Definitions Part - 2
2(aa). Issuer
Issuer means a company or a body corporate.
Such entity must be authorized to issue specified securities under the relevant laws.
Its specified securities must be either being issued or offered for sale.
The issue or offer must be in accordance with these regulations.
Explanation:
An issuer is the entity that is raising money or offering securities to investors.
It can be a company (Indian company) or any other body corporate legally allowed to issue securities.
A issuer can issue securities by a Fresh Issue or by Offer of sale.
Issuance of new securities (fresh issue).
Offer for sale (existing securities being sold).
The key condition is that the process must follow SEBI regulations (ICDR).
Example:
A company launches an IPO and the company is the issuer.
In an OFS where promoters sell shares - The company is still the issuer, even though shares are sold by promoters
2(bb). Key Managerial Personnel
Key managerial personnel has the same meaning as under Section 2(51) of the Companies Act, 2013.
Key managerial personnel (often called KMP) are the most senior executives responsible for managing and controlling the company’s operations.
Under the Act, KMP includes:
The Chief Executive Officer (CEO), Managing Director, or Manager.
The Company Secretary.
The Whole-time Director.
The Chief Financial Officer (CFO).
Any other officer, not more than one level below the directors, who is in whole-time employment and is designated as a key managerial personnel by the Board.
Any other officer as may be prescribed by the government.
These individuals hold key positions of authority and accountability in the company’s management and decision-making processes
2(cc). Lead Manager
Lead manager means a merchant banker.
Such merchant banker must be registered with the Board (SEBI).
It is appointed by the issuer.
Its role is to manage the issue.
In case of a book-built issue, the lead manager(s) act as book running lead manager(s) (BRLMs).
They perform functions specifically related to the book building process.
Explanation:
A lead manager is basically the main intermediary handling the entire public issue process.
It is always a SEBI-registered merchant banker to ensure credibility and compliance.
The issuer appoints one or more lead managers to:
Structure the issue.
Prepare offer documents (DRHP/RHP).
Ensure regulatory compliance.
Coordinate with SEBI, stock exchanges, and other intermediaries.
In book building, they also:
Collect bids from investors.
Help discover the issue price.
Manage demand during the issue period.
2(dd). Listed Issuer
Listed issuer means an issuer whose equity shares are listed.
Such listing must be on a recognised stock exchange.
The stock exchange must have nationwide trading terminals.
Explanation:
A listed issuer is simply a company whose shares are publicly traded on a stock exchange.
The exchange must be a recognised one (like NSE, BSE).
Nationwide trading terminals means:
Investors across India can trade in those shares.
Not limited to a local or regional exchange.
Once listed, the company becomes subject to:
SEBI regulations.
Listing obligations and disclosure requirements (LODR).
When a company lists its shares on NSE and BSE.
Its shares are now available for public trading across India.
Therefore, the company becomes a listed issuer.
2(ee). Main Board
Main board means a recognised stock exchange.
Such stock exchange must have nationwide trading terminals.
It excludes an SME exchange.
Therefore, it refers to the primary stock exchange platform for regular (non-SME) listings.
2(ff). Net Offer
Net offer means an offer of specified securities to the public.
It excludes reservations made in the issue.
It also excludes promoters’ contribution brought in as part of the issue.
Explanation:
Net offer refers to the portion of the issue that is actually available for the general public to subscribe.
It does not include portions that are already set aside for specific categories.
So, from the total issue size:
Remove reserved portions (like for employees, shareholders, etc.)
Remove promoters’ contribution.
The remaining portion = Net offer
Difference between issue size and net offer
Issue size is the total size of the issue (including everything)
Net offer is only the public portion available for subscription
What is excluded from net offer?
(a). Reservations
Portions reserved for specific categories like:
Employees.
Existing shareholders.
Anchor investors (in some contexts).
(b). Promoters’ contribution
Mandatory contribution by promoters.
Not available to public investors.
2(gg). Net Tangible Assets
Net tangible assets mean the sum of all net assets of the issuer.
It excludes intangible assets.
Intangible assets are as defined under Accounting Standard 26 (AS 26) or Indian Accounting Standard (Ind AS) 38.
These standards are issued by the Institute of Chartered Accountants of India (ICAI).
Explanation:
Net tangible assets represent the real, physical and financial value of a company.
It removes assets that cannot be physically touched or easily valued (like goodwill, patents, brand value).
So, it focuses on solid, measurable assets of the company.
Net tangible assets = Total assets − Intangible assets − Liabilities (since “net assets” already account for liabilities)
Net Assets
Net assets = Total assets − Total liabilities.
Represents the actual ownership value of the company.
Tangible Assets
As per AS 26 / Ind AS 38:
Goodwill
Brand value
Patents
Trademarks
Software (in some cases)
These are excluded because:
They are not physical.
Their valuation can be subjective.
Net tangible assets matter are used to assess:
Financial strength of the company.
Eligibility criteria for IPOs (e.g., minimum NTA requirements).
It gives investors a more reliable picture of asset backing.
2(hh). Net Worth
Net worth means the aggregate value of paid-up share capital.
It includes all reserves created out of profits.
It also includes the securities premium account.
It includes the debit or credit balance of the profit and loss account.
From this total, the following are deducted:
Accumulated losses
Deferred expenditure
Miscellaneous expenditure not written off
The calculation is based on the audited balance sheet.
It does NOT include:
Reserves created out of revaluation of assets.
Write-back of depreciation.
Reserves arising from amalgamation.
Explanation:
Net worth represents the true financial strength of a company.
It shows how much value belongs to shareholders after adjustments.
It includes:
Capital invested by shareholders
Profits retained in the business
It excludes items that may artificially inflate value (like revaluation reserves).
Net worth includes:
(a). Paid-up share capital - Money invested by shareholders.
(b). Free reserves - Profits retained in the business.
(c). Securities premium - Extra amount received over face value of shares.
(d) P&L balance - Profit (credit) increases net worth & Loss (debit) reduces net worth.
Deductions include:
Accumulated losses - Past losses reduce value.
Deferred expenditure - Expenses not yet written off.
Miscellaneous expenditure - on-core expenses pending write-off.
Exclusions include:
These are excluded because they are not real cash/profit-backed reserves:
Revaluation reserves (increase in asset value on paper).
Write-back of depreciation.
Amalgamation reserves.
2(ii). Nominated Investor
Nominated investor means a qualified institutional buyer or a private equity fund.
Such investor enters into an agreement with the lead manager(s).
The agreement relates to a specific issue made under Chapter IX.
The investor agrees to subscribe to the issue in case of under-subscription.
The investor may also agree to receive or deliver specified securities in the market-making process.
Explanation:
A nominated investor is a pre-identified strong investor brought in to support the issue.
It is usually a QIB or PE fund that is financially capable and sophisticated.
In case of under-subscription: If the public does not subscribe fully the nominated investor steps in and buys the remaining shares.
After listing, the nominated investor may buy and sell shares in the market.
Private equity fund means a fund that is registered with a regulatory authority.
It also includes a fund established by a person who is registered with a regulatory authority.
Thus, the fund itself may be registered, or it may be set up by a regulated entity.
2(jj). Non-Institutional Investor
Non-institutional investor means an investor who is neither a retail individual investor nor a qualified institutional buyer.
It is a residual category covering all investors who do not fall under retail or QIB categories.
Such investors are typically high net worth individuals (HNIs), corporates, or other entities.
2(kk). Offer Document
Offer document means a red herring prospectus, prospectus, or shelf prospectus in case of a public issue.
These documents are as referred to under the Companies Act, 2013.
In case of a rights issue, “offer document” means a letter of offer.
Thus, the term covers different documents depending on the type of issue (public issue or rights issue).
2(ll). Offer Through Offer Document
“Offer through offer document” means the net offer plus reservations.
It represents the total portion of securities offered through the offer document.
Explanation:
When a company issues securities through an offer document, the total offer is divided into:
Net offer - Portion available to the general public.
Reservations - Portion set aside for specific categories.
So: Offer through offer document = Net offer + Reservations.
This essentially represents the entire public issue (excluding promoter contribution).
2(mm). Persons Acting in Concert
Persons acting in concert shall have the same meaning as assigned under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
The definition is not independently provided here but is borrowed from the Takeover Regulations.
2(nn). Preferential Issue
“Preferential issue” means an issue of specified securities by a listed issuer.
Such issue is made to a select person or group of persons.
It is done on a private placement basis.
It must be in accordance with Chapter V of these regulations.
It does NOT include:
Issue under employee stock option scheme (ESOP).
Issue under employee stock purchase scheme (ESPS).
Sweat equity shares.
Depository receipts issued outside India.
Foreign securities.
Explanation:
A preferential issue is when a listed company issues shares to specific investors instead of the general public.
These investors are pre-identified, such as:
Promoters.
Strategic investors.
Private equity funds.
It is not an open offer like an IPO or FPO, but a targeted fundraising method.
2(oo). Promoter
Promoter shall include a person:
The definition covers a person who is considered a promoter based on their formal identification, actual control over the issuer, or influence over the Board of Directors.
i). Person named as promoter in the offer document or annual return
A person will be treated as a promoter if the issuer itself identifies or names that person as a promoter.
This can happen in:
A draft offer document.
An offer document.
The annual return filed under Section 92 of the Companies Act, 2013.
Therefore, even if the person does not directly manage the day-to-day affairs of the issuer, being officially identified as a promoter can bring that person within the definition.
ii). Person having control over the affairs of the issuer
A person will also be treated as a promoter if they have control over the affairs of the issuer.
The control may be direct or indirect.
The person may exercise such control in different capacities, including:
As a shareholder.
As a director.
Through some other arrangement or position.
Therefore, a person does not necessarily have to be formally designated as a promoter to fall within the definition.
iii). Person whose advice, directions or instructions the Board is accustomed to follow
A person will also be treated as a promoter where the Board of Directors of the issuer is accustomed to act according to that person's:
Advice , Directions or instructions.
This focuses on the person's actual influence over the Board.
The person may not necessarily:
Be a director.
Hold a large shareholding.
Be formally named as a promoter.
What matters is whether the Board regularly acts in accordance with that person's advice, directions or instructions.
Exception to sub-clause (iii)
Sub-clause (iii) treats a person as a promoter where the Board of Directors is accustomed to act according to that person’s:
Advice , Directions or instructions.
However, this rule does not apply when the person is acting merely in a professional capacity.
In other words, A professional who gives advice or guidance to the issuer in the normal course of their professional work will not become a promoter merely because:
The Board follows their advice.
The key distinction is between:
professional advice given as part of the person's professional role; and
directions or instructions given as a person exercising influence or control over the Board.
Financial institutions and other regulated investors not automatically treated as promoters
This provision creates a special rule for certain institutional investors.
Normally, holding a significant percentage of an issuer's equity share capital could be relevant in determining whether a person has control or promoter status.
However, the following entities will not be treated as promoters merely because they hold 20% or more of the issuer's equity share capital:
Financial institution.
Scheduled commercial bank.
Foreign portfolio investor, other than: Individuals corporate bodies and family offices.
Mutual fund.
Venture capital fund.
Alternative investment fund.
Foreign venture capital investor.
Insurance company registered with the Insurance Regulatory and Development Authority of India.
Any other category specified by SEBI from time to time.
Such a person shall not be deemed to be a promoter merely by virtue of the fact that twenty per cent or more of the equity share capital of the issuer is held by such person.
However, this exemption does not apply unless such person also satisfies the other requirements prescribed under these regulations.
2(pp). Promoter Group
“Promoter group” includes:
The definition of “promoter group” is wider than just the promoter.
It brings certain relatives and entities connected with the promoter within the promoter group.
There are two main situations to understand:
When the promoter is any person/body corporate generally.
When the promoter is specifically a body corporate.
When the promoter is specifically an individual.
i). The promoter
The promoter themselves is included in the promoter group.
Therefore, the promoter is always the starting point for determining the promoter group.
ii). Immediate relative of the promoter
An immediate relative of the promoter is also included in the promoter group.
Immediate relative includes:
Spouse of the promoter.
Parent of the promoter.
Brother of the promoter.
Sister of the promoter.
Child of the promoter.
It also includes the following relatives of the promoter's spouse:
Parent of the spouse.
Brother of the spouse.
Sister of the spouse.
Child of the spouse.
iii). Where the promoter is a body corporate
This part applies when the promoter itself is a company or another body corporate.
Three important relationships are covered.
A). Subsidiary or holding company
The following entities are included in the promoter group:
A subsidiary of the promoter body corporate; and
The holding company of the promoter body corporate.
B) Body corporate with 20% or more shareholding relationship
This covers two directions of ownership:
Body corporate in which the promoter holds 20% or more.
If the promoter body corporate holds 20% or more of the equity share capital of another body corporate, that entity becomes part of the promoter group.
Example:
ABC Ltd. is the promoter of XYZ Ltd.
ABC Ltd. holds 25% of PQR Ltd.
PQR Ltd. is part of the promoter group of XYZ Ltd.
Body corporate which holds 20% or more of the promoter
If another body corporate holds 20% or more of the equity share capital of the promoter body corporate, that entity is also included.
So, remember:
Promoter holds ≥ 20% in another body corporate then , that body corporate is included.
Another body corporate holds ≥ 20% in promoter then , that body corporate is included.
C). Omitted
iv). Where the promoter is an individual
If the promoter is an individual rather than a body corporate then:
It covers three types of relationships.
A) Body corporate connected through the promoter, immediate relative, firm or HUF
A body corporate becomes part of the promoter group if 20% or more of its equity share capital is held by:
The promoter.
An immediate relative of the promoter.
A firm in which the promoter or one or more of their relatives is a member.
A Hindu Undivided Family (HUF) in which the promoter or one or more of their relatives is a member.
The important point is that the 20% connection can arise through the promoter, immediate relative, firm or HUF mentioned in this clause.
B) Body corporate connected through another body corporate
This extends the promoter group one level further.
If a body corporate covered under clause (A) holds 20% or more of the equity share capital of another body corporate, that second body corporate is also included in the promoter group.
Example:
Mr. X is the promoter.
PQR Ltd. is covered under clause (A).
PQR Ltd. holds 25% of DEF Ltd.
DEF Ltd. will also form part of the promoter group.
C) HUF or firm where promoter + relatives hold 20% or more
A Hindu Undivided Family or firm is included where the aggregate share of the promoter and their relatives is equal to or more than 20% of the total capital.
Here, the holdings of the promoter and their relatives are considered together.
Example:
Mr. X, the promoter, has 10% of the capital of a firm.
His relatives collectively hold another 12%.
Aggregate holding = 22%.
Since 22% is equal to or more than 20%, the firm falls within the promoter group.
(v). All persons whose shareholding is aggregated under the heading “Shareholding of the Promoter Group”
All persons whose shares are collectively shown under the heading “Shareholding of the Promoter Group” are treated as members of the promoter group.
Their individual shareholdings are disclosed and then aggregated together under the common heading:
“Shareholding of the Promoter Group”.
Such persons may include:
The promoter.
Immediate relatives of the promoter.
Other persons/entities falling within the definition of “promoter group”.
The purpose is to show the total ownership held by the entire promoter group, rather than looking only at the promoter's individual shareholding.
Financial and institutional investors holding 20% or more of the promoter
Certain financial and institutional investors are specifically excluded from being treated as part of the promoter group merely because they hold 20% or more of the promoter.
The entities covered are:
Financial institution
Scheduled bank
Foreign portfolio investor, other than:
individuals;
corporate bodies; and
family offices
Mutual fund
Venture capital fund
Alternative investment fund
Foreign venture capital investor
Insurance company registered with IRDAI
Any other category specified by SEBI
Example:
Assume ABC Ltd. is the promoter of XYZ Ltd.
A mutual fund holds 25% of ABC Ltd.
Normally, a 20% or more shareholding in the promoter can result in the investor being included in the promoter group.
However, because the investor is a mutual fund, it is not treated as part of the promoter group simply because it holds 25% of ABC Ltd.
Financial and institutional investors treated as promoter group in certain cases
Certain financial and institutional investors are generally not treated as part of the promoter group merely because they hold 20% or more of the promoter.
However, they will be treated as promoter group in relation to entities that they themselves promote or sponsor.
The entities covered are:
Financial institution
Scheduled bank
Foreign portfolio investor, other than:
Individuals;
Corporate bodies; and
Family offices
Mutual fund
Venture capital fund
Alternative investment fund
Foreign venture capital investor
Insurance company registered with IRDAI
Any other category specified by SEBI
Where will they be treated as promoter group?
They will be treated as promoter group for:
Subsidiaries promoted by them: If the financial/institutional investor promotes a subsidiary, it will be treated as part of the promoter group of that subsidiary.
Companies promoted by them: If they promote a company, they will be treated as part of that company's promoter group.
Mutual funds sponsored by them: Where they sponsor a mutual fund, they will be treated as part of the promoter group of that mutual fund.
2(qq). Public Financial Institution
Public Financial Institution” means an institution that is recognised as a public financial institution under the Companies Act, 2013.
2(rr). Public Issue
“Public issue” means either of the following:
Initial Public Offer (IPO)
The first offer of securities made by an issuer to the public.
It is generally used when a company is offering its securities to the public for the first time and seeking listing on a stock exchange.
Further Public Offer (FPO)
A further offer of securities made to the public by an issuer that is already listed.
It is used by an existing listed company to raise additional capital from the public.
2(ss). Qualified Institutional Buyer
A “Qualified Institutional Buyer” means certain specified institutional investors that are recognised as QIBs under the ICDR Regulations.
The definition includes the following:
(i). Mutual funds, venture capital funds, AIFs and FVCIs
Mutual funds registered with SEBI.
Venture capital funds registered with SEBI.
Alternative Investment Funds (AIFs) registered with SEBI.
Foreign Venture Capital Investors (FVCIs) registered with SEBI.
(ii) Foreign Portfolio Investors
Foreign Portfolio Investors (FPIs) are included as QIBs.
However, the following are excluded:
Individuals.
Corporate bodies.
Family offices.
(iii). Public Financial Institution
A Public Financial Institution recognised under the Companies Act, 2013 is a QIB.
(iv). Scheduled Commercial Bank
A Scheduled Commercial Bank is included as a QIB.
(v). Multilateral and Bilateral Development Financial Institutions
Development financial institutions operating at multilateral level or bilateral level are included as QIBs.
These institutions generally provide development-oriented financing across countries or between two countries.
(vi). State Industrial Development Corporation
A State Industrial Development Corporation is included as a QIB.
These corporations are established by State Governments to promote industrial development within the state.
(vii). Insurance Company registered with IRDAI
An insurance company registered with the Insurance Regulatory and Development Authority of India (IRDAI) is a QIB.
(viii). Provident Fund with minimum corpus of ₹25 crore
A provident fund qualifies as a QIB if it has a minimum corpus of ₹25 crore.
“Corpus” means the total amount of funds/assets accumulated in the fund.
(ix). Pension Fund with minimum corpus of ₹25 crore
A pension fund qualifies as a QIB if:
It has a minimum corpus of ₹25 crore; and
It is registered with the Pension Fund Regulatory and Development Authority (PFRDA).
(x). National Investment Fund
The National Investment Fund (NIF) established by the Government of India is included as a QIB.
It refers specifically to the National Investment Fund established through the Government of India's resolution dated November 23, 2005.
(xi). Insurance funds managed by the Armed Forces
Insurance funds set up and managed by the Army , Navy or Air Force of the Union of India are QIBs.
(xii). Insurance funds managed by the Department of Posts
Insurance funds set up and managed by the Department of Posts, India are included as QIBs.
(xiii) Systemically Important NBFCs
Systemically Important Non-Banking Financial Companies (NBFCs) are included as QIBs.
These are NBFCs whose size, activities or interconnectedness make them significant to the financial system.
(xiv) Accredited Investors investing in Angel Funds
Accredited Investors, as defined under the SEBI (Alternative Investment Funds) Regulations, 2012, are also included.
However, this inclusion is limited to their investment in Angel Funds registered with SEBI under the AIF Regulations.
Therefore, this does not mean that every investment made by an accredited investor automatically receives QIB status.
The QIB classification applies specifically when the accredited investor invests in a qualifying Angel Fund.
2(tt). Qualified Institutions Placement
A Qualified Institutions Placement is a method through which a listed issuer raises funds by issuing eligible securities to Qualified Institutional Buyers (QIBs).
The issue is made on a private placement basis, meaning the securities are offered only to specified QIBs and not to the general public.
The definition has two parts:
Issue of eligible securities by a listed issuer
The issuer must be a listed issuer.
The issuer issues “eligible securities” to QIBs.
Eligible securities can include securities permitted under the ICDR Regulations for a QIP.
The securities are offered to QIBs rather than to the public at large.
Example:
ABC Ltd. is already listed on a stock exchange.
It wants to raise ₹500 crore.
It issues eligible securities to certain QIBs through private placement.
This is a QIP.
Offer for sale by promoters/promoter group
A QIP can also include an Offer for Sale (OFS) of specified securities.
In this situation, the securities are being sold by:
Promoters and/or members of the promoter group.
The OFS must also be made to QIBs on a private placement basis.
Example:
Promoter X holds 20 lakh shares of ABC Ltd.
X wants to sell 5 lakh of those shares to QIBs.
The sale is made through the QIP framework on a private placement basis.
This can form part of a QIP.
2(uu). Relative
Relative means a relative as defined under the Companies Act, 2013.
2(vv). Retail Individual Investor
A retail individual investor means an individual person who applies or bids for specified securities within the prescribed investment limit.
There are two conditions:
Investor must be an individual
The investor must be a natural person.
Companies, LLPs, trusts, institutions, etc. are not covered as retail individual investors.
Value of application/bid must not exceed ₹2 lakh
The total value for which the individual applies or bids for specified securities must be ₹2 lakh or less.
The limit is based on the value of the application/bid, not merely the number of securities.
Example 1: Within the limit
Mr. A applies for shares worth ₹1,80,000.
₹1,80,000 ≤ ₹2,00,000.
Therefore, Mr. A is a retail individual investor.
Example 2: Exactly ₹2 lakh
Mr. A bids for specified securities worth exactly ₹2,00,000.
The amount does not exceed ₹2 lakh.
Therefore, he qualifies as a retail individual investor.
Example 3: Above the limit
Mr. A applies for securities worth ₹2,50,000.
₹2,50,000 exceeds ₹2 lakh.
Therefore, he does not fall within the definition of a retail individual investor.
2(ww). Retail Individual Shareholder
Retail Individual Shareholder
A retail individual shareholder is a shareholder who applies or bids for specified securities within the prescribed value limit.
There are two important aspects:
The person must be a shareholder
Unlike a “retail individual investor”, this definition specifically refers to a person who is already a shareholder.
The person holds shares/securities of the issuer.
Application or bid must not exceed ₹2 lakh
The shareholder must apply or bid for specified securities for a value of not more than ₹2 lakh.
Not more than means the amount can be less than ₹2 lakh or exactly ₹2 lakh
If the value exceeds ₹2 lakh, the person will not fall within this definition.
2(xx). Rights Issue
Rights Issue
A rights issue is an offer of specified securities made by a listed issuer to its existing shareholders.
The offer is not made to the general public.
It is specifically made to shareholders who are eligible as on a particular date.
Issuer must be listed
The securities must be offered by a listed issuer.
Therefore, the company must already have its securities listed on a recognised stock exchange.
Offer is made to existing shareholders
The specified securities are offered to the shareholders of the issuer.
This gives existing shareholders an opportunity to acquire additional securities.
The offer is generally made in proportion to their existing shareholding, subject to the applicable rights issue terms.
Record Date
The issuer fixes a particular date called the “record date”.
The record date is used to determine which shareholders are entitled to participate in the rights issue.
Only shareholders who are shareholders as on the record date are considered eligible for the rights entitlement.
2(yy). Schedule
“schedule” means schedule annexed to these regulations
2(zz). Scheduled Commercial Bank
Scheduled Commercial Bank
A scheduled commercial bank means a commercial bank that is included in the Second Schedule to the Reserve Bank of India Act, 1934.
So:
Not every commercial bank is automatically a scheduled commercial bank.
The bank must be included in the Second Schedule to the RBI Act, 1934.
The Second Schedule contains the banks that are recognised as “scheduled banks” under the RBI Act.
Therefore, when the ICDR Regulations use the term “scheduled commercial bank”, you have to check whether the bank falls within the Second Schedule.
2(aaa). Self-Certified Syndicate Bank
A “Self-Certified Syndicate Bank” means a banker to an issue that is registered with SEBI and provides the ASBA facility.
Banker to an Issue
The entity must first be a banker to an issue.
A banker to an issue performs banking-related activities in connection with the issue of securities.
Registered with SEBI
The banker to the issue must be registered with SEBI.
Therefore, an ordinary bank providing banking services does not automatically become an SCSB.
Must offer ASBA facility
The bank must provide the ASBA facility to investors.
ASBA stands for: Application Supported by Blocked Amount.
Under ASBA:
The investor submits an application for securities.
The application amount is blocked in the investor's bank account.
The money is not actually debited immediately.
The amount is debited only to the extent required after allotment.
If securities are not allotted, the blocked amount is released.
2(bbb). Selling Shareholder(s)
Selling Shareholder(s)
A selling shareholder means a shareholder of the issuer who offers their existing specified securities for sale in a public issue.
There are 3 important elements:
Must be a shareholder of the issuer
The person/entity must already hold specified securities of the issuer.
They are selling securities that they already own.
Must offer the securities for sale
The shareholder decides to sell some or all of their specified securities as part of the public issue.
The securities are not newly issued by the company.
Sale must be in accordance with the ICDR Regulations
The sale must be carried out according to the requirements applicable to a public issue under the ICDR Regulations.
2(bbbb). Senior Management
Senior Management
Senior management refers to the officers and personnel who form part of the issuer’s core management team.
However, the Board of Directors is excluded from the definition.
Therefore, directors are not counted as members of “senior management” merely because they are part of the Board.
Who is included?
Core Management Team
Officers and personnel who are part of the issuer’s core management team are included.
These are generally the people involved in the important day-to-day management and decision-making of the issuer.
Management one level below the top executive
Senior management also includes all members of management who are one level below:
Chief Executive Officer (CEO).
Managing Director (MD).
Whole-time Director (WTD); or
Manager.
Therefore, the management immediately below the top executive level is included.
CEO and Manager in certain cases
The definition specifically includes Chief Executive Officer and Manager, where they are not members of the Board of Directors.
Therefore, a CEO or Manager does not have to be a director to be considered part of senior management.
Functional Heads
Functional heads are specifically included.
This applies regardless of the title used for the position.
For example, a person may be called:
Head of Finance.
Chief Operating Officer.
Head of Sales.
Head of Human Resources.
Business Head.
If the person is the functional head of an important function, they can fall within senior management.
Company Secretary
The Company Secretary is specifically included in senior management.
Therefore, the Company Secretary is treated as part of senior management even if they do not fall within the other categories mentioned above.
Chief Financial Officer (CFO)
The Chief Financial Officer is also specifically included.
Therefore, the CFO forms part of senior management regardless of the other management-level criteria.
2(ccc). Securities Laws
“Securities laws” refers to a group of laws, rules, regulations, orders, guidelines and circulars that govern the securities market and are administered by SEBI.
The definition covers the following:
SEBI Act, 1992
The Securities and Exchange Board of India Act, 1992.
This is referred to as “the Act” in the definition.
Securities Contracts (Regulation) Act, 1956
Covers matters relating to securities contracts and stock exchanges.
The rules and regulations made under this Act are also included.
Depositories Act, 1996
Governs the legal framework relating to depositories and securities held in dematerialised form.
The rules and regulations made under this Act are also included.
Rules and Regulations under these Acts
The definition includes the rules and regulations made under:
The SEBI Act.
The Securities Contracts (Regulation) Act.
The Depositories Act.
SEBI Orders, Guidelines and Circulars
General or special orders issued by SEBI under these laws are included.
Guidelines and circulars issued by SEBI under these laws are also included.
Companies Act, 2013 and previous company law
The relevant provisions of the Companies Act, 2013 are included.
Previous company law is also covered where applicable.
Subordinate legislation under company law
Rules and other subordinate legislation made under the Companies Act, 2013 or previous company law are included.
However, they are covered only to the extent that they are administered by SEBI.
2(ddd). SME Exchange
SME Exchange
An SME Exchange is a special trading platform meant for listing and trading securities of eligible Small and Medium Enterprises (SMEs).
It must be a trading platform of a recognised stock exchange.
The recognised stock exchange must have nationwide trading terminals.
It must be permitted by SEBI to list specified securities issued in accordance with Chapter IX.
Trading platform of a recognised stock exchange
The SME Exchange is not necessarily a completely separate stock exchange.
It can be a dedicated trading platform operated by an existing recognised stock exchange.
Therefore, the important point is that the platform itself must be recognised/permitted for SME listings.
Nationwide trading terminals
The recognised stock exchange must have trading terminals across the country.
This allows investors from different parts of India to access the SME securities listed on the platform.
Permission from SEBI
The platform must be permitted by SEBI to list specified securities issued under Chapter IX of the ICDR Regulations.
Chapter IX contains the framework specifically dealing with SME issues.
Therefore, an ordinary trading platform cannot automatically be called an SME Exchange.
It can also be a separately recognised stock exchange
The definition also covers a stock exchange that has been specifically granted recognition for listing securities under the SME framework.
Thus, an SME Exchange can be:
A dedicated SME trading platform of a recognised stock exchange; or
A stock exchange recognised specifically for this purpose.
Main Board is excluded
The Main Board is specifically not included in the definition of SME Exchange.
Therefore, an SME listing is different from a normal Main Board listing.
2(eee). Specified Securities
Specified Securities Equity shares and Convertible securities.
1. Equity Shares
Equity shares represent ownership in a company.
A person holding equity shares becomes a shareholder of the company.
Equity shareholders generally have voting rights and are entitled to participate in the company's profits through dividends, subject to the applicable terms.
2. Convertible Securities
Convertible securities are securities that can be converted into equity shares, subject to their terms and applicable regulations.
They may initially exist as another type of security but provide the holder with a right or mechanism to obtain equity shares.
2(eeea). SR Equity Shares
SR Equity Shares
SR equity shares means equity shares that carry superior voting rights compared to all other equity shares issued by the same issuer.
SR stands for Superior Rights.
The key feature is that these shares provide their holders with greater voting power than holders of ordinary equity shares.
They are equity shares
SR equity shares are still equity shares of the issuer.
They are not a completely different type of security.
They have superior voting rights
The voting rights attached to SR equity shares are higher than those attached to the issuer's other equity shares.
Therefore, the holder of SR equity shares can have greater voting power even if they hold fewer shares than another shareholder.
2(fff). Stabilising Agent
A stabilising agent is a merchant banker appointed to carry out price stabilisation activities under a Green Shoe Option.
There are two important elements:
Merchant Banker
The stabilising agent must be a merchant banker.
Therefore, the role is performed by a SEBI-regulated issue intermediary with the required merchant banking responsibilities.
Responsible for stabilising the price of equity shares
The stabilising agent is responsible for taking steps to support the market price of the issuer’s equity shares after the public issue.
This is done under the Green Shoe Option mechanism.
The purpose is to reduce excessive volatility or downward pressure on the share price during the stabilisation period.
Green Shoe Option
A Green Shoe Option is a mechanism that allows an issuer to make available additional equity shares beyond the original issue size, within the limits prescribed under the regulations.
These additional shares can be used for price stabilisation in the manner prescribed by SEBI.
2(ggg). Stock Exchange
Stock Exchange
Stock exchange means a recognised stock exchange that satisfies certain conditions and is selected by the issuer for a particular issue.
The definition has the following important elements:
1. Recognised stock exchange
The stock exchange must be a recognised stock exchange.
This means it must have legal recognition to operate as a stock exchange under the applicable securities laws.
2. Nationwide trading terminals
The recognised stock exchange must have trading terminals across the country.
This allows investors from different parts of India to access the securities traded on that exchange.
3. Chosen by the issuer
The issuer must choose the stock exchange for the particular issue of specified securities.
Therefore, the issuer decides which eligible stock exchange(s) will be used for listing its securities.
4. Securities are listed or proposed to be listed
The stock exchange must be one on which the issuer's securities are:
Already listed.
Proposed to be listed.
Proposed to be listed means the issuer intends to list the securities being offered through the particular issue on that stock exchange.
5. For a particular issue of specified securities
The definition applies in the context of a specific issue.
The relevant securities may be equity shares or convertible securities since these fall within specified securities.
6. SME Exchange is excluded
An SME Exchange is specifically excluded from this definition.
Therefore, “stock exchange” under this definition refers to the relevant nationwide recognised stock exchange and does not include an SME Exchange.
2(hhh). Syndicate Member
Syndicate Member
A syndicate member means an intermediary that is registered with SEBI and is permitted to perform specified activities in relation to an issue.
There are 3 key requirements:
1. Must be an intermediary registered with SEBI
The person/entity must be an intermediary registered with the Board (SEBI).
Therefore, an ordinary person or an unregistered entity cannot act as a syndicate member.
2. Permitted to accept bids, applications and place orders
The intermediary must be permitted to:
Accept bids from investors;
Accept applications for the issue; and
Place orders relating to the issue.
In simple terms, the syndicate member acts as an intermediary through which investors can submit their bids or applications in an issue.
3. Permitted to carry on activity as an underwriter
The intermediary must also be permitted to carry on underwriting activities.
An underwriter provides support to the issue by agreeing to subscribe to securities, subject to the terms of the underwriting arrangement, if the securities are not fully subscribed by investors.
2(iii). Systemically Important Non-Banking Financial Companies.
Systemically Important Non-Banking Financial Companie
This term refers to certain Non-Banking Financial Companies (NBFCs) that are considered important to the financial system.
There are two conditions that must be satisfied:
1. Registered with the RBI
The entity must be a Non-Banking Financial Company (NBFC).
It must be registered with the Reserve Bank of India (RBI).
Therefore, an NBFC that is not registered with the RBI will not satisfy this part of the definition.
2. Recognised as systemically important by RBI
Registration as an NBFC alone is not sufficient.
The RBI must also recognise the NBFC as a “systemically important” NBFC.
“Systemically important” means that the NBFC is considered significant enough that its financial condition or activities can have an impact on the wider financial system.
2(jjj). Unlisted Issuer.
Unlisted issuer means an issuer which is not a listed issuer.
2(kkk) Valuer.
Valuer
A “valuer” means a person who is legally authorised to carry out valuation work under the applicable laws.
There are two ways a person can qualify as a valuer:
Registered under Section 247 of the Companies Act, 2013
The person must be registered under Section 247 of the Companies Act, 2013.
The relevant rules made under that section must also be complied with.
Specified by SEBI: A person may also qualify as a valuer if they are specified by SEBI for this purpose.
2(lll). Wilful Defaulter or Fraudulent Borrower
This refers to a person or an issuer that has been categorised as a “wilful defaulter” or “fraudulent borrower” by a bank or financial institution, or by a consortium of banks/financial institutions.
There are several important elements:
Person or issuer
The term can apply to an individual/person or an issuer/company.
Therefore, the classification is not limited to companies.
Classified by a bank or financial institution
The person or issuer must have been categorised by a bank , a financial institution or a consortium of banks/financial institutions.
“Financial institution refers to a financial institution as defined under the Companies Act, 2013.
Classification must follow RBI guidelines
The classification must be made in accordance with the guidelines issued by the Reserve Bank of India (RBI).
Therefore, a bank cannot simply label someone a wilful defaulter or fraudulent borrower without following the applicable RBI framework.
2(mmm).
Working Day
Working day generally means a day on which commercial banks in the city specified in the offer document are open for business.
The meaning changes slightly depending on which stage of the issue is being considered.
General Meaning
Identify the city specified in the offer document.
Check whether commercial banks in that city are open for business on that day.
If they are open, that day is generally treated as a working day.
(a). Announcement of Price Band
For announcing the price band, a working day means a day on which commercial banks in the city specified in the offer document are open for business.
Saturdays, Sundays and public holidays are excluded.
(b). Bid / Issue Period
For the bid/issue period, the same specific meaning applies.
A working day means a day: on which commercial banks in the city specified in the offer document are open for business and which is not a Saturday, Sunday or public holiday.
(c). Between Bid/Issue Closing Date and Listing
This period has a different meaning of “working day”.
Here, a working day means a trading day of the stock exchanges.
Sundays and bank holidays are excluded.
Therefore, instead of checking whether commercial banks are open, we look at whether the stock exchanges have a trading day.
The relevant bank holidays and trading-day treatment are determined in accordance with SEBI circulars.
2(2).
If a word or term is not defined in these regulations, then look at other laws.
Such words will take their meaning from:
The SEBI Act.
The Companies Act, 2013.
The Securities Contracts (Regulation) Act, 1956.
The Depositories Act, 1996.
The rules or regulations made under these above laws.
The meaning will be the same as given in those laws.
This also applies to any amendments or re-enacted versions of those laws.
Regulation 3. Applicability of the regulations
Unless otherwise provided, these regulations shall apply to the following:
(a). Initial Public Offer by an Unlisted Issuer
An IPO is the first public offer of securities by a company that is not currently listed on a stock exchange.
The company offers its securities to the public and seeks listing of those securities on a recognised stock exchange.
It is the usual route through which an unlisted company becomes a listed company.
(b). Rights Issue by a Listed Issuer
A rights issue is an offer of additional securities made by a listed company to its existing shareholders.
The offer is generally made in proportion to the shareholders’ existing holdings.
Existing shareholders are given a right to subscribe to the new securities, subject to the applicable regulations.
(c). Further Public Offer by a Listed Issuer
A Further Public Offer (FPO) is a public issue of securities by a company that is already listed.
It allows the listed company to raise additional capital from the public.
Unlike an IPO, the company is already listed before making the offer.
(d). Preferential Issue by a Listed Issuer
A preferential issue is an issue of securities by a listed company to a selected person or group of persons.
The securities are issued on a preferential basis rather than being offered generally to all shareholders or the public.
The issue is subject to the conditions and pricing requirements prescribed by SEBI.
(e). Qualified Institutions Placement by a Listed Issuer
A Qualified Institutions Placement (QIP) is an issue of eligible securities by a listed company.
The securities are offered only to Qualified Institutional Buyers (QIBs).
It provides a listed company with a mechanism to raise capital from institutional investors without making a public offer.
(f). Initial Public Offer of Indian Depository Receipts
Indian Depository Receipts (IDRs) are instruments issued in India by a foreign company through a domestic depository.
An IDR represents an underlying security of the foreign company.
An IPO of IDRs involves the first public offer of such IDRs in India.
(g). Rights Issue of Indian Depository Receipts
This involves an offer of additional IDRs to existing holders of IDRs.
The offer gives existing IDR holders an opportunity to subscribe to additional IDRs, subject to the applicable framework.
It is therefore the rights issue mechanism applied to IDRs.
(h). Initial Public Offer by a Small and Medium Enterprise
This is an IPO made by a Small and Medium Enterprise (SME).
The SME raises capital from the public and seeks listing through the SME listing framework.
SME issues are subject to requirements specifically prescribed for the SME segment.
(i). Listing on the Innovators Growth Platform
An issuer can seek listing on the Innovators Growth Platform (IGP).
Such listing may take place through an issue of securities or without an issue.
Therefore, an issuer does not necessarily have to make a fresh issue of securities to obtain listing on the IGP.
(j). Bonus Issue by a Listed Issuer
A bonus issue involves the issue of additional shares to existing shareholders without requiring them to pay for those shares.
The shares are issued by capitalising eligible reserves or other permitted sources.
The shareholders receive the bonus shares in a prescribed proportion to their existing shareholding.
Exclusion under Regulation 9(1) of SAST Regulations
These regulations will not apply to certain issues of securities covered under Regulation 9(1) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
Specifically, the exemption applies to securities issued under:
Regulation 9(1)(b).
Regulation 9(1)(d).
Regulation 9(1)(e).
These provisions relate to acquisitions that are specifically exempted from the open offer obligations under the Takeover Regulations.
