Miscellaneous

PART VIII: MISCELLANEOUS

Regulation 97. Restriction on further capital issues

• Restriction on Further Issue of Specified Securities

• An issuer shall not make any further issue of specified securities during the prescribed period.

• Types of further issues covered:

  1. Public issue

  2. Rights issue

  3. Preferential issue

  4. Qualified Institutions Placement (QIP)

  5. Issue of bonus shares

  6. Any other manner of issue of specified securities

• Exception

• The above restriction does not apply to an issue made pursuant to: Employee Stock Option Scheme (ESOS) or Stock Appreciation Right Scheme (SAR Scheme).

• Relevant period

• The restriction applies during the period between:

  1. (a). Omitted

  2. (b). Omitted

• and

  1. The date of filing of the Draft Letter of Offer with the stock exchange(s); and

  2. The listing of the specified securities offered through the Letter of Offer; or

  3. The refund of application monies, as applicable.

• Exception where full disclosure is made

• An issuer may make a further issue during this period if full disclosures regarding the proposed further issue have already been made in:

  1. The Draft Letter of Offer or The Letter of Offer, as applicable.

• The disclosure must contain:

  1. Total number of specified securities proposed to be issued or Total amount proposed to be raised through such further issue.
     

• Example

• Suppose ABC Ltd. is undertaking a rights issue of 10 lakh equity shares.

• ABC Ltd. files its Draft Letter of Offer with the stock exchange on 1 January.

• The rights issue shares are proposed to be listed on 1 March

• Therefore, during the relevant period, ABC Ltd. generally cannot make another issue of specified securities, such as:

  1. A preferential issue.

  2. A QIP.

  3. A public issue.

  4. A bonus issue.

• However, an issue under an ESOP or SAR Scheme is specifically excluded from this restriction.

• Now suppose ABC Ltd. also proposes to make a preferential issue of 2 lakh shares and raise ₹4 crore.

• If the Draft Letter of Offer contains full disclosure stating that the company proposes to issue 2 lakh specified securities and raise ₹4 crore, the further issue may be made subject to the applicable regulatory requirements.

• The purpose of the provision is to ensure that investors are not faced with an undisclosed additional issue after the offer document has been filed.

Regulation 98. Alteration of rights of holders of specified securities

• Alteration of Terms of Specified Securities

• The issuer cannot alter the terms of specified securities in a manner that may adversely affect the interests of the holders, unless the required consent or approval is obtained.
  

• (a). Restriction on Alteration
  

  1. The issuer shall not alter the terms of the specified securities if such alteration may adversely affect the interests of the holders.

  2. This includes alteration of the terms of issue of the specified securities.
     

• (b). Consent of Holders
  

  1. Such alteration may be made if the issuer obtains written consent from the holders of not less than three-fourths (75%) of the specified securities of that particular class.
     

• (c). Alternative Approval Through Special Resolution
  

  1. Instead of obtaining individual written consent, the issuer may obtain the sanction of a special resolution.

  2. The special resolution must be passed at a meeting of the holders of the specified securities of that particular class.
     

• (d). Approval Must Relate to the Same Class
  

  1. The required consent or special resolution must come from the holders of the affected class of specified securities.

  2. Approval from holders of a different class is not sufficient.
     

• (e). Two Permitted Routes
  

  The issuer can therefore alter the terms adversely only through either:

  1. Written consent of at least 75% of the holders of the specified securities of that class OR

  2. Special resolution passed at a meeting of the holders of that class.

PART IX. FAST TRACK RIGHTS ISSUE

Regulation 99. Omitted.