of 5 years.

5. QUALIFIED STOCK BROKER & ENHANCED OBLIGATIONS & RESPONSIBILITIES FOR QUALIFIED STOCK BROKER (Dec
2023)
(1) The Board may designate a stock broker as a qualified stock broker having regard to its size
and scale of operations, likely impact on investors and securities market, as well as governance
and service standards, on the basis of the following parameters and the appropriate weightages
thereon:
a) the total number of active clients;
b) the available total assets of clients with the stock broker;
c) the trading volumes of the stock broker;
d) the end of day margin obligations of all clients of a stock broker;
e) compliance score as may be specified by the Board;
f) grievance redressal score as may be specified by the Board; and

g) the proprietary trading volumes of the stock broker.

(2) The stock broker designated as a qualified stock broker shall be required to meet enhanced
obligations and discharge responsibilities to ensure: -
a) appropriate governance structure and processes;
b) appropriate risk management policy and processes;
c) scalable infrastructure and appropriate technical capacity;
d) framework for orderly winding down;
e) robust cyber security framework and processes; and

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f) investor services including online complaint redressal mechanism.

6. GENERAL OBLIGATIONS & RESPONSIBILITIES OF PORTFOLIO MANAGER

• The portfolio manager shall, before taking up an assignment of management of funds and
portfolio on behalf of a client, enter into an agreement in writing with such client that clearly
defines the inter se relationship and sets out their mutual rights, liabilities and obligations
relating to management of portfolio containing the details as specified in Schedule IV.
• The discretionary portfolio manager shall individually and independently manage the funds
of each client in accordance with the needs of the client, in a manner which does not partake
character of a Mutual Fund, whereas the non-discretionary portfolio manager shall manage
the funds in accordance with the directions of the client.
• The portfolio manager shall not accept from the client, funds or securities worth less than
fifty lakh rupees.
• The portfolio manager shall act in a fiduciary capacity with regard to the client’s funds.
• The portfolio manager shall segregate each client’s holding in securities in separate
accounts.
• The portfolio manager shall keep the funds of all clients in a separate account to be
maintained by it in a Scheduled Commercial Bank.
• The portfolio manager shall not derive any direct or indirect benefit out of the client’s funds
or securities.
• The portfolio manager shall not borrow funds or securities on behalf of the client.
• The portfolio manager shall not lend securities held on behalf of the clients to a third person
except as provided under these regulations.
• The portfolio manager shall ensure proper and timely handling of complaints from his clients
and take appropriate action immediately.
• The portfolio manager shall ensure that any person or entity involved in the distribution of
its services is carrying out the distribution activities in compliance with these regulations
and circulars issued thereunder from time to time.
• Every portfolio manager shall furnish to the SEBI a net worth certificate issued by a
chartered accountant as and when required by the SEBI.
• The portfolio manager shall preserve the books of account and other records and documents
mentioned under this chapter for a minimum period of five years.

7. GENERAL OBLIGATIONS & RESPONSIBILITIES OF CUSTODIAN

• Where a custodian is carrying on any activity besides that of acting as custodian then the
activities relating to his business as custodian shall be separate and segregated from all
other activities.
• Every custodian shall have adequate mechanisms for the purposes of reviewing, monitoring,
evaluating and inspection the custodian’s controls, systems, procedures and safeguards.
• No custodian shall assign or delegate its functions as a custodian to any other person unless
such person is a custodian.
• Every custodian shall open a separate custody account for each client, in the name of the
client whose securities are in its custody and the assets of one client shall not be mixed with
those of another client.
• Every custodian shall enter into an agreement with each client on whose behalf it is acting
as custodian.
• Every custodian shall have adequate internal controls to prevent any manipulation of
records and documents including audits for securities, goods and rights or entitlements
arising from the securities and goods held by it on behalf of its client.

8. GENERAL OBLIGATIONS & RESPONSIBILITIES OF INVESTMENT ADVISOR

• An investment adviser shall act in a fiduciary capacity towards its clients and shall disclose
all conflicts of interests as and when they arise.
• An investment adviser shall not receive any consideration by way of remuneration or
compensation or in any other form from any person other than the client being advised, in
respect of the underlying products or securities for which advice is provided.
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• An investment adviser shall maintain an arms-length relationship between its activities as
an investment adviser and other activities.
• An investment adviser which is also engaged in activities other than investment advisory
services shall ensure that its investment advisory services are clearly segregated from all its
other activities, in the manner as prescribed hereunder.
• An investment adviser shall ensure that in case of any conflict of interest of the investment
advisory activities with other activities, such conflict of interest shall be disclosed to the
client.
• An investment adviser shall not divulge any confidential information about its client, which
has come to its knowledge, without taking prior permission of its clients, except where such
disclosures are required to be made in compliance with any law for the time being in force.
• An investment advisor shall not enter into transactions on its own account which is contrary
to its advice given to clients for a period of fifteen days from the day of such advice.
• An investment advisor shall follow Know Your Client procedure as specified by the SEBI from
time to time.
• An investment adviser shall not act on its own account, knowingly to sell securities or
investment products to or purchase securities or investment product from a client.
• In case of change in control of the investment adviser, prior approval from the SEBI shall be
taken.
• It shall be the responsibility of the investment adviser to ensure compliance with the
certification and qualification requirements.

9. GENERAL OBLIGATIONS & RESPONSIBILITIES OF RESEARCH ANALYST

• Research analyst or research entity shall maintain an arms-length relationship between its
research activity and other activities.
• In case of change in control of the research analyst or research entity, prior approval from
the SEBI shall be taken.
• It shall be the responsibility of the research analyst or research entity to ensure that its
employees or partners, as may be applicable, comply with the certification and qualification
requirements at all times.
• All records shall be maintained either in physical or electronic form and preserved for a
minimum period of 5 years.
• Research analyst or research entity shall conduct annual audit in respect of compliance with
these regulations from a member of Institute of Chartered Accountants of India or Institute
of Company Secretaries of India.

10. GENERAL OBLIGATIONS & RESPONSIBILITIES OF CREDIT RATING AGENCY

• Every credit rating agency shall enter into a written agreement with each client whose
securities it proposes to rate.
• Every credit rating agency shall, during the lifetime of securities rated by it continuously
monitor the rating of such securities.
• Every credit rating agency shall disseminate information regarding newly assigned ratings,
and changes in earlier rating promptly through press releases and websites, and, in the case
of securities issued by listed companies, such information shall also be provided
simultaneously to the concerned regional stock exchange and to all the stock exchanges
where the said securities are listed.
• Every credit rating agency shall disclose Rating Definitions and Rationale.
• Where any information is called for by the SEBI from a credit rating agency for the purposes
of these regulations, including any report relating to its activities, the credit rating agency
shall furnish such information to the SEBI.
• Every credit rating agency shall comply with such guidelines, directives, circulars and
instructions as may be issued by the SEBI from time to time.
• Every credit rating agency shall keep and maintain books of accounts, records and
documents for a minimum period of 5 years.

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11. GENERAL OBLIGATIONS & RESPONSIBILITIES OF FOREIGN PORTFOLIO INVESTORS
The foreign portfolio investor shall –
a) comply with the provisions of Foreign Portfolio Investors Regulations, as far as they may
apply, circulars issued thereunder and any other terms and conditions specified by the SEBI
from time to time;

b) forthwith inform the Board and designated depository participant in writing, if any
information or particulars previously submitted to the SEBI or designated depository participant
are found to be false or misleading, in any material respect;

c) forthwith inform the SEBI and designated depository participant in writing, if there is any
material change in the information including any direct or indirect change in its structure or
ownership or control, previously furnished by him to the SEBI or designated depository
participant;

d) as and when required by the SEBI or any other Government agency in India, submit any
information, record or documents in relation to its activities as a foreign portfolio investor;

e) forthwith inform the SEBI and the designated depository participant, in case of any penalty,
pending litigation or proceedings, findings of inspections or investigations for which action may
have been taken or is in the process of being taken by an overseas regulator against it;

f) obtain a Permanent Account Number from the Income Tax Department;

g) in relation to its activities as foreign portfolio investor, at all times, subject itself to the extant
Indian laws, rules, regulations, guidelines and circulars issued from time to time;

h) be a fit and proper person based on the criteria specified in Schedule II of the Securities and
Exchange Board of India (Intermediaries) Regulations, 2008;

i) undertake necessary KYC on its shareholders/investors in accordance with the rules

applicable to it in the jurisdiction where it is organised;

j) provide any additional information or documents including beneficiary ownership details of

their clients as may be required by the designate depository participant or the SEBI or any other
enforcement agency to ensure compliance with the Prevention of Money Laundering Act, 2002
and the rules and regulations specified thereunder, the Financial Action Task Force standards
and circulars issued from time to time by the Board; and

k) ensure that securities held by foreign portfolio investors are free from all encumbrances.

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 PENALTIES
PENALTIES UNDER SEBI ACT 1992
Penalty for failure to furnish information, return, etc. 15A.
If any person, who is required under this Act or any rules or regulations made thereunder,—
(a) to furnish any document, return or report to the Board, fails to furnish the same or who
furnishes or files false, incorrect or incomplete information, return, report, books or other
documents, he shall be liable to a penalty which shall not be less than one lakh rupees but
which may extend to one lakh rupees for each day during which such failure continues subject
to a maximum of one crore rupees;

(b) to file any return or furnish any information, books or other documents within the time
specified therefor in the regulations, fails to file return or furnish the same within the time
specified therefor in the regulations or who furnishes or files false, incorrect or incomplete
information, return, report, books or other documents, he shall be liable to a penalty which
shall not be less than one lakh rupees but which may extend to one lakh rupees for each day
during which such failure continues subject to a maximum of one crore rupees;

(c) to maintain books of account or records, fails to maintain the same, he shall be liable to a
penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees
for each day during which such failure continues subject to a maximum of one crore rupees.

Penalty for failure by any person to enter into agreement with clients. 15B.
If any person, who is registered as an intermediary and is required under this Act or any rules
or regulations made thereunder to enter into an agreement with his client, fails to enter into
such agreement, he shall be liable to a penalty which shall not be less than one lakh rupees but
which may extend to one lakh rupees for each day during which such failure continues subject
to a maximum of one crore rupees.

Penalty for failure to redress investors’ grievances. 15C.

If any listed company or any person who is registered as an intermediary, after having been
called upon by the Board in writing including by any means of electronic communication], to
redress the grievances of investors, fails to redress such grievances within the time specified by
the Board, such company or intermediary shall be liable to a penalty which shall not be less
than one lakh rupees but which may extend to one lakh rupees for each day during which such
failure continues subject to a maximum of one crore rupees.

Penalty for certain defaults in case of mutual funds. 15D.

If any person, who is—
(a) required under this Act or any rules or regulations made thereunder to obtain a certificate
of registration from the Board for sponsoring or carrying on any collective investment scheme,
including mutual funds, sponsors or carries on any collective investment scheme, including
mutual funds, without obtaining such certificate of registration, he shall be liable to a penalty
which shall not be less than one lakh rupees but which may extend to one lakh rupees for each
day during which he sponsors or carries on any such collective investment scheme including
mutual funds subject to a maximum of one crore rupees;

(b) registered with the Board as a collective investment scheme, including mutual funds, for
sponsoring or carrying on any investment scheme, fails to comply with the terms and conditions
of certificate of registration, he shall be liable to a penalty which shall not be less than one lakh
rupees but which may extend to one lakh rupees for each day during which such failure
continues subject to a maximum of one crore rupees;

(c) registered with the Board as a collective investment scheme, including mutual funds, fails to
make an application for listing of its schemes as provided for in the regulations governing such
listing, he shall be liable to a penalty which shall not be less than one lakh rupees but which

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may extend to one lakh rupees for each day during which such failure continues subject to a
maximum of one crore rupees;
(d) registered as a collective investment scheme, including mutual funds, fails to despatch unit
certificates of any scheme in the manner provided in the regulation governing such despatch,
he shall be liable to a penalty which shall not be less than one lakh rupees but which may
extend to one lakh rupees for each day during which such failure continues subject to a
maximum of one crore rupees;
(e) registered as a collective investment scheme, including mutual funds, fails to refund the
application monies paid by the investors within the period specified in the regulations, he shall
be liable to a penalty which shall not be less than one lakh rupees but which may extend to one
lakh rupees for each day during which such failure continues subject to a maximum of one
crore rupees;
(f) registered as a collective investment scheme, including mutual funds, fails to invest money
collected by such collective investment schemes in the manner or within the period specified in
the regulations, he shall be liable to a penalty which shall not be less than one lakh rupees but
which may extend to one lakh rupees for each day during which such failure continues subject
to a maximum of one crore rupees.

Penalty for failure to observe rules and regulations by an asset management company.
15E.
Where any asset management company of a mutual fund registered under this Act, fails to
comply with any of the regulations providing for restrictions on the activities of the asset
management companies, such asset management company shall be liable to a penalty which
shall not be less than one lakh rupees but which may extend to one lakh rupees for each day
during which such failure continues subject to a maximum of one crore rupees.

Penalty for default in case of alternative investment funds, infrastructure investment

trusts and real estate investment trusts. 15EA.
Where any person fails to comply with the regulations made by the Board in respect of
alternative investment funds, infrastructure investment trusts and real estate investment trusts
or fails to comply with the directions issued by the Board, such person shall be liable to penalty
which shall not be less than one lakh rupees but which may extend to one lakh rupees for each
day during which such failure continues subject to a maximum of one crore rupees or three
times the amount of gains made out of such failure, whichever is higher.

Penalty for default in case of investment adviser and research analyst. 15EB.
Where an investment adviser or a research analyst fails to comply with the regulations made by
the Board or directions issued by the Board, such investment adviser or research analyst shall
be liable to penalty which shall not be less than one lakh rupees but which may extend to one
lakh rupees for each day during which such failure continues subject to a maximum of one
crore rupees.

Penalty for default in case of stock brokers. 15F.

If any person, who is registered as a stock broker under this Act,—
(a) fails to issue contract notes in the form and manner specified by the stock exchange of which
such broker is a member, he shall be liable to a penalty which shall not be less than one lakh
rupees but which may extend to one crore rupees for which the contract note was required to
be issued by that broker;

(b) fails to deliver any security or fails to make payment of the amount due to the investor in the
manner within the period specified in the regulations, he shall be liable to a penalty which shall
not be less than one lakh rupees but which may extend to one lakh rupees for each day during
which 95[such failure continues] subject to a maximum of one crore rupees;

(c) charges an amount of brokerage which is in excess of the brokerage specified in the
regulations, he shall be liable to a penalty which shall not be less than one lakh rupees but

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which may extend to five times the amount of brokerage]] charged in excess of the specified
brokerage, whichever is higher.

Penalty for insider trading. 15G.

If any insider who,—
(i) either on his own behalf or on behalf of any other person, deals in securities of a body
corporate listed on any stock exchange on the basis of any unpublished price -sensitive
information; or
(ii) communicates any unpublished price-sensitive information to any person, with or without
his request for such information except as required in the ordinary course of business or under
any law; or
(iii) counsels, or procures for any other person to deal in any securities of any body corporate
on the basis of unpublished price-sensitive information, shall be liable to a penalty which shall
not be less than ten lakh rupees but which may extend to twenty-five crore rupees or three
times the amount of profits made out of insider trading, whichever is higher.

Penalty for non-disclosure of acquisition of shares and takeovers. 15H.

If any person, who is required under this Act or any rules or regulations made thereunder, fails
to,—
(i) disclose the aggregate of his shareholding in the body corporate before he acquires any shares
of that body corporate; or
(ii) make a public announcement to acquire shares at a minimum price; or
(iii) make a public offer by sending letter of offer to the shareholders of the concerned company;
or
(iv) make payment of consideration to the shareholders who sold their shares pursuant to letter
of offer, he shall be liable to a penalty which shall not be less than ten lakh rupees but which
may extend to twenty-five crore rupees or three times the amount of profits made out of such
failure, whichever is higher.

Penalty for fraudulent and unfair trade practices. 15HA.

If any person indulges in fraudulent and unfair trade practices relating to securities, he shall
be liable to a penalty which shall not be less than five lakh rupees but which may extend to
twenty-five crore rupees or three times the amount of profits made out of such practices,
whichever is higher.

Penalty for alteration, destruction, etc., of records and failure to protect the electronic
database of Board. 15HAA.
Any person, who—
(a) knowingly alters, destroys, mutilates, conceals, falsifies, or makes a false entry in any
information, record, document (including electronic records), which is required under this Act
or any rules or regulations made thereunder, so as to impede, obstruct, or influence the
investigation, inquiry, audit, inspection or proper administration of any matter within the
jurisdiction of the Board.

(b) without being authorised to do so, access or tries to access, or denies of access or modifies
access parameters, to the regulatory data in the database;

(c) without being authorised to do so, downloads, extracts, copies, or reproduces in any form
the regulatory data maintained in the system database;

(d) knowingly introduces any computer virus or other computer contaminant into the system
database and brings out a trading halt;

(e) without authorisation disrupts the functioning of system database;

(f) knowingly damages, destroys, deletes, alters, diminishes in value or utility, or affects by any
means, the regulatory data in the system database; or
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(g) knowingly provides any assistance to or causes any other person to do any of the acts
specified in clauses (a) to (f) shall be liable to a penalty which shall not be less than one lakh
rupees but which may extend to ten crore rupees or three times the amount of profits made out
of such act, whichever is higher.

Penalty for contravention where no separate penalty has been provided. 15HB.
Whoever fails to comply with any provision of this Act, the rules or the regulations made or
directions issued by the Board thereunder for which no separate penalty has been provided,
shall be liable to a penalty which shall not be less than one lakh rupees but which may extend
to one crore rupees.

PENALTIES UNDER DEPOSITORIES ACT 1996

1) Penalty for failure to furnish information/ Return/ Documents/ Report to the board; Maintain
books of accounts or records.
2) Penalty for failure to enter into Agreement.
3) Penalty for failure to redress investor’s Grievances
4) Penalty for delay in dematerialization or Issue of Certificate of Securities
5) Penalty for failure to reconcile records.
One Lakh rupees for each day during which such failure continues or One Crore; Whichever is Less.

Penalty for contravention where no separate penalty has been provided:

Which may extend to 1 crore rupees.

PENALTIES UNDER SCRA

Penalty for failure to furnish information, return, etc. 23A.
Any person, who is required under this Act or any rules made thereunder,—
(a) to furnish any information, document, books, returns or report to the recongnised stock
exchange or to the Board, fails to furnish the same within the time specified therefor in the
listing agreement or conditions or bye-laws of the recongnised stock exchange or the Act or rules
made thereunder, or who furnishes false, incorrect or incomplete information, document, books,
return or report, shall be liable to a penalty which shall not be less than one lakh rupees but
which may extend to one lakh rupees for each day during which such failure continues subject
to a maximum of one crore rupees for each such failure;
(b) to maintain books of account or records, as per the listing agreement or conditions, or
byelaws of a recognised stock exchange, fails to maintain the same, shall be liable to a penalty
which shall not be less than one lakh rupees but which may extend to one lakh rupees for each
day during which such failure continues subject to a maximum of one crore rupees.

Penalty for failure by any person to enter into an agreement with clients. 23B.
If any person, who is required under this Act or any bye-laws of a recognised stock exchange
made thereunder, to enter into an agreement with his client, fails to enter into such an
agreement, he shall be liable to a penalty which shall not be less than one lakh rupees but
which may extend to one lakh rupees for each day during which such failure continues subject
to a maximum of one crore rupees] for every such failure.

Penalty for failure to redress investors’ grievances. 23C.

If any stock broker or sub-broker or a company whose securities are listed or proposed to be
listed in a recognised stock exchange, after having been called upon by the Securities and
Exchange Board of India or a recognised stock exchange in writing, to redress the grievances of
the investors, fails to redress such grievances within the time stipulated by the Securities and
Exchange Board of India or a recognised stock exchange, he or it shall be liable to a penalty
which shall not be less than one lakh rupees but which may extend to one lakh rupees for each
day during which such failure continues subject to a maximum of one crore rupees.

Penalty for failure to segregate securities or moneys of client or clients. 23D.

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If any person, who is registered under section 12 of the Securities and Exchange Board of India
Act, 1992 as a stock broker or sub-broker, fails to segregate securities or moneys of the client
or clients or uses the securities or moneys of a client or clients for self or for any other client,
he shall be liable to a penalty which shall not be less than one lakh rupees but which may
extend to one crore rupees.

Penalty for failure to comply with provision of listing conditions or delisting conditions
or grounds. 23E.
If a company or any person managing collective investment scheme or mutual fund 123[or real
estate investment trust or infrastructure investment trust or alternative investment fund], fails
to comply with the listing conditions or delisting conditions or grounds or commits a breach
thereof, it or he shall be liable to a penalty which shall not be less than five lakh rupees but
which may extend to twenty-five crore rupees.

Penalty for excess dematerialisation or delivery of unlisted securities. 23F.

If any issuer dematerialises securities more than the issued securities of a company or delivers
in the stock exchanges the securities which are not listed in the recognised stock exchange or
delivers securities where no trading permission has been given by the recognised stock
exchange, he shall be liable to a penalty which shall not be less than five lakh rupees but which
may extend to twenty-five crore rupees.

Penalty for failure to furnish periodical returns, etc. 23G.

If a recognised stock exchange fails or neglects to furnish periodical returns or furnishes false,
incorrect or incomplete periodical returns to the Securities and Exchange Board of India or fails
or neglects to make or amend its rules or bye-laws as directed by the Securities and Exchange
Board of India or fails to comply with directions issued by the Securities and Exchange Board
of India, such recognised stock exchange shall be liable to a penalty which shall not be less than
five lakh rupees but which may extend to twenty-five crore rupees.

Penalty for failure to conduct business in accordance with rules, etc. 23GA.
Where a stock exchange or a clearing corporation fails to conduct its business with its members
or any issuer or its agent or any person associated with the securities markets in accordance
with the rules or regulations made by the SEBI and the directions issued by it under this Act,
the stock exchange or the clearing corporations, as the case may be, shall be liable to penalty
which shall not be less than five crore rupees but which may extend to twenty-five crore rupees
or three times the amount of gains made out of such failure, whichever is higher.

Penalty for contravention where no separate penalty has been provided. 23H.
Whoever fails to comply with any provision of this Act, the rules or articles or bye - laws or the
regulations of the recognised stock exchange or directions issued by the Securities and
Exchange Board of India for which no separate penalty has been provided, shall be liable to a
penalty which shall not be less than one lakh rupees but which may extend to one crore rupees.

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 OBLIGATIONS UNDER VARIOUS LAWS

OBLIGATIONS FOR ALL BUY-BACK OF SHARES OR OTHER SPECIFIED SECURITIES

Obligations of the Company Obligations of the Merchant
Banker
• The company shall ensure that, – The merchant banker shall
➢ the letter of offer, the public announcement of the offer or ensure that –
any other advertisement, circular, brochure, publicity • the company is able to
material shall contain true, factual and material information implement the offer;
and shall not contain any misleading information and must • the provision relating to
state that the directors of the company accept the escrow account has been
responsibility for the information contained in such complied with;
documents. • firm arrangements for
➢ the company shall not issue any shares or other specified monies for payment to fulfil
securities including by way of bonus till the date of expiry of the obligations under the
buy-back period for the offer made under these regulations; offer are in place;
➢ the company shall pay the consideration only by way of cash; • the public announcement of
➢ the company shall not withdraw the offer to buy-back after buy-back is made in terms
the draft letter of offer is filed with SEBI or public of the regulations;
announcement of the offer to buy-back is made; • the letter of offer has been
➢ the promoter(s) or his/their associates shall not deal in the filed in terms of the
shares or other specified securities of the company in the regulations;
stock exchange or off-market, including inter-se transfer of • a due diligence certificate
shares among the promoters during the period from the date along with the draft letter of
of passing the resolution of the board of directors or the offer has been furnished to
special resolution, as the case may be, till the closing of the SEBI;
offer. • the contents of the public
➢ the company shall not raise further capital for a period of one announcement of offer as
year from the expiry of buy-back period, except in discharge well as the letter of offer are
of its subsisting obligations. true, fair and adequate and
• No public announcement of buy-back shall be made during quoting the source wherever
the pendency of any scheme of amalgamation or compromise necessary;
or arrangement pursuant to the provisions of the Companies • due compliance of sections
Act, 2013. 68, 69 and 70 of the
• The company shall nominate a compliance officer and Companies Act and any
investors service centre for compliance with the buy-back other laws or rules as may
regulations and to redress the grievances of the investors. be applicable in this regard
• particulars of the security certificate extinguished and has been made;
destroyed shall be furnished by the company to the stock • the bank with whom the
exchanges where the shares or other specified securities of escrow or special amount
the company are listed within 7 working days of has been deposited releases
extinguishment and destruction of the certificates. the balance amount to the
• The company shall not buy-back the locked-in shares or company only upon
other specified securities and non-transferable shares or fulfilment of all obligations
other specified securities till the pendency of the lock-in or by the company under the
till the shares or other specified securities become regulations;
transferable. • a final report is submitted to
• The company shall within 2 working days of expiry of buy- SEBI in the form specified
back period issue a public advertisement in a national daily, within 15 working days
inter alia, disclosing: from the date of expiry of
(a) number of shares or other specified securities bought; buy-back period.
(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 1% of total shares or
other specified securities are bought back; and

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 (e) the consequent changes in the capital structure and the
shareholding pattern after and before the buy-back.

COMMON OBLIGATIONS OF LISTED ENTITIES UNDER LODR 2015

CHAPTER III: COMMON OBLIGATIONS OF LISTED ENTITES
OVERVIEW The Listing regulations has specified the generic obligations or common
obligations of listed entity with respect to filing of information,
responsibilities of compliance officer, fees etc. and these requirements are
applicable to all types of listed securities.

COMPLIANCE (1) A listed entity shall appoint a qualified company secretary as the
OFFICER AND compliance officer.
HIS/HER
OBLIGATIONS (2) The compliance officer of the listed entity shall be responsible for-
(Regulation 6) (a) Ensuring conformity with the regulatory provisions applicable to
the listed entity in letter and spirit.
(b) co-ordination with and reporting to the Board, recognized 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.
(c) Ensuring that the correct procedures have been followed that would
result in the correctness, authenticity and comprehensiveness of the
information, statements and reports filed by the listed entity under these
regulations.
(d) monitoring email address of grievance redressal division as
designated by the listed entity for the purpose of registering complaints
by investors:

Provided that the requirements of this regulation shall not be applicable

in the case of units issued by mutual funds which are listed on recognized
stock exchange(s) but shall be governed by the provisions of the SEBI
(Mutual Funds) Regulations, 1996.

SHARE (1) The listed entity shall appoint a share transfer agent or manage the
TRANSFER share transfer facility in-house:
AGENT
(Regulation 7) Provided that, in the case of in-house share transfer facility, as and
when the total number of holders of securities of the listed entity exceeds
1,00,000, the listed entity shall either register with the Board as a
Category II share transfer agent or appoint Registrar to an issue and
share transfer agent registered with the Board.

(2) The listed entity shall ensure that all activities in relation to share
transfer facility are maintained either in house or by Registrar to an issue
and share transfer agent registered with the Board.

(3) The listed entity shall submit a compliance certificate to the exchange,
duly signed by both the compliance officer of the listed entity and the
authorized representative of the share transfer agent, wherever
applicable, within 30 days from the end of the financial year, certifying
compliance with the requirements of sub- regulation (2).

(4) In case of any change or appointment of a new share transfer agent,

the listed entity shall enter into a tripartite agreement between the existing
share transfer agent, the new share transfer agent and the listed entity,
in the manner as specified by the Board from time to time:

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 Provided that in case the existing share transfer facility is managed in-
house, the agreement referred above shall be entered into between the
listed entity and the new share transfer agent.

(5) The listed entity shall intimate such appointment, referred to in sub-
regulation (4), to the stock exchange(s) within 7 days of entering into the
agreement.

(6) The agreement referred to in sub-regulation (4) shall be placed in the

subsequent meeting of the board of directors:

Provided that the requirements of this regulation shall not be applicable

to the units issued by mutual funds that are listed on recognized stock
exchange(s).

CO-OPERATION The listed entity, wherever applicable, shall co-operate with and submit
WITH correct and adequate information to the intermediaries registered with
INTERMEDIARIES the Board such as credit rating agencies, registrar to an issue and share
REGISTERED transfer agents, debenture trustees etc., within timelines and procedures
WITH BOARD specified under the Act, regulations and circulars issued there under:
(Regulation 8)
Provided that requirements of this regulation shall not be applicable to the
units issued by mutual funds listed on a recognized stock exchange(s) for
which the provisions of the SEBI (Mutual Funds) Regulations, 1996 shall
be applicable.

PRESERVATION The listed entity shall have a policy for preservation of documents,
OF DOCUMENTS approved by its board of directors, classifying them in at least two
(Regulation 9) categories as follows-
(a) documents whose preservation shall be permanent in nature;
(b) documents with preservation period of not less than eight years after
completion of the relevant transactions:

Provided that the listed entity may keep documents specified in clauses
(a) and (b) in electronic mode.

FILING OF (1) The listed entity shall file the reports, statements, documents, filings
INFORMATION and any other information with the recognized stock exchange(s) on the
(Regulation 10) electronic platform as specified by the Board or the recognized stock
exchange(s).
(2) The listed entity shall put in place infrastructure as required for
compliance with sub-regulation (1).

SCHEME OF The listed entity shall ensure that any scheme of arrangement
ARRANGEMENT /amalgamation /merger /reconstruction /reduction of capital etc. to be
(Regulation 11) 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):

Provided that this regulation shall not be applicable for the units issued
by Mutual Fund which are listed on a recognized stock exchange(s).

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 PAYMENT OF The listed entity shall use any of the electronic mode of payment facility
DIVIDEND OR approved by the Reserve Bank of India, in the manner specified in
INTEREST OR Schedule I, for the payment of the following:
REDEMPTION OR (a) dividends;
REPAYMENT (b) interest;
(Regulation 12) (c) redemption or repayment amounts:

Provided that where it is not possible to use electronic mode of payment,

payable-at-par‘ warrants or cheque may be issued:

Provided further that where the amount payable as dividend exceeds `

1,500, the payable-at-par ‘warrants or cheque shall be sent by speed post.

GRIEVANCE (1)The listed entity shall ensure that adequate steps are taken for
REDRESSAL expeditious redressal of investor complaints.
MECHANISM (2) The listed entity shall ensure that it is registered on the SCORES
(Regulation 13) platform or such other electronic platform or system of the Board as shall
be mandated from time to time, in order to handle investor complaints
electronically in the manner specified by the Board.
(3) The listed entity shall file with the recognized stock exchange(s) on a
quarterly basis, within 21 days from the end of each quarter, a statement
giving the number of investor complaints pending at the beginning of the
quarter, those received during the quarter, disposed of during the quarter
and those remaining unresolved at the end of the quarter.
(4) The statement as specified in sub-regulation (3) shall be placed, on
quarterly basis, before the board of directors of the listed entity.

OBLIGATIONS OF ACQUIRER (SAST REGULATIONS REGULATION 25)

(1) Prior to making the public announcement of an open offer for acquiring shares under these
regulations, the acquirer shall ensure that firm financial arrangements have been made for fulfilling
the payment obligations under the open offer and that the acquirer is able to implement the open
offer, subject to any statutory approvals for the open offer that may be necessary.

(2) In the event the acquirer has not declared an intention in the detailed public statement and the
letter of offer to alienate any material assets of the target company or of any of its subsidiaries
whether by way of sale, lease, encumbrance or otherwise outside the ordinary course of business,
the acquirer, where he has acquired control over the target company, shall be debarred from causing
such alienation for a period of two years after the offer period:

Provided that in the event the target company or any of its subsidiaries is required to so alienate
assets despite the intention to alienate not having been expressed by the acquirer, such alienation
shall require a special resolution passed by shareholders of the target company, by way of a postal
ballot and the notice for such postal ballot shall inter alia contain reasons as to why such alienation
is necessary.

(3) The acquirer shall ensure that the contents of the public announcement, the detailed public
statement, the letter of offer and the post-offer advertisement are true, fair and adequate in all
material aspects and not misleading in any material particular, and are based on reliable sources,
and state the source wherever necessary.

(4) The acquirer and persons acting in concert with him shall not sell shares of the target company
held by them, during the offer period.

(5) The acquirer and persons acting in concert with him shall be jointly and severally responsible for
fulfilment of applicable obligations under these regulations.

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OBLIGATIONS OF TARGET COMPANY (REGULATION 26 OF SAST REGULATIONS)
(1) Upon a public announcement of an open offer for acquiring shares of a target company being
made, the board of directors of such target company shall ensure that during the offer period, the
business of the target company is conducted in the ordinary course consistent with past practice.

(2) During the offer period, unless the approval of shareholders of the target company by way of a
special resolution by postal ballot is obtained, the board of directors of either the target company or
any of its subsidiaries shall not,—
(a) alienate any material assets whether by way of sale, lease, encumbrance or otherwise or enter
into any agreement therefor outside the ordinary course of business;
(b) effect any material borrowings outside the ordinary course of business;
(c) issue or allot any authorised but unissued securities entitling the holder to voting rights:
(d) implement any buy-back of shares or effect any other change to the capital structure of the target
company;
(e) enter into, amend or terminate any material contracts to which the target company or any of its
subsidiaries is a party, outside the ordinary course of business, whether such contract is with a
related party, within the meaning of the term under applicable accounting principles, or with any
other person; and
(f) accelerate any contingent vesting of a right of any person to whom the target company or any of
its subsidiaries may have an obligation, whether such obligation is to acquire shares of the target
company by way of employee stock options or otherwise.

(3) In any general meeting of a subsidiary of the target company 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 2 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:

(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:

(7) The committee of independent directors 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 2 working days before the commencement of
the tendering period, in the same newspapers where the public announcement of the open offer was
published, and simultaneously, a copy of the same shall be sent to,—
(i) the Board;
(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) to the manager to the open offer, and where there are competing offers, to the manager
to the open offer for every competing offer.

(8) The board of directors of the target company shall facilitate the acquirer in verification of shares
tendered in acceptance of the open offer.

(9) The board of directors of the target company 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 of the target company shall without any delay register the transfer of shares acquired by
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the acquirer in physical form, whether under the agreement or from open market purchases, or
pursuant to the open offer.

OBLIGATIONS OF THE MANAGER TO THE OPEN OFFER (REGULATION 27 OF SAST REGULATION)

(1) Prior to public announcement being made, the manager to the open offer shall ensure that,—
(a) the acquirer is able to implement the open offer; and
(b) firm arrangements for funds through verifiable means have been made by the acquirer to
meet the payment obligations under the open offer.

(2) The manager to the open offer shall ensure that the contents of the public announcement, the
detailed public statement and the letter of offer and the post offer advertisement are true, fair and
adequate in all material aspects, not misleading in any material particular, are based on reliable
sources, state the source wherever necessary, and are in compliance with the requirements under
these regulations.
(3) The manager to the open offer shall furnish to the Board a due diligence certificate along with the
draft letter of offer filed under regulation 16.
(4) The manager to the open offer shall ensure that market intermediaries engaged for the purposes
of the open offer are registered with the Board.
(5) The manager to the open offer shall exercise diligence, care and professional judgment to ensure
compliance with these regulations.
(6) The manager to the open offer shall not deal on his own account in the shares of the target
company during the offer period.
(7) The manager to the open offer shall file a report with the Board within 15 working days from
the expiry of the tendering period, in such form as may be specified, confirming status of
completion of various open offer requirements.

GENERAL OBLIGATIONS OF COMPANY IN RELATION TO ISSUE OF SWEAT EQUITY SHARES (SBEBSE REGULATIONS)

The company shall ensure that –

(a) the explanatory statement to the notice for general meeting contains the disclosures specified
under clause (b) of sub-section (1) of section 54 of the Companies Act, 2013 and sub-regulation (1)
of regulation 32 of these regulations.
(b) the secretarial auditor’s certificate required under regulation 36 is placed in the general meeting
of the shareholders.
(c) the company, within 7 days of the issue of sweat equity shares, sends a statement to the
recognised stock exchange, disclosing:
(i) number of sweat equity shares issued;
(ii) price at which the sweat equity shares are issued;
(iii) total amount received towards sweat equity shares;
(iv) details of the persons to whom sweat equity shares have been issued; and
(v) the consequent changes in the capital structure and the shareholding pattern before and after
the issue of sweat equity shares.

OBLIGATIONS OF COLLECTIVE INVESTMENT MANAGEMENT COMPANY (CIMC)

Every CIMC should:
• be responsible for managing the funds or properties of the CIS on behalf of the unit holders and
take all reasonable steps and exercise due diligence to ensure that the CIS is managed in
accordance with the provisions of these regulations, the offer document and the trust deed.
• exercise due diligence and care in managing assets and funds of the CIS and also be responsible
for the acts of commissions and omissions by its employees or the persons whose services have
been availed by it
• remain liable to the unit holders for its acts of commission or omissions.
• be incompetent to enter into any transaction with or through its associates, or their relatives
relating to the CIS. However, in case the CIMC enters into any transactions relating to the CIS
with any of its associates, a report to that effect shall immediately be sent to the trustee and to
SEBI.
• appoint registrar and share transfer agents and should also abide by their respective Code of
Conducts.
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• give receipts for all monies received and report of the receipts and payments to SEBI, on monthly
basis.
• hold a meeting of Board of Directors to consider the affairs of CIS, at least twice in every 3 months
and also ensures that its officers or employees do not make improper use of their position or
information to gain, directly or indirectly, an advantage for themselves or for any other person or
to cause detriment to the CIS.
• obtain adequate insurance against the properties of the CIS and comply with such guidelines,
directives, circulars and instructions as may be issued by SEBI from time to time on the subject
of Collective Investment Scheme.

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 DISTINGUISH BETWEEN
Depository Bank
Holds securities in an account Holds funds in an account
Transfers securities between accounts on Transfer funds between accounts on the
the instruction of the beneficial owner instructions of the account holder
account holder.
Facilitates transfer of ownership without Facilitates transfer of funds without having to
having to handle securities handle money
Accountable for safe custody of securities Accountable for safe custody of funds

Depository Custodian
Function It is responsible for “safe keeping” of securities It is responsible for “safe keeping” of
but also transfers beneficial ownership to the securities but does not transfer
real owner. beneficial ownership to the real
owner.
Act There is a separate Act i. e. Depositories Act, There is no separate Act and it is
1996, apart from SEBI (Depositories and regulated by SEBI (Custodian of
Participant) Reg., 1996 Securities) Reg., 1996

Basis for Primary Market Secondary Market

comparison
Meaning The market place for issuing freshThe market place for trading already
securities issued securities
Objectives To raise funds Capital Appreciation
Scope Includes issuance of new securities
Includes the further trading of
through Initial Public Offer (IPO)securities already offered to the
public
Purchasing of Investors can purchase securities Purchase and sale of securities is
securities directly from the Company done by the investors among
themselves
Financing Primary market provides funds to It does not provide funding to
new and old companies for their companies
expansion and diversification
Parties to Company and Investors Investors among themselves
transactions
Major Underwriters, Merchant Bankers Brokers
Intermediaries
Price Price as given in the offer document/ Price fluctuates i.e. depends on
red herring prospectus demand and supply forces
Utilisation of fund Fund gained from primary market Fund received from secondary
becomes the capital of the company market becomes income of investors

Key differences between WPI & CPI

• Primary use of WPI is to have inflationary trend in the economy as a whole. However, CPI is used
for adjusting income and expenditure streams for changes in the cost of living.
• WPI is based on wholesale prices for primary articles, administered prices for fuel items and ex -
factory prices for manufactured products. On the other hand, CPI is based on retail prices, which
include all distribution costs and taxes.
• Prices for WPI are collected on voluntary basis while price data for CPI are collected by
investigators by visiting markets.
• CPI covers only consumer goods and consumer services while WPI covers all goods including
intermediate goods transacted in the economy.
• WPI weights primarily based on national accounts and enterprise survey data and CPI weights
are derived from consumer expenditure survey data.

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Dematerialization:
It is a process of conversion of physical share certificate into electronic form. So, when a shareholder
uses the dematerialization facility, a company takes back the shares, through depository system and
equal number of shares is credited in his Demat account in electronic form.

The investors can dematerialize only those shares certificate that are already registered in their name
and belong to the list of securities admitted for dematerialized at the depositories. This method is
cost effective and simple and has been adopted in India.

An Investor will have to first open an account with a Depository Participant and then request for
Dematerialization of his share certificate through the Depository Participant so that the
dematerialized holdings can be credited into that account. This is very similar to opening a bank
account.

Dematerialization of shares is optional and an investor can still hold shares in physical form.
However, he/ she have to Demat the shares if he/she wishes to sell the same through stock
exchanges. Similarly, if an Investor purchases shares from stock exchange, he/she will get the
delivery of shares in Demat form.

Immobilization: Where physical share certificates are kept in vaults with the depository for safe
custody. All subsequent transactions in these securities take place in book entry form. The actual
owner has the right to withdraw his physical securities as and when desired. The immobilization of
fresh issue may be achieved by issuing a jumbo certificate representing the entire issue in the name
of depository, as nominee of the beneficial owners.

Voluntary Delisting Compulsory Delisting

▪ Voluntary delisting is a wish of a ▪ Compulsory delisting is a penalty imposed on
company for permanent removal of company which has not complied with provisions
trading of its shares from the stock of listing agreement requirement.
market.
▪ In simple words, it is an action taken ▪ Compulsory delisting means permanent removal
by the Company on its own to of securities trading on of listed company from
permanently remove its securities stock exchange as penalizing measure at behest of
trading from a stock exchange. stock exchange for not making
submissions/comply with requirements set out in
the Listing agreement within prescribed time
frames.
▪ In Voluntary delisting, a company has ▪ The Stock Exchanges have power under the
to follow SEBI (Delisting of equity provisions of the Securities Contracts
shares) Regulations, 2021. (Regulations) Act, 1956 to delist the trading of any
securities of a listed company.

BASIS OF DIFF BULK DEAL BLOCK DEAL

Quantity/ Value Total quantity bought or sold is
more than 0.5% of the number
of equity shares of a listed
company.
Trading Window Normal trading window
Visibility Bulk deal are visible to
everyone.
In the block deal, the minimum order size
for execution of trades shall be `10 Crore.
Separate trading window
The stock exchanges disseminates the
information on block deals such as the
name of the scrip, name of the client,
quantity of shares bought/sold, traded
price, etc. to the general public on the
same day, after the market hours.

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Direct Route for ESOPs
1. Company forms a compensation committee and define the eligibility criteria of ESOPs.
2. Company issue fresh shares for ESOPs.
3. After vesting period employees can exercise the option.
4. On exercise of an option company issues the shares to the eligible employees.

Trust Route for ESOPs

1. Company forms an Employee Welfare Trust.
2. Company grants loan to the trust for subscribing shares.
3. Company issues fresh shares to the Trust and option to the Eligible Employees.
4. Employees exercise the options.
5. Trust transfers the Shares to the employee upon receipt of exercise price.
6. Trust repays the loan to the company.

Open Ended MUTUTAL FUND Close Ended MUTUAL FUND

• Can be purchased on any transaction day • Can be purchased only
during NFO
• Can be redeemed on any transaction day [Except when units • Can be redeemed only at
are locked-in in the case of Equity-Linked Savings Scheme maturity
(ELSS) funds]
• High liquidity • Low on liquidity

Regular Plans MUTUAL FUND Direct Plans MUTUAL FUND

• Sold through a distributor • Sold directly by the AMC (AMC)
• Higher Expense Ratio (Due to commissions • Lower Expense Ratio (No commission paid to
paid to distributor) distributor)
• Potentially lower returns to the investor • Potentially higher returns

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RECENT AMENDMENTS & CIRCULARS FROM ICSI SUPPLEMENT
1. Redressal of Investor Grievances through the SEBI Complaint Redressal (SCORES)
Platform and Linking it to Online Dispute Resolution Platform. (Circular No.
SEBI/HO/OIAE/IGRD/CIR/P/2023/156 dated September 20, 2023)

SEBI Complaint Redressal System (SCORES) is a centralised web based complaint redressal
facilitation platform launched in 2011 vide circular dated June 3, 2011 to provide a facilitative
platform for the benefit of the aggrieved investors, whose grievances against (a) listed company,
(b) registered intermediary or (c) market infrastructure institution (“Entities”) remain
unresolved. Since then, SEBI has revised and strengthened the process of facilitating the
redressal of grievances by such Entities. Currently, the process of investor grievances redressal
on SCORES is governed by the Master Circular dated November 07, 2022 on “Processing of
investor complaints against listed companies in SEBI Complaints Redress System –SCORES”
(bearing reference SEBI/HO/OIAE/IGRD/P/CIR/2022 /0150)

In order to strengthen the existing investor grievance handling mechanism through SCORES by
making the entire redressal process of grievances in the securities market comprehensive by
providing a solution that makes the process more efficient by reducing timelines and by
introducing auto-routing and auto-escalation of complaint, SEBI notified the SEBI (Facilitation
of Grievance Redressal Mechanism) (Amendment) Regulations, 2023 and amended the various
SEBI regulations such as SEBI (Stock Brokers) Regulations, 1992, SEBI (Merchant Bankers)
Regulations, 1992, SEBI (Registrars to an Issue and Share Transfer Agents) Regulations,1993,
SEBI (Debenture Trustees) Regulations, 1993, SEBI (Bankers to an Issue) Regulations, 1994
etc., vide notification dated August 16, 2023. Consequently, it becomes necessary to revise the
extant process for redressal of investors’ grievances against Entities and provide for a
mechanism through which Designated Bodies may monitor the process of the redressal of
investors’ grievances by Entities.

The Designated Bodies, as per this circular, include Listed companies, Merchant Bankers,
Bankers to an Issue, Real Estate Investment Trusts, Municipal Debt Securities, Debenture
Trustees, Portfolio Managers, Mutual Funds, Depository Participants, Investment Advisers,
Registrars to an Issue and Share Transfer Agents, Stock Brokers, Vault Managers.

Responsibilities of the Designated Bodies

The Designated Bodies shall be responsible for:
• Monitoring and handling grievance redressal of investors against respective entities under
their domain as stipulated under Schedule
• Taking non-enforcement actions including issuing advisories, caution letters for non-redressal
of investor grievances and referring to SEBI for enforcement actions.

Framework for handling of investor grievances received through SCORES by Entities and
monitoring of the redressal process by designated bodies.
1. Submission of the Complaint and handling of the Complaint by the Entity:
• All Entities who are in receipt of the complaints of the investors through SCORES, shall resolve
the complaint within 21 calendar days of receipt of such Complaint.

• The Complaints lodged on SCORES against any Entity shall be automatically forwarded to the
concerned Entity through SCORES for resolution and submission of ATR. Entities shall resolve
the Complaint and upload the ATR on SCORES within 21 calendar days of receipt of the
Complaint. The ATR of the entity will be automatically routed to the complainant.

• The Complaint against the Entity shall be simultaneously forwarded through SCORES to the
relevant Designated Body. The Designated Body shall ensure that the concerned Entity submits
the ATRs within the stipulated time of 21 calendar days.

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• The Designated Body shall monitor the ATRs submitted by the entities under their domain
and inform the concerned entity to improve the quality of redressal of grievances, wherever
required.
• SEBI may concurrently monitor grievance redressal process by entities and Designated Bodies.

2. First review of the Complaint:

• In case complainant is satisfied with the resolution provided by the entity vide the ATR or
complainant does not choose to review the Complaint, the Complaint shall be disposed on
SCORES. However, if the complainant is not satisfied, the complainant may request for a review
of the resolution provided by the entity within 15 calendar days from the date of the ATR.

• In case the complainant has requested for a review of the resolution provided by the entity or
the entity has not submitted the ATR within the stipulated time of 21 calendar days, the
concerned Designated Body shall take cognizance of the Complaint for first review of the
resolution through SCORES. The Designated Body shall take up the first review with the
concerned Entity, wherever required. The concerned Entity shall submit the ATR to the
Designated Body within the time stipulated by the Designated Body.

• The Designated Body may seek clarification on the ATR submitted by the Entity for the first
review. The concerned Entity shall provide clarification to the respective Designated Body,
wherever sought and within such timeline, as the Designated Body may stipulate. The
Designated Body shall stipulate the timeline in such as manner to ensure that the Designated
Body submits the revised ATR to the complainant on SCORES within 10 calendar days of the
review sought.

3. Second Review of the Complaint:

• The complainant may seek a second review of the Complaint within 15 calendar days from the
date of the submission of the ATR by the Designated Body. In case the complainant is satisfied
with the ATR provided by the concerned Designated Body or complainant does not choose to
review the Complaint within the period of 15 calendar days, the Complaint shall be disposed on
SCORES.

• In case the complainant is not satisfied with the ATR provided by the Designated Body or the
concerned Designated Body has not submitted the ATR within 10 calendar days, SEBI may take
cognizance of the Complaint for second review through SCORES.

• SEBI may take up the review with stakeholders involved, including the concerned entity
or/and Designated Body. The concerned entity or/and Designated Body shall take immediate
action on receipt of second review complaint from SEBI and submit revised ATR to SEBI through
SCORES, within the timeline specified by SEBI.

• SEBI or the Designated Body (as the case may be) may seek clarification on the ATR submitted
by the concerned entity for SEBI review complaint. The concerned entity shall provide
clarification to the respective Designated Body and/or SEBI, wherever sought and within such
timeline as specified.

• The second review Complaint shall be treated as ‘resolved’ or ‘disposed’ or ‘closed’ only when
SEBI ‘disposes’ or ‘closes’ the Complaint in SCORES. Hence, mere filing of ATR with respect to
SEBI review complaint will not mean that the SEBI review complaint is disposed.

4. Action for failure to redress investor complaints by listed companies:

• The Designated Stock Exchange (DSE) shall levy a fine of ₹ 1000 per day per complaint on the
listed company for violation of Regulation 13 (1) of SEBI (Listing Obligation and Disclosure
Requirements) Regulations, 2015 (LODR Regulations) read with SEBI circular no.
SEBI/HO/CFD/CMD/CIR/P/2020/12 dated January 22, 2020.

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• DSE shall issue a notice intimating the listed company about the levy of fines while also
directing it to submit ATRs on the pending complaints and payment of the fines within 15 days
from the date of such notice.

• In case the listed company fails to redress the grievances and/or pay fine levied within 15 days
from the date of such notice, the concerned DSE shall issue notices to the promoter(s) of such
listed company, to ensure submission of ATRs on the pending complaints and payment of fines
by the listed company within 10 days from the date of such notice.

• In case the listed entity fails to comply with the aforesaid requirement and/ or pay fine levied
within the stipulated period as per the notices, the DSE shall forthwith intimate the depositories
to freeze the entire shareholding of the promoter(s) in such listed company as well as all other
securities held in the demat account of the promoter(s).

• In case the listed entity fails to pay the fine or resolve the complaint despite receipt of the
notice as stated above, the DSE may initiate other action as deemed appropriate.

• The procedure and actions mentioned above shall only be applicable for categories of
complaints provided below:
1) Non updation of address /Signature or Corrections etc.
2) Non-receipt of Bonus
3) Non receipt of Dividend
4) Non receipt duplicate debt securities certificate
5) Non-receipt of duplicate share certificate
6) Non receipt of fractional entitlement
7) Non receipt of interest for delay in dividend
8) Non receipt of interest for delay in payment of interest on debt security
9) Non receipt of interest for delay in redemption proceeds of debt security
10) Non receipt of interest for delay in refunds
11) Non receipt of interest on securities
12) Non receipt of redemption amount of debt securities
13) Non receipt of refund in Public/ Rights issue
14) Non receipt of Rights Issue form
15) Non receipt of securities after conversion/ endorsement/ consolidation/ splitting
16) Non receipt of securities after transfer
17) Non receipt of securities in public/ rights issue
18) Non receipt of shares after conversion/ endorsement/ consolidation/ splitting
19) Non receipt of shares after transfer
20) Non receipt of shares after transmission
21) Non receipt of shares in public/ rights issue (including allotment letter)
22) Non-receipt of interest for delay in dispatch/credit of securities
23) Receipt of refund/ dividend in physical mode instead of electronic mode
24) Receipt of shares in physical mode instead of electronic mode
25) Demat/Remat
26) Complaints of any other nature as may be informed from time to time

General provisions regarding investor grievance redressal

• Investors shall first take up their grievances for redressal with the entity concerned, through
their designated persons/officials who handle issues relating to compliance and redressal of
investor grievances.
• Investors who wish to lodge a Complaint on SCORES (complainant) are required to register
themselves on www.scores.gov.in by clicking on “Register here” under the “Investor Corner”.
While filing the registration form, details like Name of the investor, Permanent Account Number
(PAN), contact details, email id, are required to be provided for effective communication and
speedy redressal of the grievances. Upon successful registration, a unique user id and a
password shall be generated and communicated through an acknowledgement email to the
complainant.
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• In order to enhance ease, speed and accuracy in the redressal of grievance, the investor may
lodge the Complaint against any Entity on SCORES within a period of one year from the date of
occurrence of the cause of action, where:
a. The complainant has approached the Entity for redressal of the complaint and the Entity has
rejected the complaint or the complainant has not received any communication from the
concerned Entity;
b. The complainant is not satisfied with the reply received or the redressal by the concerned
Entity.

• If any complaint filed on SCORES beyond the limitation period specified above, SEBI may
reject such complaint.

• The following types of complaints shall not be dealt through SCORES:

a. Complaints against companies which are unlisted/delisted and companies on Dissemination
Board of Stock Exchanges (except complaints on valuation of securities).

b. Complaints relating to cases pending in a court or subject matter of quasijudicial proceedings,

disputes pending with Online Dispute Resolution mechanism under the aegis of Market
Infrastructure Institutions [as per SEBI master circular
SEBI/HO/OIAE/OIAE_IAD1/P/CIR/2023/145 dated July 31, 2023] etc.

c. Complaints falling under the purview of other regulatory bodies such as Reserve Bank of
India, (RBI), Insurance Regulatory and Development Authority of India (IRDAI), Pension Fund
Regulatory and Development Authority of India (PFRDAI), Competition Commission of India
(CCI), or complaints falling under the purview of other ministries.

d. Complaints against a company under resolution under the relevant provisions of the
Insolvency and Bankruptcy Code, 2016 (IBC).

e. Complaints against the companies where the name of company is struck off from Register of
Companies (RoC) or a vanishing company as published by MCA.

f. Liquidated Companies or companies under liquidation.

g. Complaints which are in the nature of market intelligence i.e., information given to SEBI
regarding violation of any of the provisions of the securities laws.

• SEBI shall handle the first review complaint for categories of intermediaries where no
Designated Body has been appointed for the purpose.

• The complainant in the event of being dissatisfied shall give reasons for not being satisfied
with the ATR and provide clear reasons for review at any stage.

• SCORES shall only be a facilitative platform for investors to get redressal of their grievances
from the concerned entity.

• In cases where investors raise issues, which require adjudication on any third party rights, on
questions of law or fact or which is in the nature of a lis between parties, or if investors are not
satisfied with disposal on SCORES post SEBI review, they shall seek appropriate remedies
through the Online Dispute Resolution mechanism in securities market. In addition, investors
have the option to approach legal forums including civil courts, consumer courts etc.

• Investors can approach the Online Dispute Resolution mechanism or other appropriate civil
remedies at any point of time. In case the complainant opts for Online Dispute Resolution
mechanism or other appropriate civil remedies while the complaint is pending on SCORES, the
complaint shall be treated as disposed on SCORES.

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The provisions of this circular related to work flow of processing of investor grievances by
Entities and framework for monitoring and handling of investor complaints by the Designated
Bodies shall come into force with effect from April 01, 2024. This Circular shall rescind the
Master Circular SEBI/HO/OIAE/IGRD/P/CIR/2022/0150 dated November 07, 2022 above
with effect from April 01, 2024.

2. Shareholder approval required for Appointment or Reappointment [Regulation 17(1D) of

LODR 2015] Board Constitution

17(1D) With effect from April 1, 2024, the continuation of a director serving on the board of
directors of a listed entity shall be subject to the approval by the shareholders in a general
meeting at least once in every five years from the date of their appointment or reappointment,
as the case may be.

However, the continuation of the director serving on the board of directors of a listed entity as
on March 31, 2024, without the approval of the shareholders for the last five years or more shall
be subject to the approval of shareholders in the first general meeting to be held after March
31, 2024.

Provided further that the requirement specified in this regulation shall not be applicable to the
Whole-Time Director, Managing Director, Manager, Independent Director or a Director retiring
as per the sub-section (6) of section 152 of the Companies Act, 2013, if the approval of the
shareholders for the reappointment or continuation of the aforesaid directors or Manager is
otherwise provided for by the provisions of these regulations or the Companies Act, 2013 and
has been complied with.

The requirement specified in this regulation shall not be applicable to the director appointed
pursuant to the order of a Court or a Tribunal or to a nominee director of the Government on
the board of a listed entity, other than a public sector company, or to a nominee director of a
financial sector regulator on the board of a listed entity.

The requirement specified in this regulation shall not be applicable to a director nominated by
a financial institution registered with or regulated by the Reserve Bank of India under a lending
arrangement in its normal course of business or nominated by a Debenture Trustee registered
with the Board under a subscription agreement for the debentures issued by the listed entity.

3. Vacancy to be filled in the office of a director [Regulation 17(1E) of LODR 2015]

Any vacancy in the office of a director shall be filled by the listed entity at the earliest and in
any case not later than 3 months from the date such vacancy. However, if the listed entity
becomes non-compliant, due to expiration of the term of office of any director, the resulting
vacancy shall be filled by the listed entity not later than the date such office is vacated.

4. Vacancies to be filled in respect of certain Key Managerial Personnel (Regulation 26A of

LODR 2015)
• Any vacancy in the office of Chief Executive Officer, Managing Director, Whole Time Director
or Manager shall be filled by the listed entity at the earliest and in any case not later than 3
months from the date of such vacancy.

• Any vacancy in the office of the Chief Financial Officer shall be filled by the listed entity at the
earliest and in any case not later than 3 months from the date of such vacancy.

• The listed entity shall not fill such vacancy by appointing a person in interim capacity, unless
such appointment is made in accordance with the laws applicable in case of a fresh appointment
to such office and the obligations under such laws are made applicable to such person.

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5. Disclosure requirements for certain types of agreements binding listed entities: (Regulation
30A of LODR)
All the shareholders, promoters, promoter group entities, related parties, directors, key
managerial personnel and employees of a listed entity or of its holding, subsidiary and associate
company, who are parties to the agreements specified in clause 5A of para A of part A of schedule
III to these regulations, shall inform the listed entity about the agreement to which such a listed
entity is not a party, within 2 working days of entering into such agreements or signing an
agreement to enter into such agreements.
6. Special rights to shareholders: (Regulation 31B of LODR)
Any special right granted to the shareholders of a listed entity shall be subject to the approval
by the shareholders in a general meeting by way of a special resolution once in every five years
starting from the date of grant of such special right.

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