SMALL & MEDIUM ENTERPRISES EXCHANGE BOARD OF INDIA
Issue of specified securities by small & medium enterprises under chapter XA 1. Applicability An issuer whose post-issue face value capital does not exceed Rs. 10 crores shall issue its specified securities in accordance with provisions of this chapter. Further, an issuer whose post-issue face value capital exceeds Rs. 10 crores but does not exceed Rs. 25 crores, may also issue specified securities in accordance with the provisions of this chapter. 2. Filing of offer document and due diligence certificate 2.1. The issuer under this chapter shall not file the draft offer document with the Board : Provided it shall file a copy of offer document with the Board through a merchant banker, simultaneously with the filing of prospectus with SME exchange & ROC or letter of offer with SME exchange: Provided further that the Board shall not issue any observation on the offer document. 2.2. The merchant banker shall submit a due-diligence certificate as per Form A of schedule VI including additional confirmations as provided in Form H of schedule VI alongwith the offer document to the Board. 3. Underwriting by merchant bankers & underwriters 3.1. Issue made under this chapter shall be 100% underwritten through offer document and shall not restricted upto minimum subscription level. 3.2. The merchant banker shall underwrite at-least 15% of the issue size on his/their own account/s. 3.3. The issue in consultation with merchant banker may appoint underwriters in accordance with SEBI of India. 3.4. If other underwriters or nominated investors failed to fulfil their obligation/s, the merchant banker shall fulfil the underwriting obligations. 3.5. Underwriters other than merchant banker shall not subscribe to the issue made under his chapter in any manner except for fulfilling their obligations as agreed upon with the merchant banker/s in this regard. (All the underwriting & subscription agreements shall be disclosed in the offer documents by the merchant banker) 3.6. The merchant banker shall file an undertaking to the Board that the issue has been 100% underwritten along with the list of underwriters & nominated investors indications the extent of underwriting & subscription commitment, one day before the opening of issue.
4. Minimum requirements for issue under this chapter 4.1. The issuer shall stipulate the minimum application size in terms of number of specified securities which shall not be less than Rs. 1 lakh per application. 4.2. No allotment shall be made pursuant to any initial public offer made, if the number of prospective alottees is less than 50.
5.
Listing & Migration of specified securities under this chapter 5.1. Specified securities issued in accordance with the provisions of this chapter shall be listed on SME exchange. Further where any listed issuer issues specified securities under the provisions of this chapter shall migrate the specified securities already listed on any recognized stock exchange/s to the SME exchange & vice-versa. 5.2. Migration in both the cases can only be acted upon if the shareholders approve such migration by passing a special resolution through postal ballot to this effect. SR in this chapter is different 7 specified below: SR in this context shall be considered passed only if votes casted in favour by public shareholders (shareholders other than promoters) are twice the votes casted against the resolution by public shareholders (shareholders other than promoters) 5.3. Further where the post-issue face value capital of an issuer is likely to increase beyond Rs. 25 crores by virtue of any further issue, the issuer shall migrate its specified securties listed on SME exchange to the Main Board of exchange(any recognized Board other than SME exchange Board) Provided no further issue of capital shall be made unless: 5.3.1. The shareholders approve the migration by special resolution through postal ballot wherein the votes casted in favour by public shareholders (shareholders other than promoters) are twice the votes casted against the resolution by public shareholders (shareholders other than promoters) 5.3.2. The issuer has obtained in-principle approval from the Main Board for listing of its entire specified securities on it.
6. Market Making 6.1. The merchant banker shall ensure compulsory market making through stock brokers of SME exchange in the manner specified by the Board for a period minimum to 3 years from the date of listing of specified securities or from the date of migration in case the specified securities are migrated. 6.2. Specified securities being bought or sold under this process of market making may be transferred to or from the nominated investors: Provided the inventory of market maker, as on date of allotment shall be at-least 5% of the specified securities proposed to be listed on SME exchange. 6.3. The market maker for this purpose shall buy the entire shareholding of a shareholder in one lot, provided such shareholding is not less than the minimum contract size allowed for trading on SME exchange.
Further provided the market maker too shall not sell in lots less than the minimum contract size allowed for trading on SME exchange. 6.4. Market maker shall not buy the specified securities from the promoters or person belonging to the promoters group of issuer or any other person who have acquired shares from such promoters or person belonging to the promoters group of issuer during the compulsory market making period as laid down in sub clause 6.1. Provided the holding which is not locked-in as per these regulations can be traded with the prior permission of SME exchange in the manner specified by the Board.
