Appointments

PART V: APPOINTMENT OF LEAD MANAGERS, OTHER INTERMEDIARIES AND COMPLIANCE OFFICER

Regulation 23. Appointments

23(1).

• The issuer must appoint one or more Merchant Bankers to manage the public issue.

• The Merchant Banker(s) appointed as Lead Manager(s) must be registered with SEBI.

• An issuer may appoint:

  1. One Lead Manager, or

  2. Multiple Lead Managers, depending on the size and complexity of the issue.

• A Lead Manager is the Merchant Banker primarily responsible for managing and coordinating the entire public issue.

• The Lead Manager performs functions such as:

  1. Conducting due diligence.

  2. Preparing and filing the Draft Offer Document and other issue documents.

  3. Coordinating with SEBI, stock exchanges and other intermediaries.

  4. Managing the IPO process.

  5. Ensuring compliance with the ICDR Regulations and other applicable laws.

• Only a Merchant Banker registered with SEBI can act as a Lead Manager.

• An unregistered Merchant Banker cannot be appointed as a Lead Manager.

23(2).

• When the issuer appoints more than one Lead Manager for the public issue:

  1. The rights, obligations and responsibilities of each Lead Manager must be clearly determined in advance.

  2. The allocation of responsibilities must be made before the public issue.

• The responsibilities may relate to, among other things:

  1. Disclosures in the Draft Offer Document and Offer Document.

  2. Allotment of securities.

  3. Refund of application money, where applicable.

  4. Underwriting obligations, if the issue is underwritten.

  5. Any other responsibilities assigned in connection with the issue.

• Each Lead Manager must know which specific functions it is responsible for.

• The allocation of these responsibilities must be disclosed in:

  1. The Draft Offer Document (DOD).

  2. The Offer Document.

• The disclosure must be made in the manner specified in Schedule I of the ICDR Regulations

23(3).

• At least one Lead Manager appointed for the public issue must not be an associate of the issuer.

  1. The term "associate" has the meaning assigned to it under the SEBI (Merchant Bankers) Regulations, 1992.

  2. This ensures that at least one independent Lead Manager is involved in managing the issue.

  3. A Lead Manager may be an associate of the issuer.

• However, where a Lead Manager is an associate of the issuer:

  1. It must disclose that it is an associate of the issuer.

  2. The disclosure must be made in the Draft Offer Document and the Offer Document, as applicable.

• An associate Lead Manager cannot perform all the functions of a Lead Manager.

• Its role is restricted only to the marketing of the issue.

• It cannot undertake responsibilities such as:

  1. Due diligence.

  2. Certification of disclosures.

  3. Regulatory compliance.

  4. Other core responsibilities entrusted to an independent Lead Manager.

23(4).

• The issuer must appoint the other intermediaries required for the public issue.

  1. The appointment must be made in consultation with the Lead Manager(s).

  2. The Lead Manager(s) must independently assess the capability of each intermediary before its appointment.

  3. The assessment must ensure that the intermediary is capable of performing its assigned functions and obligations in relation to the public issue.

  4. The issuer cannot appoint an intermediary without the involvement and assessment of the Lead Manager(s).

• The intermediaries appointed must be registered with SEBI, wherever such registration is required.

• Other intermediaries may include:

  1. Registrar to the Issue.

  2. Bankers to the Issue.

  3. Underwriters.

  4. Brokers to the Issue.

  5. Credit Rating Agencies (where applicable).

  6. Debenture Trustees (where applicable).

  7. Any other SEBI-registered intermediary involved in the public issue

23(5).

• The issuer must enter into a written agreement with the Lead Manager(s) appointed for the public issue.

• The agreement with the Lead Manager(s) must be in the format specified in Schedule II of the ICDR Regulations.

• The agreement defines the rights, duties, obligations and responsibilities of the issuer and the Lead Manager(s) in relation to the public issue.

• The issuer must also enter into separate agreements with the other intermediaries appointed for the issue.

• The agreements with the other intermediaries must comply with the respective SEBI regulations governing those intermediaries.

• Different intermediaries are governed by different regulations. For example:

  1. Registrar to the Issue.

  2. Bankers to the Issue.

  3. Underwriters.

  4. Debenture Trustees.

  5. Credit Rating Agencies.

  6. Other SEBI-registered intermediaries.

• The format and contents of these agreements will depend on the regulations applicable to the particular intermediary.

Additional Contractual Clauses Cannot Dilute Statutory Obligations

• The agreements between the issuer and the intermediaries may contain additional clauses apart from those prescribed under the applicable regulations.

• The additional clauses may be included if both the issuer and the intermediaries consider them appropriate.

• However, the additional clauses must not reduce, restrict or dilute the legal responsibilities of:

  1. The Lead Manager(s).

  2. Other intermediaries.

  3. The issuer.

• The contractual terms cannot override or weaken the obligations imposed under law.

• The liabilities and obligations under the following laws must continue to apply in full:

  1. The SEBI Act, 1992.

  2. The Companies Act, 2013.

  3. The Securities Contracts (Regulation) Act, 1956 (SCRA).

  4. The Depositories Act, 1996.

  5. The rules and regulations made under these Acts.

  6. Any statutory modification or re-enactment of these laws.

• Even if the agreement contains additional commercial terms, none of those terms can excuse a party from complying with its statutory duties.

Deemed Agreement with SCSBs under ASBA Process

• In an ASBA (Application Supported by Blocked Amount) process, the issuer is not required to execute a separate agreement with the Self-Certified Syndicate Banks (SCSBs).

• Instead, the issuer must recognise the existence of a deemed agreement with the SCSBs.

  1. A deemed agreement means that, by virtue of the ASBA framework and the applicable SEBI regulations:

  2. The relationship between the issuer and the SCSBs is treated as if an agreement exists, even though no formal written agreement is executed.

• Self-Certified Syndicate Banks (SCSBs) are banks recognised by SEBI to:

  1. Accept ASBA applications.

  2. Block the application money in the applicants' bank accounts.

  3. Upload the bid details to the stock exchange.

  4. Debit the blocked amount only if shares are allotted.

• The issuer must acknowledge and act in accordance with this deemed contractual relationship while conducting the public issue through the ASBA process.

23(6).

• The issuer must appoint different intermediaries depending on the method of the public issue.

  1. Where the issue is made through the Book Building Process, the issuer must appoint Syndicate Member(s).

  2. Where the issue is made through any method other than the Book Building Process (such as a Fixed Price Issue), the issuer must appoint Bankers to the Issue.

  3. The appointment must be made at the centres specified in Schedule XII of the ICDR Regulations.

• The number and location of the centres must comply with the requirements laid down in Schedule XII.

• Syndicate Members are intermediaries who:

  1. Accept bids from investors during a book-built issue.

  2. Upload bid details into the electronic bidding system.

  3. Assist investors in the bidding process.

  4. Coordinate with the stock exchanges and other intermediaries.

• Bankers to the Issue are banks that:

  1. Collect application forms and application money (where applicable).

  2. Handle banking operations relating to the issue.

  3. Facilitate processing of applications in accordance with the applicable regulations

23(7).

• The issuer must appoint a Registrar to the Issue for the public issue.

  1. The Registrar to the Issue must be registered with SEBI.

  2. The Registrar must have connectivity with all the depositories.

• Connectivity with all the depositories ensures that the Registrar can:

  1. Process applications received in demat form.

  2. Coordinate allotment of securities.

  3. Credit securities to investors' demat accounts.

  4. Exchange information with every recognised depository.

• The Registrar performs functions such as:

  1. Processing applications.

  2. Finalising the basis of allotment.

  3. Coordinating refunds, where applicable.

  4. Crediting securities to successful applicants.

  5. Maintaining records relating to the issue.

Appointment of Independent Registrar to the Issue

• The issuer cannot appoint itself as the Registrar to the Issue, even if it is registered as a Registrar.

• An independent Registrar must be appointed.

• The objective is to avoid a conflict of interest by ensuring that the processing of applications and allotments is carried out by an independent intermediary.

Lead Manager and Registrar Cannot Be the Same

• A Lead Manager cannot act as the Registrar to the Issue if it is also handling the post-issue responsibilities.

• Post-issue responsibilities include activities such as:

  1. Finalising the basis of allotment.

  2. Coordinating refunds.

  3. Ensuring credit of securities to investors' demat accounts.

  4. Filing post-issue reports with SEBI.

  5. Supervising completion of post-issue formalities

23(8).

• The issuer must appoint a Compliance Officer.

  1. The Compliance Officer must be a person qualified to be a Company Secretary.

  2. It is not necessary that the person is appointed as the Company Secretary of the issuer.

  3. It is sufficient if the person possesses the qualifications required to be appointed as a Company Secretary under the applicable law.

• The Compliance Officer is responsible for monitoring compliance with the securities laws.

• Securities laws include:

  1. The SEBI Act, 1992.

  2. The ICDR Regulations.

  3. The LODR Regulations (where applicable).

  4. The SAST Regulations.

  5. The PIT Regulations.

  6. Other applicable SEBI laws and regulations.

• The Compliance Officer is also responsible for redressal of investors' grievances.

• Investors' grievances may include complaints relating to:

  1. Non-receipt of shares.

  2. Delay in refunds.

  3. Errors in allotment.

  4. Non-credit of securities to demat accounts.

  5. Any other issue relating to the public issue.

• The Compliance Officer acts as the nodal person for ensuring regulatory compliance and addressing investor complaints during and after the public issue.