Documentation – Corporate Funding & Listing in Stock Exchange Study Material

Chapter 16 Documentation – Corporate Funding and Listing in Stock Exchange ICSI Study Material is designed strictly as per the latest syllabus and exam pattern.

Documentation – Corporate Funding & Listing in Stock Exchange Study Material

Question 1.
Write short notes on the following:
Preferential offer (3 marks)
Answer:
‘Preferential Offer’ means an issue of shares or other securities, by a company to any select person or group of persons on a preferential basis and does not include shares or other securities offered through a public issue, rights issue, employee stock option scheme, employee stock purchase scheme or an issue of sweat equity shares or bonus shares or depository receipts issued in a country outside India or foreign securities.

Question 2.
Distinguish between the following:
‘Rights issue’ and ‘private placement’. (June 2012, 5 marks)
Answer:

Rights Issue

Private Placement

1. When an issue of shares or convertible securities is made by an issuer to its existing shareholders as on a particular date fixed by the issuer (i.e. record date), it is called a rights issue. The rights are offered in a particular ratio to the number of shares or convertible securities held as on the record date. 2. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders unless they do not intend to subscribe to their entitlements .

“Private Placement” means any offer or invitation to subscribe or issue of securities to a select group of persons by a company (other than by way of public offer.) through private placement offer-cum-application, which satisfies the conditions specified in section 42 of the Companies Act, 2013.

Question 3.
Distinguish between the following:
‘IPO’and‘FPO’. (Dec 2016, 3 marks)
Answer:
‘Initial Public Offering’ (IPO) means an offer of specified securities by an unlisted issue to the public for subscription and includes an offer for sale of specified securities to the public by any existing holders of such securities in an unlisted issuer.

A further public offering (FPO) is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document. An offer for sale in such scenario is allowed only if it is made to satisfy listing or continuous listing obligations.

Question 4.
Narendra has applied for shares under the Employee Stock Option Scheme (ESOS) and his option was granted by the company. Now, he wants to transfer his option to his friend Neeraj. Comment on the check points for non-transferability of option under the ESOS. (Dec 2014, 5 marks)
Answer:
Non-Transferability of Option

(i) Check that option granted to an employee is not transferable to any person.

(ii) (a) No person other than the employee to whom the option is granted shall be entitled to exercise the option.
(b) Under the cash less system of exercise, the company may itself fund or permit the empaneled stock brokers to fund the payment of exercise price which shall be adjusted against the sale proceeds of some or all the shares.

(iii) Check that the option granted to the employee is not pledged, hypothecated, mortgaged or otherwise alienated in any other manner.

(iv) Check that in the event of the death of employee while in employment, all the options granted to him till such date are vested in the legal heirs or nominees of the deceased employee.

(v) Check that in case the employee suffers a permanent incapacity while in employment, all the option granted to him as on the date of permanent incapacitation, shall vest in him on that day.

(vi) Check that if an employee resigns or is terminated, all options not vested as on that day expire.
However, the employee shall, subject to the terms and conditions formulated by compensation committee, be entitled to retain all the vested options.

(vii) Check that, the options granted to a director, who is an employee of an institution and has been nominated by the said institution, has not been renounced in favour of institution nominating him.

Question 5.
Enumerate any five common restrictions for issuers in case of public and rights issues. (Dec 2014, 5 marks)
Answer:
Five common restrictions for issuers in case of public and rights issues
No issuer shall make a public issue or rights issue of specified securities:

(a) if the issuer, any of its promoters, promoter group or directors or persons in control of the issuer are debarred from accessing the capital market by the Board;

(b) if any of the promoters, directors or persons in control of the issuer was or also is a promoter, director or person in control of any other company which is debarred from accessing the capital market under any order or directions made by the Board;

(c) if the issuer of convertible debt instruments is in the list of wilful defaulters published by the Reserve Bank of India or it is in default of payment of interest or repayment of principal amount in respect of debt instruments issued by it to the public, if any, for a period of more than 6 months;

(d) unless it has made an application to one or more recognised stock exchanges for listing of specified securities on such stock exchanges and has chosen one of them as the designated stock exchange: Provided that in case of an initial public offer, the issuer shall make an application for listing of the specified securities in at least one recognised stock exchange having nationwide trading terminals;

(e) unless it has entered into an agreement with a depository for dematerialisation of specified securities already issued or proposed to be issued.

Question 6.
Company Secretary of a listed company, in addition to Board meetings and other documentation and filing formalities, is expected to do certain activities relating to securities laws and compliances. State those activities. [Old Syllabus] (Dec 2014, 6 marks)
Answer:
Company Secretary of a listed company, in addition to Board Meeting and other documentation and filing formalities are expected to do the certain activities relating to securities laws and compliances. The following are the few of the main activities:

• Compliance with SEBI and Listing Agreement
• Publication of financial results
• Intimations and disclosures to stock exchanges and SEBI
• Implementation of Employee Stock Option plans, if any
• Cautious about takeovers
• Continuous watch on stock price movements
• Watch on insider trading
• Taking steps to prevent money laundering activities
• Carrying out necessary certifications required by stock exchanges as compliance officer of the company.

Question 7.
As a Company Secretary of Kairar Ltd., state the special points to be checked by you in the matter of issue of foreign currency convertible bonds by the company. (June 2016, 5 marks)
Answer:
As a Company Secretary of Kairar Ltd., the following point should be verified in the matter of issue of foreign currency convertible bonds:

1. Check if the fresh FCCBs is raised with the stipulated average maturity period and applicable all in cost being as per the ECB guidelines.
2. The amount of fresh FCCB shall not exceed the outstanding redemption value at maturity on the outstanding FCCBs.
3. The fresh FCCB shall not be raised 6 months prior to the maturity date of outstanding.
4. FCCB beyond USD 500 million for the purpose if redemption of the existing FCCB will, be considered under the approval route.
5. The proposed of buyback/ pre-payment if FCCB from Indian Companies may be considered subject to condition that buy back value of FCCB shall be at a minimum discount of 5% on the accreted value.

Question 8.
Describe the compliances under institutional placement programme to be furnished by a Company Secretary. (June 2016, 5 marks)
Answer:
Check list for compliances under Institutional Placement Programme (IPP):

1. Check the certified copy of special resolution passed in the general meeting approving the Institutional Placement Programme and form MGT 14 filed with ROC.
2. Check the issuer has obtained in-principle approval from the stock exchange(s).
3. The issuer has appointed a SEBI registered merchant banker to manage the IPP.
4. Check the copy of the due diligence certificate submitted to SEBI with respect to the IPP.
5. Check that in case of over subscription allotment of not more than ten percent of the offer size has been made by the eligible seller.

Question 9.
As per the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, what are the conditions for preferential issue of specified securities by a listed issuer ? (Dec 2018, 5 marks)
Answer:
Conditions for Preferential Issue
According to Regulation 160 of the SEBI (ICDR) Regulations, 2018, 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 Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), 2015, as amended, and any circular or notification issued by the Board thereunder;
(e) the issuer has obtained the Permanent Account Numbers 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.

Question 10.
What are the documents required to be prepared by the company secretary for listing approval for Bonus Shares issued by the company for documentation purpose? (June 2019, 5 marks)
Answer:
The following documents are required to be prepared by the Company Secretary for listing approval for Bonus equity shares issued by the Company:

1. Letter of Application (i.e. by Listed companies applying for listing of further issue) duly completed.
2. Certified true copy of the Board resolution in which the equity shares were allotted.
3. Brief particular of the new securities issued.
4. Shareholding Pattern as per the format prescribed under Regulation 31 of the SEBl (Listing Obligations and Disclosure Requirements), Regulations, 2015 giving details pre and post allotment of bonus shares.
5. Certificate from Statutory Auditors/Practicing Chartered Accountant/ Practicing Company Secretary to the effect that the SEBl (ICDR) Regulations, 2018 for bonus issue has been complied with.
6. Confirmation by the Managing Director/ Company Secretary.
7. Details of further listing/Processing fee remitted.

Question 11.
Discuss the post issue formalities to be completed by the company secretary for Rights Issue of equity shares for listing purpose. (June 2019, 5 marks)
Answer:
The following are the post issue formalities to be completed by the Company Secretary for Rights Issue of equity shares for listing purpose.

The Company has to finalise the basis of allotment, and submit the documents as under, within 10 days from closure of the issue:

1. Bid data of Exchanges other than the designated stock exchange.
2. All rejections application along with Summary statement (1 set photocopy to be submitted).
3. Certified copies of all Bank final certificates (ASBA and NON ASBA).
4. Minutes of Basis of allotment duly signed by all the Lead Manager, Registrar and the Company.
5. Basis of allotment sheet for each category.
6. Round summary in case of over subscription, in hard as well as soft format.
7. Copy of post issue initial monitoring report filed with SEBl (3 days monitoring report).
8. Undertaking from Lead Manager, Company and the Registrar.
9. Pre Allotment shareholding and Post proposed Allotment Shareholding pattern as per Regulation 31 of the SEBl (Listing Obligations and Disclosure Requirements), Regulations, 2015.
10. The calculation of ex right price by the Statutory Auditor/Practicing company secretary/Practicing Chartered Accountant, if not available in the offer document.

Question 12.
ABC is a company intending to issue Preferential Shares to Rakesh Bansal. List out the Pre-Issue Formalities for this Preferential Issue. (Dec 2019, 5 marks)
Answer:
Following are the Pre-Issue formalities for the Preferential Issue:

1. Certified copy of the resolution passed by the Board of Directors of the company for the proposed preferential issue
2. Printed copy of notice of AGM/EGM
3. Where allotment is:

(I) for consideration other than cash:
(a) Certified copy of valuation report
(b) Certified copy of Shareholders Agreements.
(c) Certified copy of approval letters from FIPB and RBI if applicable.

(II) pursuant to CDR Scheme/Order of High Court/BIFR:
(a) Certified copy of relevant scheme/ order

(III) pursuant to conversion of loan of financial institutions:
(a) Certified copy of the Loan Agreement executed by the company.

4. Brief particulars of the proposed preferential issue.
5. In case if the prior holding of the allottee is under pledge with banks/ financial institution(s), company needs to provide an undertaking/ confirmations from the banks/ financial institutions, company and allottee(s).
6. Confirmation by the Managing Director/ Company Secretary.
7. Certificate from Statutory Auditors/ Practicing Chartered Accountant/ Practicing Company Secretary.
8. Pricing certificate by Statutory Auditor/ Practicing Chartered Accountant/ Practicing Company Secretary.
In case the securities of the company are infrequently traded pricing certificate as prescribed under the SEBI (CDR) Regulation, 2018.
9. Non-refundable processing fees.

Question 13.
List out the documents to be submitted to Stock Exchange at the time of approval of finalization of basis of allotment in India. (Aug 2021, 5 marks)
Answer:
The documents that needs to be submitted to Stock Exchange at the time of approval of finalisation of basis of allotment in India are as under:

1. Copy of Prospectus filed with the Registrar of Company (also in soft copy CD) along with letter from all the merchant bankers involved in the issue specifying details of amendments/ changes made in Red Herring Prospectus.
2. Proceeding details / minutes of basis of allotment, verified and signed by R & T Agent, Book Runner Lead Manager and the issuer along with the reasons for exception to rejection cases.
3. Category wise, summary of list of “technical rejection” cases Specifying – Application No., Category, Name & Add., Pan, DP ID, CL ID, Quantity, price Amount and reason for rejection along with photo-copies of Application forms.
4. Confirmation from registrar regarding withdrawal of applications received, considered in the basis, indicating date and time (should not be more than 12 hours from time of submission of basis).
5. Statements giving branch wise/bank wise/city wise/state wise/zone wise details of the total collections with a breakup of Application Supported by Blocked Amount fund received at the various participating bank branches in response to the public issue / offer for sale.
6. Category wise, Bid lot wise, two copies of Calculation sheet of proposed basis of allotment of equity shares to the Qualified Institutional Buyers, Non Institutional Bidders and Retail Bidders, Reserved category etc. duly signed by Registrars and Transfer Agents, Book Runner Lead Manager & Issuer.
7. Photocopy of the final certificate issued by the controlling branch of Application Supported by Blocked Amount bankers giving branch wise details of collections received.
8. Undertakings from the company, lead managers and the registrars & transfer agents in respect of the basis of allotment.
9. Copy of the statutory advertisement released in respect of the public issue / offer for sale, opening and closing of the issue, price revision, if any etc. up to the stage of basis of allotment.
10. Auditors certificate with regard to the promoters contribution, if applicable.
11. Declaration from the Managing Director / Company Secretary that there is no injunction / prohibition order of a competent court of law on the issue or on a part of any particular category of the issue.

Question 14.
Prepare a Checklist of documents for listing of securities issued pursuant to the Rights Issue. (Aug 2021, 5 marks)
Answer:
The company should submit the letter of application along with the following documents:

1. Listing Application for all types of securities issued on rights basis should be submitted.
2. Certified copy of the resolution passed by the BOD for allotment of securities on Right Basis.
3. Shareholding pattern for pre and post issue as per the format prescribed under Regulation 31 of the SEBI (LODR), Regulations, 2015 for all types of securities issued on Rights basis.
4. A certified copy of Basis of Allotment as approved by Designated Stock Exchange should be filed.
5. Auditors/Practicing CA/CS certificate that allotment has been done as per basis of allotment approved by the designated stock exchange.
6. The total number of securities allotted in the physical category and in Demat (Central Depository Services Ltd. & National Securities and Depository Ltd. Separately) with category wise distinctive numbers should be filed.
7. Undertaking from the Compliance Officer of the issuer as per the following format:
   • “The company or its promoters or whole time directors are not in violation of the provisions of Regulation 24 of the SEBI Delisting Regulations, 2009”.
   • “We hereby confirm that the company, its promoters, its directors are not in violation of the restrictions imposed by SEBI”
8. Undertaking from the Compliance Officer of the issuer as per the following format:
   “Neither the issuer nor any of its promoters or directors is a wilful defaulter as defined under the SEBI (ICDR), 2018”;
9. Annual Listing fees

Question 15.
Ajanta Car Care Ltd. successfully completed its initial public offer (IPO). List out the documents to be submitted on T + 2 days for listing of IPO. (June 2022, 5 marks)

Question 16.
(a) Som Ltd. wants to make ‘rights issue’ of shares. As a Company Secretary, advise on the following issues:

1. The record date for rights issue is 30^th June, 2015. The company desires to withdraw rights issue on 2nd July, 2015.
2. The rights issue is open for subscription from 30th June, 2015 to 10^th July, 2015.
3. The letter of offer is dispatched through courier to all existing shareholders on 29^th June, 2015 when the issue is open for subscription on 30^th June, 2015.
4. The record date is 30^th June, 2015. On 2^nd July, 2015, the issue price of shares is decided. (June 2016, 5 marks)

(b) Mini Ltd., a listed company, comes out with issue of shares through ESOS. As a Company Secretary, how would you deal with the following issues:

1. Suresh is an employee on a contract basis. His contract is renewed every year. Can he participate in ESOS?
2. Lakshya, an employee, is granted option under ESOS by the company.’He writes a letter to his friend Mukesh for transferring the offer. But he dies. With whom will the option vest?
3. Akhil, a director and his wife Beena together hold more than 15% of the equity shares of the company. Can the director Akhil participate in ESOS?
4. The ESOS in Mini Ltd. is a part of public issue and the shares are issued to employees at the same price as in the public issue. What is the duration of the lock-in-period to which these shares are subject to?
5. Anil has acquired shares under ESOS in Simi Ltd. Now, Mini Ltd. acquires Simi Ltd. fully. Mini Ltd. allots shares to Anil in lieu of shares which he has under ESOS in Simi Ltd. In Simi Ltd., he has undergone 5 months of lock-in-period. How many minimum months of lock-in-period he has to undergo in Mini Ltd.? (June 2016, 5 marks)

Answer:
(a) (i) The issuer shall not withdraw rights issue after announcement of the record date. If the issuer withdraws the rights issue after announcing the record date, it shall not make an application for listing of any of its specified securities on any recognised stock exchange for a period of twelve months from the record date announced. Provided that the issuer may seek listing of its equity shares allotted pursuant to conversion or exchange of convertible securities issued prior to the announcement of the record date, on the recognised stock exchange where its securities are listed.

(ii) A rights issue shall be open for subscription for a minimum period of fifteen days and for a maximum period of thirty days. In this case it is open for subscription for a period less than the minimum period. Hence it is not valid.

(iii) The abridged letter of offer, along with application form, shall be dispatched through registered post or speed post to all the existing shareholders at least three days before the date of opening of the issue.
In this case letter of offer is dispatched through courier and that too just one day before the date of opening of issue. Hence it is not valid. Provided that the letter of offer shall be given by the issuer or lead merchant banker to any existing shareholder who has made a request in this regard.

(iv) The issue price shall be decided before determining the record date which shall be determined in consultation with the designated stock exchange. In this case it is decided after the record date which is wrong.

(b) (i) As per Regulation 2 (1) (f) of SEBI (Share based Employee Benefits and Sweat Equity) Regulations, 2021:
“employee” means,:

• a permanent employee of the company who has been working in India or outside India; or
• a director of the company, whether a whole time director or not but excluding an independent director; or
• an employee as defined in clause (i) or (ii) of a subsidiary, in India or outside India, or of a holding company of the company. But does not include:

(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 percent of the outstanding equity shares of the company.
Hence, Suresh cannot participate in ESOS.

(ii) As the Option granted to an employee shall not be transferable to any person and No person other than the employee to whom the option is granted shall be entitled to exercise the option.

(iii) No, please refer the above said meaning of employee. In this case, Akhil along with his wife Beena together holds more than 15% of the equity share. Hence he is not eligible to participate in ESOS.

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

(v) There shall be a minimum vesting period of one year in case of ESOS.

Provided that in a 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 company, the period during which the options granted by the transferor company were held by him shall be adjusted against the minimum vesting period required under this sub-regulation.

In this case, lock in period already undergone is 5 months. Hence, Anil has to undergo a minimum 7 months of Lock in Period in Mini Ltd.

Question 17.
(a) What is ‘preferential offer’ according to Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014?
(b) Madhav Ltd. makes preferential offer of securities for consideration other than cash. How is such consideration valued?
(c) Prakash Ltd. makes preferential offer of shares for consideration other than cash. Name the two methods by which this non-cash consideration is treated in the books of account of Prakash Ltd. (Dec 2016, 5 marks)
Answer:
(a) According to the Section 42 and Section 62 read with explanation to Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014, ‘Preferential Offer’ means an issue of shares or other securities, by a company to any select person or group of persons on a preferential basis and does not include shares or other securities offered through a public issue, rights issue, employee stock option scheme, employee stock purchase scheme or an issue of sweat equity shares or bonus shares or depository receipts issued in a country outside India or foreign securities.

(b) Where shares or other securities are to be allotted for consideration other than cash, the valuation of such consideration shall be done by a registered valuer who shall submit a valuation report to the company giving justification for the valuation.

(c) Where the preferential offer of shares is made 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 accounting standards; or
2. where clause (i) is not applicable, it shall be expensed as provided in the accounting standards.

Question 18.
Strong Ltd. is contemplating to introduce Employees Stock Purchase Scheme (ESPS). As a Practicing Company Secretary, advise the management on the following issues:
(i) Whether directors of the company are eligible for ESPS?
(ii) Is there any restriction on the price of shares to be issued under ESPS?
(iii) The. nature of approvals to be taken from the shareholders of the company.
(iv) Lock-in-period. (Dec 2016, 5 marks)
Answer:
(i) Yes, a director of the company, whether a whole time director or not but excluding an independent director, is eligible for ESPS.

(ii) The company may determine the price of shares to be issued under an ESPS, provided they conform to the provisions of accounting policies under Regulation 15.

(iii) No scheme shall be offered to employees of a company unless the shareholders of the company approve it by passing a special resolution in the general meeting.
The explanatory statement to the notice and the resolution proposed to be passed by shareholders for the schemes shall include the information as specified by SEBI in this regard.

(iv) Shares issued under an ESPS shall be locked-in for a minimum period of one year from the date of allotment:
Provided that 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.

Question 19.
Raj Mani Hadlooms Ltd., an unlisted Public Company, having paid-up Capital of ₹ 18 Crore, has seven Members. Shri Raj and Shri Mani are the Promoters of the company and their aggregate holding in the paid-up Capital is 95%. Now the promoters want to invest 2 Crore more in the paid-up capital. On 30^th March, 2017, the Company has received ₹ 1 Crore each from promoters through RIGS as advance share capital money. Discuss- Whether it is mandatory for the company to make a rights issue to implement the capital raising programme? Can the company use the share capital advance prior to completing the allotment of shares? State whether’ it is mandatory to determine fair price of shares if a preferential allotment were to be made to Promoters alone? (June 2017, 5 marks)
Answer:
No, it is not mandatory for company to make right issue to implement the capital raising programme, the company may go for the other method of the capital raising like preferential allotment, private placement.

In case of an allotment by way of private placement of shares, the proviso under section 42 (6) states that the money received with share application should not be utilised except for adjustment against allotment of securities or for refund arising from failure to allot securities. However, such a provision does not apply to Rights issue. Hence, if the company plans a preferential allotment of shares or a private placement of shares, the amount received by way of share application money cannot be utilised prior to allotment and in case the shares are not allotted, the money has to be returned.

For the purpose of issuing securities on a preferential allotment basis to the promoters alone it is mandatory that the fair price of the shares must be determined.

Question 20.
ADLAP Infra Project Ltd. is in process of Initial Public Offer of ₹ 450 Crore. M/s SPMG, is being appointed for due diligence in respect of Project of ADLAP.
As the Company Secretary, prepare a Checklist for such due diligence to provide Project related information and records. (June 2017, 5 marks)
Answer:
Checklist for due diligence to provide Project related information and records

1. Project Feasibility report

2. Reports/documents prepared by independent research agencies in respect of the state of the industry and demand and supply for the company’s products.

3. Break-up of Cost of Project:

• Land – Location site & map, area, copy of documents i.e. Sale/ Lease Deed for land, Soil Test Report, Order for converting land into Industrial land etc.
• Building – Details break-up from Architect, Approval details from Municipality etc. and Valuation Report from a Chartered Engineer, (for existing building and suitability of site)
• Equipments – Invoices/Quotations of main items. (Indicate Imported machinery separately)
• Margin Money for Working Capital – Margin Money for Working Capital (calculation)
• Preliminary & Pre-operative expenses – break-up
• Provision for contingencies – break-up

4. Schedule of Implementation.
5. Status of Project as on a recent date – Amount spent & sources
6. Promoter’s contribution till date (supported by Auditor’s Certificate, if possible)
7. Current & proposed Shareholding pattern
8. Sanctions received by the issuer from bankers/institutions for debt financing in the project
9. Notes on the following: Technical process, utilities (power, water, transport, effluent treatment, location, land building, plant & machinery).

(a) Manpower

1. Break-up of employees – whether any agreements are entered into with employee – If so, copy of agreement
2. Details of Pay scales/bonus (including performance bonus)/PF/ Gratuity etc.
3. Employment of contract labour – Number of workers, copy of contract.

(b) Quality Control facilities, Research & Development.

10. Market (Demand/supply with sources along with copies),
11. Marketing & Distribution (network etc.) & relevant documents wherever ’ applicable,
12. Arrangements and strategy of the company for marketing its products
13. Discussions with important customers, suppliers, Joint Venture partners, collaborators of the company.

Question 21.
ABC Ltd. is considering a right issue by issuing one share against two shares to raise funds to finance a new project requiring ₹ 4.5 Crore. The floatation cost will be 10% of funds raised. The company currently has 18 Lakh shares outstanding and the current price of its share is ₹ 100. The subscription price has been fixed at ₹ 50 per share. Calculate the value of a right. (Dec 2020, 5 marks)
Answer:
Market value of 2 shares presently held = ₹ 200
Add: price to be paid for buying one share = ₹ 50
Total value of 3 shares = ₹ 250
Average value of one share = ₹ 250/3 = ₹ 83.33
Value of rights (₹) = Market value of one share – Average price of one share
= ₹ 100 – ₹ 83.33
= ₹ 16.67 (Value of Rights)

Question 22.
The Board of Directors of Sujah Limited are planning to introduce an Employee Stock Option Scheme (ESOS) for select category of employees. The Board has requested the Company Secretary to prepare the required documentation for obtaining in-principle approval from Stock Exchanges. Advise. (Dec 2021, 5 marks)
Answer:
The following are the documentary requirements for prior in-principle under Regulation 28(1) of the SEBI (LODR), Regulations, 2015 for ESOS:

1. Certified copy of Stock Option/Stock Purchase Scheme/ Stock Appreciation Rights Scheme General Employee Benefits Scheme Retirement Benefit Schemes certified by the Company Secretary.
2. Certified copy of statement to be filed with the Stock Exchange as required under Regulation 10(b) SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021
3. Certified true copy of the notice of AGM/EGM for approving the Scheme/for amending the Scheme / for approving grants under Regulation 6 of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, certified by the company secretary.
4. Certified true copy of resolution passed by the shareholders of the Company approving / amending the Scheme.
5. Certificate of Auditors on compliance with SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.
6. Certificate of Merchant Banker on compliance with SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.
7. List of Promoters as defined under the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.
8. Details of employee (wherever applicable) –
   (a) Who have been granted options / issued shares in excess of 5% of option/ Shares issued in one
   (b) Who have been granted options / issued shares equal to or exceeding 1% of issued capital during any one year
9. Copy of latest Annual Report.
10. Specimen copy of Share certificate (where shares are issued in physical form)
11. Confirmation from the Company.
12. Undertakings as required by SEBI under the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.
13. Reconciliation statement.

Question 23.
Sunlight Solar Ltd. decides to issue six right shares for every eleven shares held. The right shares are priced at 561 each and the present cum-right price of the company’s share traded in the NSEIBSE is 785. Average Floating Cost of each right share is 10. Calculate the fair value of the right. (June 2022, 5 marks)

Documentation Notes

1. Documentation for IPO/FPO
The stage wise documentation for IPO/FPO is as follows:

• In principal Approval Stage
• Basis of Allotment Stage
• Listing & Trading Approval Stage

IPO/FPO Draft Prospectus/RHP clearance
Along with the application for seeking in-principle approval of the Exchange to use name of the Exchange in the offer document, the following documents/information shall to be fled by the Company with the Exchange:

1. 10 copies of the draft offer document.
2. Copy of resolution passed by the Board of Directors for issue of securities and by the shareholders at the AGM/EGM authorising the issue of securities to the public
3. Copy of the letter vide which the draft Offer Document was fled with SEBI.
4. Latest date/period up to which the information has been incorporated in the draft offer document Date of opening of public issue to be intimated as soon as it is finalized.
5. Certified true copies of Company’s relevant statement of bank accounts wherein promoter’s contribution, if any, received by the Company is reflected.
6. PAN, TAN, Bank Account Number, Passport Number of the Promoters.
7. Printed Balance Sheets, Profit & Loss Accounts and Cash Flow Statements for the preceding 5 years.
8. Name of the exchange which is proposed to be designated by the Company as the lead exchange, for the purposes of approval of the basis of allotment, and for depositing the security deposit as required under the listing conditions of the exchanges.
9. Copy of Form 32/DIR 12 fled with the ROC for appointment of directors and company secretary.
10. Memorandum & Articles of Association of the Company,
11. Confirmation from the Issuer Company confirming that:
    • The Company is in compliance with all the eligibility criteria of the Exchange
    • There are no restrictive clauses in the Articles of Association of the Company
    • The provisions of the Memorandum and Articles of Association are not inconsistent with the clauses of the Listing agreement or any other applicable law, Rules or Regulations
12. A certificate from the statutory auditor/practicing chartered accountant
    certifying compliance of conditions of Corporate Governance as stipulated SEBI (LODR) Regulations, 2015. The company should also give the composition of various committees as required under the said clause.
13. Complete details of any outstanding ESOP and other employee benefit schemes and a confirmation from Merchant Bankers & Statutory Auditor that said schemes are in compliance with the requirement of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.
14. Confirmation from BRLM(s) / Lead Manager(s) regarding the applicant Company being in compliance with Regulation 4(2) of SEBI (ICDR) Regulations, 2009
15. Confirmation from BRLM(s)/ Lead Manager(s) stating “Neither the Issuer nor any of its Promoters/Directors are appearing under the list of willful defaulter as defined under SEBI (ICDR) Regulations 2018”.

2. Checklist for listing of IPO
Documents to be submitted on T+2 days (i.e. within 2 working days from the closure of the issue)

1. All due diligence certificates fled with SEBI by Merchant banker(s).
2. Observation Letter issued by SEBI pursuant to fling of draft offer document.
3. List of authorized signatories along with their specimen signatures.
4. Confirmation from Lead Managers that devolvement notices have been sent to underwriters (applicable if the issue has devolved).
5. Certificate from the BRLM(s) that the issue has received minimum subscription as specified under Regulation 45 (1) of SEBI (ICDR) Regulations, 2018.
6. Confirmation from the company regarding the email ID for Investor Grievances as per Regulation 46 of SEBI (LODR), Regulations, 2015.
7. Copies of all advertisements published in connection with the issue upto T+1 stage.
8. Confirmation from the company stating that they .have obtained authentication for SCORES from SEBI as per Regulation 13 of LODR, Regulations, 2015.

3. Rights Issue

(a) Pre Issue Formalities
The following document should be submitted to obtain in-principle approval for the proposed Rights issue:

1. Certified true copy of the resolution passed by the Board of Directors for issue of securities under proposed rights issue/ approving the proposed fast track rights issue.

2. Certified true copy of the resolution passed by the Shareholders, if any;
(a) for issue of securities under proposed rights issue/ fast track rights issue.
(b) increase in the authorised share capital (if required).

3. Undertaking from the Company that the entire issued capital of the Company is listed with the Stock Exchange and are fully paid up.

4. Undertaking from the Compliance Officer of the issuer as per the following format:
“Neither the issuer nor any of its promoters or directors is a wilful defaulter as defined SEBI (ICDR) Regulations, 2018”;

5. Certificate from all Lead Manager/Merchant Banker and Company w.r.t compliance with of SEBI (ICDR) Regulation, 2018 (in case of fast track rights issue).

6. 10 Copies of Draft Letter of Offer along with a soft copy on CD.

7. Processing fees.

(b) Post Issue Formalities- Rights Issue
Checklist of documents for Basis of allotment Company has to finalise the basis of allotment, and submit the documents as under, within 10 days from closure of the issue:

1. Bid data of Exchanges other than the designated stock exchange.
2. All rejections application along with Summary statement (1 set photocopy to be submitted).
3. Certified copies of all Bank final certificates (ASBA & NON ASBA).
4. Minutes of Basis of allotment duly signed by all the Lead Manager, Registrar and the Company.
5. Basis of allotment sheet for each category.
6. Round summary in case of oversubscription, in hard as well as soft format.
7. Copy of post issue initial monitoring report fled with SEBI (3 day monitoring report).
8. Undertaking from Lead Manager, Company and the Registrar.
9. Pre Allotment shareholding and Post proposed Allotment Shareholding pattern as per Regulation 31 of the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015.
10. The calculation of ex right price by the Statutory Auditor/ Practicing company secretary/ Practicing Chartered Accountant, if not available in the offer document.

4. Bonus Issue
Documents required for granting in-principle approval under Regulation 28(1) of the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015, for the companies proposing Bonus Issue:

1. Certified copy of the resolution passed by the Board of Directors of the Company approving the bonus issue.
2. Certified copy of the notice sent to the shareholders of the company for the proposed bonus issue.
3. Certified copy of the resolution passed by the shareholders of the Company approving bonus issue.
4. Clause in the Articles of Association granting powers to the Board of Directors to capitalize the profits.
5. Copy of the shareholders resolution for increase in authorized capital in case the existing authorized share capital is insufficient to accommodate the bonus issue
6. Confirmation by the Managing Director/ Company Secretary.
7. Statement of total bonus entitlement as per the existing capital, bonus shares to be allotted and shares kept in abeyance, if any to be given by the Company Secretary.
8. Processing fee.
9. Copy of the latest audited annual report.
10. Certified true copy of the amended copy of the Memorandum and Articles of Association of the Company. In case the Memorandum and Articles of Association is not amended, confirmation from the company regarding the same.
11. Name & Designation of the Contact Person of the Company.
    • Telephone Nos. (landline & mobile)
    • Email add.

5. Preferential Issue
(a) Pre-Issue Formalities

1. Certified copy of the resolution passed by the Board of Directors of the company for the proposed preferential issue
2. Printed copy of notice of AGM/EGM
3. Where allotment is:

(I) for consideration other than cash:
(a) Certified copy of valuation report
(b) Certified copy of Shareholders Agreements.
(c) Certified copy of approval letters from FIPB and RBI if applicable.

(II) pursuant to CDR Scheme/ Order of High Court/ BIFR:
(a) Certified copy of relevant scheme/ order

(III) pursuant to conversion of loan of financial institutions:
(a) Certified copy of the Loan Agreement executed by the company.

4. Brief particulars of the proposed preferential issue.
5. Confirmation by the Managing Director/ Company Secretary.
6. Certificate from Statutory Auditors/ Practicing Chartered Accountant/ Practicing Company Secretary.
7. Pricing certificate by Statutory Auditor/ Practicing Chartered Accountant/ Practicing Company Secretary.
In case the securities of the company are infrequently traded pricing certificate as prescribed under the SEBI (ICDR) Regulation, 2018.
8. Non-refundable processing fees.

(b) Post Issue Formalities
Documents required for granting listing approvals, for the equity shares issued on a preferential basis:

1. Letter of Application (i.e. by Listed companies applying for listing of further issue) duly completed.
2. Brief particular of the new securities issued.
3. Certified copy of the resolution passed by board of directors for allotment of equity shares along with depository confirmation for the credit of securities in dematerialized form.
4. Certified copy of the resolution passed by board of directors for allotment of convertible instrument, applicable only where the allotment of equity shares is pursuant to conversion of convertible instrument.
5. Certified copy of the resolution passed by the shareholders of the Company approving the allotment on preferential basis and the resolution passed for increasing the authorized capital wherever applicable.
6. Shareholding Pattern as per the format prescribed under Regulation 31 of the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 giving details pre and post allotment.
7. Certified copy of the compliance certificate from the Statutory Auditor placed before the shareholders in the general meeting.
8. Certificate from Statutory Auditor of the company for receipt of funds.
9. Certificate from the Statutory Auditors/ Practicing Chartered Accountant / Practicing Company Secretary for compliance.
10. Certificate from the Managing Director/Company Secretary of the company.
11. Confirmation for authentication on SEBI for SCORES.
12. Certified copy of the order passed by Hon’ble High Court/ BIFR/ Scheme approved by CDR, if applicable.

6. Qualified Institutional Placement
(a) QIPs- Pre Issue
Documents required for granting approvals under Regulation 28(1) of SEBI (LODR), 2015, for the companies coming out with Qualified Institutions Placement (QIPs) – Prior Approval:
Covering letter should mention whether Company intends to give discount to the investors.

1. Copy of the two days prior intimation given by the company to the Exchange about the proposed meeting of the Board of Directors in which fund raising by way of QIP issue is specifically mentioned

2. Certified true copy of the resolution passed by the Board of Directors of the Company approving the placement of securities with Qualified Institutional Buyers (QIBs) under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

3. Copy of the notice sent to the shareholders of the company.

4. Certified true copy of the resolution passed by the shareholders of the Company in accordance with the requirements of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

5. Draft placement document for issue of specified securities to QIBs. The placement document required to be prepared in accordance with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, Shall contain disclaimer in bold capital letters to the effect that “the placement is meant only for QIBs on a private placement basis and is not an offer to the public or to any other class of investors.”

6. Abridged shareholding pattern of the Company at the time of application for in-principle approval.

7. Net worth certificate from PCA/PCS together with related workings of the company based on the audited balance sheet of the previous financial year.

8. Confirmation from the Merchant Banker that the proposed issue of (Name of the Company), is being made in compliance with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 and the (Name of the Company) complies with the requirements of SEBI (ICDR) Regulations, 2018.

9. Confirmation by the Managing Director/ Company Secretary.

10. Processing fee.

(b) QIP- Post Issue
Documents required for granting listing approvals, for the securities issued by the companies under Qualified Institutions Placement (QIPs) – Post Allotment:

1. Letter of Application (i.e. by Listed companies applying for listing of further issue) duly completed along with Distribution Schedule pre and post allotment.
2. Certified true copy of the Board resolution in which the securities were allotted.
3. List of allottees and the number of equity shares allotted to them should be fled with the Stock Exchange.
4. List of allottees who have been allotted more than 5% of the securities offered in the issue giving details such as name of the allottees, nos. of equity shares allotted, % of the issue size, etc. and the number of equity shares.
5. Shareholding Pattern Form duly completed with relevant enclosures giving details before and after the issue.
6. Additional listing fee, if applicable, to be paid on the enhanced capital as per the enclosed schedule of listing fee.
7. Confirmation by the Managing Director/ Company Secretary.
8. PCA/PCS Certificate confirming the floor price and receipt of funds against the placement if securities with QIBs.
9. Due diligence certificate from the Merchant Bankers that the placement of _____ securities issued to QIBs by (Name of the Company) has been made in compliance with Chapter VIII of SEBI (ICDR) Regulations, 2018 and the (Name of the Company) complies with the requirements of SEBI (ICDR) Regulations, 2018.
10. Confirmation from the post-issue Merchant Banker giving summary of bids received and details of allocations made to QIBs.
11. Certified true copy of the final Placement Document along with soft copy in pdf format.
12. Detail terms and conditions of the NCDs/ securities which are convertible into or exchangeable with equity shares, as may be applicable. Also provide the reconciliation of such outstanding securities.
13. Undertaking from MD/ CS/ Compliance Officer of the company stating:
    “We hereby confirm that the company or its promoters or whole time directors are not in violation of the provisions of Regulation 24 of the SEBI Delisting Regulations, 2009.”
14. Undertaking from MD/ CS/ Compliance Officer of the company stating: “We hereby confirm that the company, its promoters, its directors are not in violation of the restrictions imposed by SEBI under SEBI circular no. SEBI/HO/ MRD/DSA/CIR/P/2017/92 dated August 01, 2017.”

7. ESPS/ESOS/SARS/GEBS/RBS

(a) Pre Issue Formalities
Checklist – Prior In-principle under Regulation 28(1) of the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 for ESPS/ESOS/SARS/GEBS/RBS:

1. Certified copy of Stock Option/Stock Purchase Scheme/ Stock Appreciation Rights Scheme/General Employee Benefits Scheme/ Retirement Benefit Schemes, certified by the Company Secretary.
2. Certified copy of statement to be fled with the Stock Exchange as required under Reg 10(b) SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021
3. Certified true copy of the notice of AGM/EGM for approving the Scheme/for amending the Scheme/for approving grants under Regulation 6 of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, certified by the company secretary.
4. Certified true copy of resolution passed by the shareholders of the Company approving/ amending the Scheme.
5. Certificate of Auditors on compliance with SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.
6. Certificate of Merchant Banker on compliance with SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.
7. List of Promoters as defined under the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.
8. Details of employee (wherever applicable) –
   (a) Who have been granted options/issued shares in excess of 5% of option/Shares issued in one year.
   (b) Who have been granted options/issued shares equal to or exceeding 1% of issued capital during any one year.
9. Copy of latest Annual Report.
10. Specimen copy of Share certificate (where shares are issued in physical form)
11. Confirmation from the Company.
12. Undertakings as required by, SEBI ESOS/ESPS Regulations.
13. Reconciliation statement.
14. Confirmation whether options lapsed / forfeited will re-issued or not.

(b) Post Issue Formalities
Documents required for listing of equity shares issued pursuant to
exercise of options granted under ESPS/ESOS/SARS/GEBS/RBS:

1. Letter of application and listing application.

2. Certified true copy of Notification for issue of shares as per the format prescribed under Regulation 10(c) of (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

3. Applicable Additional Listing Fees.

4. A certified copy of the resolution passed by the Board of Directors

5. Certificate from Company Secretary for receipt of money.

6. Certificate for receipt of money from the Statutory Auditors Practicing Company Secretary/ Practicing Chartered Accountant specifically certifying that the company has received the application/allotment monies from the applicants of these shares. For other than ESPS, in case the company opt to submit the above certificate on a quarterly basis the same should be mentioned in the application. Further, the company should ensure submission of quarterly certificate from the Statutory Auditors)Practicing Company Secretary/ Practicing Chartered Accountant specifically certifying that the company has received the application/allotment monies from the applicants of these shares.

7. List of allottees specifying the name of the allottee, number of shares allotted.

8. NSDIJCDSL credit and/or dispatch of physical certificate confirmation by the R & T agent.

9. Statement of the Compliance Officer/Company Secretary/ Authorised signatory showing number of shares for which the in-principle approval was taken and no. of shares allotted, date of allotment and the balance outstanding.

8. GDRS/ADRS/FCCBS
Pre Issue- Formalities
Documents required for granting approval under Regulation 28(1) of the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015, for companies proposing to come out with issue of GDRs/ADRs/
FCCBs:

1. Certified true copy of the resolution passed by the Board of Directors of the Company approving the issue of the GDRs/ADRs/FCCBs.
2. Copy of the notice sent to the shareholders of the company.
3. Certified true copy of the resolution passed by the shareholders of the Company in the general body meeting approving the issue of the GDRs/ADRs/FCCBs.
4. Draft offering circular for issue of the GDRs/ADRs/FCCBs.
5. Confirmation by the Managing Director and/or Company Secretary.
6. Processing fee

9. Listing on SME Platform
Checklist for Basis of Allotment — SME IPO:

1. One Copy of final prospectus fled with ROC along with ROC fling acknowledgement copy.
2. Authenticated proceeding details / minutes of basis of allotment, verified and signed by R & T Agent, BRLM (Responsible for post issue) and the Issuer along with the reasons for exception to rejection cases
3. Confirmation from registrar regarding withdrawal of applications received, considered in the basis, indicating date and time (should not be more than 12 hours from time of submission of basis.
4. Category wise, summary of list of “technical rejection” cases Specifying – Application No., Category, Name& Add., Pan #, DP ID CL ID, Quantity, price Amount and reason for rejection along with photocopies of Application forms.
5. Statement of multiple application and status of its acceptance. (If applicable)
6. Statements giving branch wise/bank wise/city wise/state wise/zone wise details of the total collections with a breakup of ASBA fund received at the various participating bank branches in response to the public issue / offer for sale.
7. Category wise, Bid lot wise, four copies of Calculation sheet of proposed basis of allotment of equity shares to the Qualified Institutional Buyers. Non-Institutional Bidders and Retail Bidders, Reserved category etc. duly signed by RTA, BRLM & Issuer.
8. Photo copy of the final certificate issued by the controlling branch of ASBA bankers giving branch wise details of collections received.
9. Undertakings from the company, lead managers and the registrars & transfer agents in respect of the basis of allotment.
10. Copy of the statutory advertisement released in respect of the public issue / offer for sale, opening and closing of the issue, price revision, if any etc. upto the stage of basis of allotment.