Indian Equity – Public Funding

Right issue eligibility condition (Regulation 61)

(a) If the issuer, any of its promoters, promoter group or

directors of the issuer are debarred from accessing the
capital market by SEBI;
(b) If any of the promoters or directors of the issuer is a
promoter or director of any other company which is
debarred from the accessing the capital market by SEBI;
(c) If any of its promoters or directors is a fugitive
economic offender.
Conditions (Regulation 62)
 The issuer making a rights issue of specified securities shall
ensure that:
(a) it has made an application to one or more stock exchanges to
seek an in-principle approval for listing of its specified securities
on such stock exchanges and has chosen one of them as the
designated stock exchange,
(b) all its existing partly paid-up equity shares have either been
fully paid-up or have been forfeited and
(C) it has made firm arrangements of finance through verifiable
means towards seventy five per cent of the stated means of
finance for the specifi project proposed to be funded from issue
proceeds,
 The amount for general corporate purposes, shall not exceed
25%of the amount raised by the issuer.
 Where the issuer or any of its promoters or directors is a wilful
defaulter
Pricing
The issuer shall decided the issue price, in consultation
with the lead manager(s)

The issue price shall not be less than the face value of
the specified securities

The issue shall disclose the issue price in the letter of

offer filed with SEBI and the stock exchanges.
Subscription Period

Minimum period of fifteen days and for a maximum

period of thirty days.
Payment Option

The part payment on application shall not be less than

25% of the issue price.
Procedure for making a Rights Issue

The various steps involved for issue of rights share are

enumerated below:
 Check whether the rights issue is within the authorised
share capital of the company. If not, steps should be
taken to increase the authorised share capital.
 Notify the stock exchange concerned the date of Board Meeting
at which the rights issue is proposed to be considered at least 2
days in advance of the meeting.
 Convene the Board meeting and place before it the proposal for
rights issue.
 Immediately after the Board Meeting notify the concerned Stock
Exchanges
 Appoint a merchant banker and file a draft letter of Offer with SEBI.
 Convene another Board Meeting which shall decide on the following
matters:.
 Quantum of issue and the proportion of rights shares
 Alteration of share capital
 Fixation of record date
 Appointment of merchant bankers and underwriters (if necessary).
 Rights issue shall be kept open for at least 15 days and not more than 30
days.
 File a copy of the letter of offer with the stock exchange.
 Despatch letters of offer
 Check that an advertisement giving date of completion of despatch of letter
of offer has been released in at least an English National Daily, one Hindi
National Paper and a Regional Language Daily where registered office of
the issuer company is situated.
 Make arrangement with bankers for acceptance of share
application forms.
 Finalise the allotment in consultation with Stock Exchange.
 Convene Board Meeting and make allotment of shares.
 Make an application to the Stock Exchange(s) where the
company’s shares are listed for permission of listing of new
shares.
Preferential issue- Pricing

1. Listed for more than 26 weeks

The equity shares shall be allotted at a price not less than higher of
the following:
(a) The average of the weekly high and low of the volume
weighted average price (VWAP) of the related equity shares
quoted on the recognised stock exchange during the twenty six
weeks preceding the relevant date; or
(b) The average of the weekly high and low of the volume
weighted average prices of the related equity shares quoted on a
recognised stock exchange during the two weeks preceding the
relevant date.

2. Listed for less than 26 weeks

The equity shares shall be allotted at a price not less than the
higher of the following:
(a) the price at which equity shares were issued by the issuer in its
initial public
(b) the average of the weekly high and low of the volume weighted
average prices of the related equity shares quoted on the
recognised stock exchange during the period shares have been
listed preceding the relevant date; or
(c) the average of the weekly high and low of the volume weighted
average prices of the related equity shares quoted on a recognised
stock exchange during the two weeks preceding the relevant date.
Where the price of the equity shares is determined in terms of point no. 2,
such price shall be recomputed by the issuer on completion of twenty six
weeks from the date of listing on a recognised stock exchange with reference
to the average of the weekly high and low of the volume weighted average
prices of the related equity shares quoted on the recognised stock exchange
during these twenty six weeks and if such recomputed price is higher than the
price paid on allotment, the difference shall be paid by the allottees to the
issuer.
“Frequently traded shares” means the shares of the issuer, in
which the traded turnover on any recognized stock exchange
during the twelve calendar months preceding the relevant
date, is at least ten per cent of the total number of shares of
such class of the shares of the issuer.
Pricing of equity shares - Infrequently traded shares

Where the shares are not frequently traded, the price

determined by the issuer shall take into account valuation
parameters including book value, comparable trading
multiples.
Qualified Institutional Buyer (QIB)

“Qualified Institutional Buyer” means

 a mutual fund, venture capital fund
 a foreign portfolio investor
 a public financial institution;
 a scheduled commercial bank;
 a provident fund with minimum corpus of twenty five crore rupees;
Pricing

Pricing of QIP
At a price not less than the Issuer may offer a discount of
average of the weekly high and not more than five per cent,
low of the closing prices of the on the price so calculated,
same class quoted on the stock subject to approval of
exchange during the two weeks shareholders.
preceding the relevant date.
Tenure of Convertible Securities

The tenure of the convertible or exchangeable eligible

securities issued through qualified institutions placement
shall not exceed sixty months from the date of allotment.
Transferability

The eligible securities allotted under the qualified

institutions placement shall not be sold by the allottee for
a period of one year from the date of allotment, except on
a recognised stock exchange.
Minimum Number of Allottees

 The minimum number of allottees for each placement of eligible securities

shall at least be:
(a) two, where the issue size is less than or equal to Rs. 200 and Rs. 50 crore;
(b) five, where the issue size is greater than Rs. 200 and Rs. 50 crore;

 No single allottee shall be allotted more than 50% of the issue size.
Eligibility requirements for an initial public offer

If post issue face value capital is

If the issuer’s post issue paid up more than ten crore rupees and
capital is less than or equal to upto twenty five crore then listing
ten crore rupees, then list only on SME platform of the Exchange
on SME Platform of the is optional and company may opt
Exchange. for listing on the main board of the
Exchange also.
Comply the following:
(a) adequate disclosures are made in the financial
statements as required to be made by the issuer as per
Schedule III of the Companies Act, 2013;
(b) the financial statements are duly certified by auditors,
Filing of the offer document
 The issuer shall file a copy of the offer document with SEBI through
the lead manager(s), immediately upon`filing of the offer document
with the Registrar of Companies.
 SEBI shall not issue any observation on the offer document.
 The lead manager(s) shall submit a due-diligence certificate.
 The offer document shall be displayed from the date of filing on the
websites of SEBI, the lead manager(s) and the SME exchange(s) for
at least 21 days.
Migration to SME Exchange
An issuer, whose specified securities are listed on a SME Exchange and whose
post issue face value capital is more than ten crore rupees and upto twenty
five crore rupees, may migrate:
 if its specified securities to Main Board if its shareholders approve such
migration by passing a special resolution through postal ballot to this
effect; and
 if such issuer fulfils the eligibility criteria for listing laid down by the Main
Board.
However, the special resolution shall be acted upon if and only if the votes cast
by shareholders other than promoters in favour of the proposal amount to at
least two times the number of votes cast by shareholders other than promoter
shareholders against the proposal which means that resolution shall be
approved by majority of minority.
Where the post issue face value capital of an issuer listed on SME exchange is
likely to increase beyond twenty five crore rupees by virtue of any further
issue of capital by the issuer by way of rights issue, preferential issue, bonus
issue, etc. the issuer shall first migrate its specified securities listed on SME
exchange to Main Board and seek listing of specified securities proposed to be
issued on the Main Board subject to the fulfilment of the eligibility criteria for
listing of specified securities laid down by the Main Board.
However, no further issue of capital by the issuer shall be made unless:
 the shareholders of the issuer have approved the migration by passing a
special resolution through postal ballot wherein the votes cast by
shareholders other than promoters in favour of the proposal amount to at
least two times the number of votes cast by shareholders other than
promoter shareholders against the proposal;
 the issuer has obtained in- principle approval from the Main Board for
listing of its entire specified securities on it.
Market Making

 The lead manager shall ensure compulsory market making

through the stock brokers of SME exchange appointed by the
issuer, for a minimum period of three years from the date of
listing of specified securities or from the date of migration from
the Main Board.
 The issuer shall disclose the details of arrangement of market
making in the offer document.
 However, the inventory of the market maker, as on the date of
allotment of the specified securities, shall be at least 5 % of the
specified securities proposed to be listed on SME exchange.
 Market maker shall not buy the shares from the promoters or
persons belonging to promoter group.
INNOVATORS GROWTH PLATFORM [CHAPTER X OF SEBI (ICDR)
Regulations, 2018]

“Innovators growth platform” (IGP) means the trading platform for listing and
trading of specified securities.
Institutional investor” means
(i) qualified institutional buyer; or
(ii) family trust or intermediaries registered with the Board, with net worth of
more than five hundred crore rupees,
Eligibility

An issuer which is intensive in the use of technology, information technology,

intellectual property, data analytics, bio-technology or nano-technology to
provide products, services or business platforms with substantial value 25% of
the pre-issue capital of the Issuer Company for at least a period of one year,
should have been held by:
I. Qualified Institutional Buyers;
II. Foreign Portfolio Investor;
Minimum application size

The minimum application size shall be two lakh rupees

and in multiples thereof.
Allocation and allotment

The number of allottees in the initial public offer

shall at least be fifty.
GENERAL CONDITIONS OF LOCK IN

The entire pre-issue capital of the shareholders shall be

locked-in for a period of six months from the date of
allotment
TRADING LOT

The minimum trading lot on the stock exchange shall be

two lakh rupees and in multiples thereof.
Framework for Regulatory Sandbox

The Securities and Exchange Board of India (“SEBI”) introduced a

framework for “Regulatory Sandbox”. Under this sandbox
framework, entities regulated by SEBI shall be granted certain
facilities and flexibilities to experiment with financial technologies
(“FinTech”) solutions in a live environment and on limited set of
real customers for a limited time frame.
Real Estate Investment Trusts
 Introduction

The Real Estate Investment Trust (REIT) is an investment vehicle

that invests in rent-yielding completed real estate properties
which has the potential to transform the Indian real estate
sector.
 Genesis

REIT markets started in US in 1960s, followed by Australia in the early 1970s.

From the late 1990s, and particularly the early 2000s, Asian governments have
been passing legislation which allows the establishment of REITs. SEBI on 26th
September 2014 finally notified the final regulations - SEBI (Real Estate
Investment Trust) Regulations, 2014. Hon’ble Finance Minister in Union Budget
Speech 2021-22, allowed Debt Financing to REITs by Foreign Portfolio Investors.
REITs in India would issue securities, which would be listed on stock exchanges.
 Registered REITs in India as on March 31, 2021

Embassy Office Parks REIT

Mindspace Business Parks REIT

Brookfield REIT

IIFL REIT

India is the 31st country in the world to enact REIT Legislation.

 Difference between REITs and Mutual Funds

Basis REIT Mutual Funds

Meaning A REIT is a corporation, trust, or association Mutual funds are
that invests directly in real estate through professionally managed
properties or mortgages. They trade on a stock pooled investments that invest
exchange and are bought and sold like stocks. in a variety of vehicles, such as
stock and bonds.
Investment A large amount of funds to be shelled out if one Mutual funds require small
wish to invest in real estate. amounts to be invested.
diversification An investor can invest only real estate related Mutual funds, however, allow
stocks through REITs. you to diversify your portfolio
by investing in various
sections.
 REIT Structure

Trustee Manager
Sponsor
• Hold REIT asset in • Manage portfolio.
• Setup REIT and
trust for the benefits • Take investment
appoint trustee.
of unitholders.
• Hold minimum decisions.
• Oversee activities of • Ensure reporting
required percentage
manager. disclosures
of total units of
• Timely payment of
REIT.
dividend.
 SALIENT FEATURES OF SEBI (REIT)
REGULATIONS, 2014
Governing Code Legal Structure Parties to the REITs
SEBI (Real Estate Trust setup under Indian Sponsor Group, Inducted
Investment Trusts) Trusts Act, 1882. Sponsor, Manager and
Regulations, 2014. Trustee.
Maximum number of sponsors that REITs can have & Unit holding obligation
 Each sponsor shall hold or propose to hold minimum 5% of units of REITs on
post-initial offer basis.
 Collectively to hold minimum of 25% of the units of the REIT for a period of not
less than 3 years from the date of listing.
 Eligibility for Trustee Listing requirement Investment conditions
• Shall be registered as a Listing is mandatory Atleast 80% of the value of
Trustee under SEBI for Units. the REIT assets needs to be
(Debenture Trustee) invested in completed and
Regulations, 1993 and revenue generating
shall not be an associate properties.
of Sponsor/ Manager.
Other Permissible Investments
Remaining 20% can be invested in:
 Developmental properties;
 Listed or unlisted debt of companies/body corporate in real estate sector;
Other Permissible Investments
 Mortgage backed securities;
 Equity shares of companies listed on a recognized stock exchange in India
which derive not less than 75% of their operating income from Real
Estate activity
 Government securities;
 Unutilized FSI(Floor Space Index) of a project;
 TDR
 Money market instruments or Cash equivalents.
Valuation of assets
Full valuation on a yearly basis and updating the same on a half yearly basis
and declare NAV within 15 days from the date of such valuation/updation.
Distribution of Income
Atleast 90% of the net distributable income after tax of the REIT/Holdco shall be
distributed as dividend to the unit holders atleast on half-yearly basis and shall be made
not later than fifteen days.
Mode of Investment in properties
Directly or through SPVs
Initial offer restrictions
Minimum offer size should be atleast Rs. 250 crore.
Minimum Subscription Amount and unit size
 REITs shall be in range of ten thousand rupees to fifteen thousand rupees.
 The units offered to the public in initial offer shall not be less than 25% of the number
of units of the REIT on post-issue basis.
 Trading lot shall be 1 Unit.
Borrowings and Deferred Payments
 The aggregate consolidated borrowings and deferred payments of the REIT shall never
exceed 49% of the value of the REIT assets.
 In case such borrowings/deferred payments exceed 25%, approval from unit holders
and credit rating shall be required.
 Value of Assets by REIT shall be at least Rs. 500 crores.
 Minimum Number of Unit holders other than sponsor(s), its related parties and its
associates forming part of public shall be at least 200.
 DEFINITIONS

“Associate” of any person shall be as defined under the Companies

Act, 2013 or under the applicable accounting standards and shall
also include following:
(i) any person controlled, directly or indirectly, by the said
person;
(ii) any person who controls, directly or indirectly, the said
person;
 DEFINITIONS

(iii) where the said person is a company or a body corporate, any

person(s) who is designated as promoter(s) of the company or
body corporate and any other company or body corporate with
the same promoter(s);
(iv) where the said person is an individual, any relative of the
individual.
 DEFINITIONS

“Body corporate” shall have the meaning assigned to it in or

under clause (11) of section 2 of the Companies Act, 2013.
“Completed property” means property for which occupancy
certificate has been received from the relevant authority.
“Floor Space Index” or “FSI” shall mean the buildable are a on a
plot of land as specified by the competent authority.
 DEFINITIONS

“Net Asset Value” or “NAV” means the value of the REIT assets
reduced by the external debt divided by the number of
outstanding units as on a particular date.
“Real Estate” or” Property” means land and any permanently
attached improvements to it, whether leasehold or freehold and
includes buildings, sheds, garages, fences, fittings, fixtures,
warehouses, carparks, etc.
 DEFINITIONS

“Related Party” shall be defined under the Companies Act, 2013 s

and shall also include:
(i) parties to the REIT;
(ii) promoters;
(iii) directors; and
(iv) partners of the persons in clause(i).
 Parties to the REIT

Sponsor Inducted Trustee

Manager
Group(s) Sponsor
 DEFINITIONS

“Valuer” means any person who is a “registered valuer” under

section 247 of the Companies Act, 2013 or as specified by SEBI
from time to time.
There are three types of REIT available: equity REITs which
purchase, own and manage income-generating properties;
mortgage REITs which lend money directly or indirectly to real
estate owners; and hybrid REITs which are a combination of the
first two.
 Eligibility criteria

No person shall act as a REIT unless it is registered with SEBI

under the REIT Regulations.
(a) Applicant
The applicant must be a sponsors or on behalf of trust and
Trust Deed shall be duly registered in India under the
provisions of the Registration Act, 1908.
(b) Sponsor
Each sponsor shall hold or propose to hold not less than five percent of
the number of units of the REIT on post-initial offer basis.
 The sponsor(s), on a collective basis, have a networth of not less
than one hundred crore rupees. However, each sponsor has a
networth of not less than twenty crore rupees; and
 The sponsor or its associate(s) has not less than five years’
experience in development of real estate.
However, where the sponsor is a developer, at least two projects of the
sponsor have been completed.
(c) Manager
 In case, the Manager is a body corporate or a company, the
networth of the manager shall not be less than Rs. 10 crore or in
case, the manager is a LLP, the value of net tangible assets shall not
be less than ten crore rupees;
 The Manager must have at least 5 years of experience in fund
management/advisory services/property management in the real
estate industry.
 The manager must have entered into an investment management
agreement with the trustee which provides for the responsibilities
of the manager in accordance with REIT Regulations.
(d) Trustee
 It should be registered with SEBI under SEBI (Debenture Trustees)
Regulations, 1993. It is not an associate of the sponsor(s) or
manager.
 The unit holder of the REIT shall not enjoys superior voting or any
other rights over another unit holder and there are no multiple
classes of units of REIT. However, subordinate units may be issued
only to the sponsors and its associates, where such subordinate
units shall carry only inferior voting or any other rights compared to
other units.
 The applicant has clearly described at the time of application for
registration, details pertaining to proposed activities of the REIT.
 The REIT and parties to the REIT are fit and proper persons.
 Whether any previous application for grant of certificate by the RIET
or the parties to the REIT has been rejected by SEBI.
 Whether any disciplinary action has been taken by SEBI or any other
regulatory authority against the REIT or the parties to the REIT or
their directors/ members of governing board.
 ISSUE AND ALLOTMENT OF UNITS

1. A REIT shall make an initial offer of its units by way of

public issue only.
2. No initial offer of units by the REIT shall be made unless:
 the REIT is registered with SEBI
 the value of the REIT assets owned by the REIT is not less
than Rs. 500 crores
 the minimum number of unit holders other than
sponsor(s), its related parties and its associates forming
part of public shall be not less than two hundred;
 maximum subscription from any investor other than
sponsor(s), its related parties and its associates shall not
be more than 25 percent of the total unit capital; and
 the offer size is not less than Rs.250 crores.
3. The requirement of ownership of assets and size of REIT to be not
less that 500 crores may be complied at any point of time before
allotment of units .
For a REIT raising funds through an initial offer, the units proposed
to be offered to the public through such initial offer:
(a) Shall be not less than 25% of the total of the outstanding units
of the REIT. If the post issue capital of the REIT calculated at
offer price is less than Rs.1,600 crores.
However, this requirement shall be complied along with the
requirement as specified in Point No. 2.
Issue size < 1600 Cr = 25% x total units to public
(b) shall be of the value of atleast Rs. 400 crore, if the post
issue capital of the REIT calculated at offer price is equal to
or more than Rs.1600 crore and less than Rs. 4000 crore
Issue size ≥ 1600 Cr < 4000 Cr = 1+ value of units offered to
public minimum 400 Cr
(c) shall be not less than 10% of the total of the outstanding
units of the REIT and the units being offered by if the post
issue capital of the REIT calculated at offer price is equal to
or more than Rs. 4000 crore.
Issue size ≥ 4000 Cr = 10% x total units to public.
5. Any subsequent issue of units by the REIT may be by way
of follow-on offer, preferential allotment, qualified
institutional placement, rights issue, bonus issue, offer for
sale or any other mechanism and in the manner as may be
specified by SEBI.
6. REIT, through the merchant banker, shall file a draft offer
document along with the prescribed fees with the
designated stock exchange(s) and SEBI, not less than 30
working days before filing offer document with the
designated stock exchange and SEBI.
7. The draft offer document filed with SEBI shall be made
public, for comments, by hosting it on the websites of SEBI,
designated stock exchanges and merchant bankers
associated with the issue for a period of not less than 21
days.
8. The draft offer document and/or final offer document
shall be accompanied by a due diligence certificate signed by
the lead merchant banker.
9. SEBI may communicate its comments to the lead merchant
banker and, in the interest of investors, may require the lead
merchant banker to carry out such modifications in the draft
offer document as it deems fit.
10. The lead merchant banker shall ensure that all comments
received from SEBI on the draft offer document are suitably
taken into account prior to the filing of the offer document
with the designated stock exchanges.
11. In case no observations are issued by SEBI on the draft
offer document within 21 working days, then REIT may file
the offer document or follow-on offer document with SEBI
and the exchange(s).
12. The offer document shall be filed with the designated
stock exchanges and SEBI not less than 5 working days
before opening of the offer.
13. The initial offer or follow-on offer or right issue shall be
made by the REIT with in a period of not more than one year
from the date of issuance of observations by SEBI.
14. The REIT may invite for subscriptions and allot units to
any person, whether resident or foreign.
15. The application for subscription shall be accompanied by
a statement containing the abridged version of the offer
document, detailing the risk factors and summary of the
terms of issue.
16. Under both the initial offer and follow-on public offer,
the minimum subscription amount which a REIT shall accept
from any investor shall fall in range of Rs. 10,000 to Rs.
15,000.
17. Initial offer and follow-on offer shall not be open for
subscription for a period of more than thirty days.
18. In case of over-subscriptions, the REIT shall allot units to
the applicants on a proportionate basis rounded off .
19. The REIT shall allot units or refund application money as
the case may be, within 12 working days from the date of
closing of the issue.
20. The REIT shall issue units only in dematerialized form to
all the applicants.
21. The price of REIT units issued by way of public issue shall
be determined through the book building processor any
other process in accordance with the circulars or guidelines
issued by SEBI.
22. The REIT shall refund money:-
(a) to all applicants in case it fails to collect subscription
amount of exceeding 90% of the fresh issue size as
specified in the offer document.
(b) to all applicants in case the number of subscribers to the
initial offer forming part of the public is less than 200.
23. If the manager fails to allot, or list the units, or refund
the money within the specified time, then the manager shall
pay interest to the unit holders at 15% per annum.
24. If the manager fails to allot, or list the units, or refund
the money within the specified time, then the manager shall
pay interest to the unit holders at 15% per annum.
25. If the REIT fails to make its initial offer within three years
from the date of registration with SEBI, it shall surrender its
certificate of registration to SEBI.
26. SEBI may specify by issue of guidelines or circulars any
other requirements, as it deems fit.
 OFFER DOCUMENT AND ADVERTISEMENT

 The Offer document of the REIT shall contain material, true, correct
and adequate disclosures to enable the investors to make an
informed decision.
 REIT shall not be misleading.
 LISTING AND TRADING OF UNITS

After the initial offer it shall be mandatory for all units of

REITs to be listed on a recognized stock exchange having
nation wide trading terminals within a period of twelve
working days from the date of closure of the offer.

The listing of the units of the REIT shall be in accordance

with the listing agreement entered into between the REIT
and the designated stock exchange.
 LISTING AND TRADING OF UNITS

In the event of non-receipt of listing permission from the stock

exchange(s) , the units shall not be eligible for listing and the
REIT shall be liable to refund the subscription monies, if any, to
the respective allottees immediately along with interest at the
rate of 15% per annum from the date of allotment.

The units of the REIT listed in recognized stock exchanges shall

be traded, cleared and settled in accordance with the bye-laws
of concerned stock exchanges.
 LISTING AND TRADING OF UNITS

The REIT shall redeem units only by way of a buy-back or at the

time of delisting of units.

The units of REIT shall remain listed on the designated stock

exchange unless delisted under REIT Regulations.
The minimum public holding for the units of the listed REIT
shall be in accordance with point 4 as discussed under Issue
and Allotment of Units of this lesson.

SEBI and the designated stock exchanges may specify any other
requirements pertaining to listing and trading of units of the
REIT
 DELISTING OF UNITS

1. The manager shall apply for delisting of units of the REIT to

SEBI and the designated stock exchanges if,-
(a) the public holding falls below the specified limit as
prescribed under REIT Regulations.
(b) if there are no projects or assets remaining under the REIT
for a period exceeding six months. The period may be
extended by further six months, with the approval of unit
holders
(c) violation of the listing agreement or these regulations or the Act.
(d) The sponsor(s) or trustee requests such delisting and such request
has been approved by unit holders.
(e) The unit holders may also apply for such delisting.
2. SEBI and the designated stock exchanges may consider such
application for approval or rejection as may be appropriate in the
interest of the unit holders.
3. SEBI, instead of requiring delisting of units, if it deems fit, may
provide additional time to the REIT or parties to the REIT to comply
with REIT Regulations.
4. SEBI may reject the application for delisting and take any other
action.
5. The procedure for delisting of units of REIT including provision of
exit option to the unit holders shall be in accordance with the listing
agreement.
6. SEBI may require the REIT to windup and sell its assets in order to
redeem units of the unit holders for the purpose of delisting of units.

7. After delisting of its units, the REIT shall surrender its certificate of
registration to SEBI and shall no longer undertake activity of a REIT.
 RIGHTS AND MEETING OF THE UNIT HOLDERS

With respect to any matter requiring approval of the unit holders:

The unit holder shall have (a) a resolution shall be considered as passed when the votes cast
the rights to receive income by unit holders, so entitled and voting, in favour of the
or distributions as provided resolution exceed a certain percentage, as specified in this
for in the Offer document regulation, of the votes cast against;
or trust deed. (b) the voting may also be done by postal ballot or electronic
mode;
(c) a notice of not less than 21 days either in writing or through
electronic mode shall be provided to the unit holders;
 RIGHTS AND MEETING OF THE UNIT HOLDERS

An annual meeting of all unit With respect to the annual meeting of unit
holders shall be held not less holders,-
than once a year within 120 (a) latest annual accounts and performance of the
days from the end of financial REIT;
year and the time between (b) approval of auditor
two meetings shall not exceed (c) latest valuation reports;
15 months. (d) appointment of valuer,
 RIGHTS AND MEETING OF THE UNIT HOLDERS

In case of votes in favour > votes against In case of 60% in favour for following
i.e., against i.e., simple majority of unit decisions:
holders:  Any change in investment manager.
 any borrowing in excess of limit as  any material change in investment
specified under the REIT Regulations. strategy.
 de-classification of the status of  Delisting.
sponsor. Approval from unit holders shall be required
 any issue for which SEBI or the where the votes cast in favour of the
designated stock exchange requires resolution shall be not less than one and half
approval. times the votes cast against the resolution.
 Discolsures

1. The manager shall ensure that 2. The manager shall submit an

the disclosures in the offer annual report to all unit holders
document are in accordance with of the REIT with respect to
Schedule II of the REIT activities of the REIT, within three
Regulations and any circulars or months from the end of the
guidelines issued by SEBI in this financial year.
regard.
3. The manager shall submit a
half-yearly report to all unit
4. Such annual and half yearly
holders of the REIT with respect
reports shall contain disclosures
to activities of the REIT within
as specified under Schedule IV of
forty five days from the end of
the REIT Regulations.
the half year ending on
September 30th.
 Such annual and half yearly reports shall contain
disclosures as specified under Schedule IV of the REIT
Regulations.

Acquisition or disposal of any properties, value of which exceeds

5% of value of the REIT assets;

borrowing exceeding 5% of the value of the REIT assets during

the year;

Additional issue of units by the REIT;

Details of any credit rating obtained by the REIT and any
change in such rating;

Any legal proceedings which may have significant bearing

on the functioning of the REIT;

Notices and results of meetings of unit holders;

Any instance of non-compliance with the REIT Regulations

 Liability for Action in case of Default

Action will be taken by SEBI. Securities and Exchange Board of

India (Intermediaries) Regulations, 2008.
PARTICIPATION BY STRATEGIC INVESTOR(S) IN REITs

‘Strategic investor’ means

an infrastructure an insurance a mutual

a Scheduled company registered
finance company fund
Commercial with the Insurance
registered with
Bank; Regulatory and
RBI as a NBFC;
Development
Authority of India;
Who invest either jointly or severally not less than 5% of the
total offer size of the InvIT or such amount as may be specified
by SEBI.
Participation by the ‘strategic investors’ in the public issue of the
REITs
Holding requirements Issue price of the units and Lock-in period
utilisation of funds
• Holding by strategic • The price at which units The unit subscribed by
investors-Minimum 5%, are offered to the strategic investors, pursuant
maximum 25%. strategic investors must to the unit subscription
• Holding by public, other not be less than the price agreement, will be locked -
than strategic investors determined in the public in for a period of 180 days
and sponsors minimum issue from the date of listing in the
25% • It must be ensured that public issue.
• Holding by sponsor the subscription amount
minimum 5%, maximum is kept in the separate
70%. account until the public
issue is opened.
 POWER TO RELAX STRICT ENFORCEMENT OF THE
REGULATIONS

Exemption from enforcement of the regulations in special cases

The SEBI may, exempt any person or class of persons from the
operation of all or any of the provisions of these regulations for a
period as may be specified but not exceeding twelve months, for
furthering innovation in technological aspects relating to testing new
products, processes, services, business models, etc. in live
environment of regulatory sandbox in the securities markets.
Any exemption granted by the SEBI as mentioned above shall
be subject to the applicant satisfying such conditions as may
be specified by the SEBI including conditions to be complied
with on a continuous basis.
“Regulatory Sandbox” means a live testing environment
where new products, processes, services, business models, etc.
may be deployed on a limited set of eligible customers for a
specified period of time, for furthering innovation in the
securities market, subject to such conditions as may be
specified by the SEBI.
Infrastructure Investment Trusts
 Introduction
InvITs work like mutual funds or real estate investment
trusts (REITs) in features. InvITs can be treated as the
modified version of REITs designed to suit the specific
circumstances of the infrastructure sector. The purpose of
InvITs is to encourage and provide additional financing for
investment in the infrastructure sector in India.
 Introduction
It aims to provide stable long term cash flows to its unit
holders; suited for long term capital such as Pension Funds
and Insurance Companies. InvITs support diversification of
ownership of infrastructure assets such as power
transmission, roads, ports, renewable projects.
 An InvIT, is a private trust set-up under the Indian
Trusts Act, 1882, and registered with SEBI as an InvIT.
Following InvITs are registered with SEBI in India

India Grid
Trust
India National POWERGRID
Infrastructure Highways Infrastructure
Trust Infra Trust Investment
Trust
Hon’ble Finance Minister in Union Budget Speech 2021-
22, allowed Debt Financing to InvITs by Foreign Portfolio
Investors to ease access of finance to InvITs.
 How does it benefit investors?

InvIT
Provide long -term
financial Option for Low-risk investments
Free up developer
Existing Infrastructure offered to attract long-
Capital for
Projects. term investors such as
Reinvestment into
New Infrastructure insurance and pension
Projects. funds.
 InvIT

Facilitation of
ownership of To bring higher
Growth potential
diversified standards of
for investors.
infrastructure. governance.
 Distinguish between REITs and InvITs
Basis REITs InvITs
Investment REITs only real estate infrastructure. InvITs can invest in all kinds of
infrastructure.

Scope The scope of REITs is narrower. The scope of InvITs is broader.

Return In REITs investors gets short term return In InvITs is mainly for long term
in every 6 months. investors.
Risk The risk in REITs is very low. The risk in InvITs is very high.

Payback Period In REITS payback period is very less. In InvITs the payback period is
after a certain number of years.
 Structure of InvIT
Sponsor Trustee Investment Project Manager
Manager
 A company, limited liability partnership
Same as REITs or body corporate, which is responsible
for the execution and management of
the project assets held by the InvIT.
 The Project Manager is responsible for
the execution of an infrastructure project
and achieving project milestones in
accordance with the project documents
or concession agreement
 Merchant
bankers

Intermediaries Registrar
Public Issue
Banks
involved in an to the
InvIT issue

Syndicate
Members
 Escrow
Collection
Banks

Intermediaries Credit
Advertising involved in an Rating
Agency InvIT Agencies

SCSBs,
Registered
Brokers, RTAs
and Collecting
Depository
Participants
 KEY STAKEHOLDERS
InvIT Structure
Sponsor
• Setup InvIT and appoint the trustee.
• Hold minimum required percentage of total units of InvIT.
Trustee
• Hold InvITs assets in the name of InvIT for the benefit of unit holders.
• Ensure investment manager timely payment of dividend to unit
holders.
 KEY STAKEHOLDERS
Investment Manager
• Make investment decisions in relation to underlying assets.
• Ensure assets have proper legal title and contracts entered as legal, valid
and binding.
Project Manager
• Undertake operations and management of InvIT assets.
• For under construction projects, ensure progress of developments,
approval status and such other aspects
Can an Individual be sponsor of InvIT?
No an individual can’t be sponsor of InvIT. A company,
limited liability partnership or body corporate, which is
the settlor and author of the trust is designated as the
‘sponsor’ of an InvIT.
 Eligibility criteria
Any person shall not act as an InvIT unless it has obtained a certificate of
registration from the SEBI.
Applicant
The applicant is the sponsor on behalf of the trust and the trust deed must be
registered in India under the provisions of the Registration Act, 1908
containing undertaking activity of InvIT as main objective and includes
responsibilities of the trustee.
Sponsor
 Net worth of at least INR 100 crores in case of body corporate or a
company or net intangible assets of INR 100 crores in case of a Limited
Liability Partnership (LLP).
 Minimum experience of at least 5 years and has completed at least two
projects.
Investment Manager
 Net worth of at least INR 10 crores in case of body corporate or a company
or net intangible assets of INR 10 crores in case of a LLP;
 Minimum experience of 5 years in fund management/advisory services/
development in infrastructure sector/combined experience of the
directors/partners/employees of the investment manager in fund
management or advisory services or development in the infrastructure
sector is not less than 30 years;
 Not less than half of its directors/members should be independent.
Project Manager
The project manager has been identified and shall be appointed in terms of
the project implementation/management agreement;
However, the project implementation agreement/management agreement
shall be submitted along with the draft offer document/or the placement
memorandum.
Trustees
 Registered with SEBI and is not an associate of sponsor/investment
manager;
 Sufficient resources with respect to infrastructure, personnel etc. as
specified by SEBI; and
 Holds InvIT assets in trusts for the benefit of unit holders.
Other Conditions
 No unit holder of the InvIT enjoys superior voting or any other rights over
another unit holder and there shall not be multiple classes of units of
InvITs;
 subordinate units may be issued only to the sponsors and its associates,
where such subordinate units shall carry only inferior voting or any other
rights compared to other units;
 The applicant has clearly described at the time of registration, details
pertaining to proposed activities of the InvIT;
 Whether any previous application for grant of certificate made by the InvIT
or the parties to the InvIT or their directors/members of governing board
has been rejected by SEBI;
 Whether any disciplinary action has been taken by SEBI
 OFFER OF UNITS AND LISTING OF UNITS

No initial offer of units by an InvIT shall be made unless–

 The InvIT is registered with SEBI;
 The value of InvIT assets is not less than Rs. 500 crore.
 The offer size is not less than rupees two hundred fifty crore.
However, the requirement of ownership of assets and offer size may be
complied at any point of time before allotment of units.
 The minimum offer and allotment to public
through an offer document/placement
memorandum shall be,–

Exactly same as REITs.

 If the InvIT, raises funds by way of private
placement–

a) it shall do it through a placement memorandum;

b) from institutional investors and body corporate only, whether Indian or
foreign;
c) with minimum investment from any investor of Rs. 1 crore;
d) shall file a placement memorandum with SEBI alongwith the fee as
specified in the SEBI InvIT Regulations, atleast 5 days prior to opening of
the issue;
 If the InvIT raises funds by public issue
InvITs,–
(a) it shall be by way of initial public offer;
(b) any subsequent issue of units after initial public offer
may be by way of follow-on offer,
(c) minimum subscription amount of Rs. 10,000 to Rs.
15,000.
(d) prior to initial public offer and follow-on offer, the merchant banker shall
file the draft offer document along with prescribed fees with the designated
stock exchange(s) and SEBI not less than thirty working days before filing the
offer document with the designated stock exchange and SEBI;
(e) the draft offer document filed with SEBI shall be made public, for comments,
if any, by hosting it on the websites of SEBI, designated stock exchanges,
InvIT and merchant bankers associated with the issue for a period of not less
than twenty one days;
(f) SEBI may communicate its comments to the lead merchant banker and, in
the interest of investors, may require the lead merchant banker to carry out
such modifications in the draft offer document as it deems fit;
(g) the lead merchant banker shall ensure that all comments received from SEBI
on the draft offer document are suitably addressed prior to the filing of the
offer document.
(j) in case no observations are suggested by SEBI in the draft offer
document within twenty one working days;
(k) initial public offer and follow-on offer shall not be open for
subscription for a period of more than thirty days;
(l) in case of over-subscriptions, the InvIT shall allot units to the
applicants on a proportionate basis rounded off;
(m) the InvIT shall allot units or refund application money, as the
case may be, within twelve working days from the date of closing
of the issue;
(n) the InvIT shall refund money, -
 the InvIT shall refund money, -
All applicants in case it fails to All applicants in case the number
collect subscription of atleast 90% of subscribers to initial public
of the fresh issue size as specified offer forming part of the public is
in the offer document. less than 20

Applicants to the extent of over

subscription in case the money
received is in excess of the extent of
over-subscription as specified in the
offer document, money shall be
refunded to the applicants to the
extent of the over subscription.
(o) If the investment manager fails to allot or list the units or refund
the money within the specified time, then the investment
manager shall pay interest to the unit holders at the rate of
fifteen per cent per annum.
Is there a mandatory listing requirement under the InvIT
Regulations?

Yes, an InvIT is required to list its units under the InvIT Regulations.
Under the extant InvIT Regulations, if an InvIT fails to offer its
Units (either through a public offer or a private placement) within
three years from the date of registration of the InvIT with SEBI, it
is required to surrender its certificate of registration and should
cease to operate as an InvIT.
 Allocation in public issue

 Institutional investors shall not be allocated more than 75% in a public

offering of the InvIT units.
 Other investors, including retail investors, have to be allocated at least
25% of the InvIT units.
 Who is an Anchor Investor?

“Anchor Investor” means a qualified institutional buyer who makes an

application for a value of at least ten crore rupees in a public issue on the
SEBI main board made through the book building process or makes an
application for a value of at least two crore rupees for an issue made in
accordance with SEBI (ICDR) Regulations, 2018.
A strategic investor may participate in an offer as an anchor
investor.
The investment manager, on behalf of the InvIT, may allocate up
to 60% of the portion available to institutional investors to
anchor investors.
The anchor investors will have to make an application of a value
of at least INR 100 million(10 Cr) in the public issue
 Security Deposit

The investment manager, on behalf of the InvIT, will have to

deposit before the opening of subscription, and keep deposited
with the stock exchanges, an amount calculated at the rate of
0.5% of the amount of units offered for subscription to the public
or INR 50 millions (5 Cr), whichever is lower.
 Opening of an issue and subscription period

 The issue shall open after at least five working days from the date of
filing of the final offer document with SEBI.
 The public issue shall remain open for at least three working days, but
not more than thirty working days.
 Other Conditions

No InvIT can make a public issue of units if it or any of its sponsors,

investment managers, or trustees is debarred from accessing the
capital market by SEBI, or is on the list of wilful defaulters
published by the Reserve Bank of India.
 GUIDELINES FOR PREFERENTIAL ISSUE OF UNITS BY
InvITs

No preferential
A resolution of the The InvIT is in The minimum issue of units
unitholders of the compliance with the public by the InvIT has
InvIT approving the conditions for unitholding been made in
preferential issue has continuous listing requirement the six months
been passed. and disclosure as stipulated. preceding the
relevant date.
 Placement Document
The InvIT may appoint one or more The placement document shall be
SEBI registered intermediaries to serially numbered and copies shall be
carry out the obligations relating to circulated only to select investors
the issue. subject to compliance with above
mentioned clause.

The preferential issue of units by an InvIT

shall be done on the basis of a
placement document, which shall
contain disclosures as specified in the
InvIT Regulations.
 Pricing
The preferential issue shall be
made at a price not less than
the average of the weekly high The InvIT shall not allot
and low of the closing prices of partly paid-up units.
the units quoted on the stock
exchange during the two weeks
preceding the relevant date.
 Transferability of Units

The units allotted under preferential issue shall not be sold by the allottee
for a period of one year from the date of allotment, except on a
recognised stock exchange.
 LISTING AND TRADING OF UNITS

 It shall be mandatory for units of all InvITs to be listed on a recognized

stock exchange having nationwide trading terminals, whether publicly
issued or privately placed.
 The listing of the units shall be in accordance with the listing agreement
entered into between the InvIT and the designated stock exchanges.
 In the event of non-receipt of listing permission from the stock
exchange(s) the InvIT shall be liable to refund the subscription monies, if
any, to the respective allottees immediately along with interest at the
rate of fifteen percent per annum from the date of allotment.
 The units of the InvIT listed in the designated stock exchanges shall be
traded, cleared and settled in accordance with the bye-laws of
designated stock exchanges and such conditions as may be specified by
SEBI.
 The InvIT shall redeem units only by way of a buyback or at the time of
delisting of units.
 The minimum public holding for the units of the InvIT.
 The minimum number of unit holders in an InvIT other than the
sponsor(s), its related parties and its associates,–
• in case of privately placed InvIT, shall be five;
• forming part of public shall be twenty;
 Trading lot for the purpose of trading of units on the designated stock
exchange shall be 1 unit.
DELISTING OF UNITS

Exactly same as REITs.

 INVESTMENT CONDITIONS
AND DISTRIBUTION POLICY

1. The investment by an InvIT shall only be in Holdco and/or SPVs or

infrastructure projects or securities in India in accordance with the SEBI
InvIT Regulations and the investment strategy as detailed in the offer
document or Placement memorandum.
2. In case of PPP projects, the InvIT shall mandatorily invest in the
infrastructure projects through Holdco and/or SPV.
3. The InvIT shall invest not less than eighty per cent of the value of the InvIT
assets in eligible infrastructure projects either directly or through holdcos or
through SPVs.
4. In case of InvITs as specified in not more than 20% of value of the InvIT
assets:
(i) under-construction infrastructure projects, shall not exceed 10% of the
value of the InvIT assets;
(ii) listed or unlisted debt of companies or body corporate in infrastructure
sector,
(iii) equity shares of companies listed on a recognized stock exchange in India
which derive not less than 80% of their operating income from
infrastructure sector;
(iv) government securities;
(v) money market instruments, liquid mutual funds or cash equivalents.
5. With respect to distributions made by the InvIT and the Holdco and/or SPV-
(a) not less than 90% of net distributable cash flows of the SPV shall be
distributed to the InvIT/ holdco in proportion of its holding
(b) not less than 90% of net distributable cash flows of the SPV shall be
distributed to the InvIT/ holdco in proportion of its holding;
(c) such distributions shall be declared and made not less than once every six
months in every financial year in case of publicly offered InvITs and not
less than once every year in case of privately placed InvITs and shall be
made not later than 15 days from the date of such declaration.
6. If the distributions are not made within fifteen days of
declaration, then the investment manager shall be liable to pay
interest to the unit holders at the rate of 15% per annum till the
distribution is made and such interest
7. An InvIT shall not invest in units of other InvITs.
 Maintenance of Records

The investment manager shall maintain records pertaining to the activity of the
InvIT-
(a) all investments or divestments of the InvIT
(b) agreements entered into by the InvIT or on behalf of the InvIT;
(c) documents relating to appointment of persons;
(d) insurance policies
(e) investment management agreement;
(f) documents pertaining to issue and listing of units
(g) distributions declared and made to the unit holders;
(h) valuation reports
(i) books of accounts
(j) audit reports;
(k) unit holders grievances
 POWER TO RELAX STRICT
ENFORCEMENT OF THE REGULATIONS

Exactly same as REITs.

 Indian Equity – Private Funding
SEBI (ALTERNATIVE INVESTMENT FUNDS)
REGULATIONS, 2012

“Alternative Investment Fund” means any fund established or incorporated

in India in the form of a trust or a company or a limited liability partnership
or a body corporate which-
(i) is a privately pooled investment vehicle which collects funds from
investors, whether Indian or foreign, for investing it in accordance with a
defined investment policy for the benefit of its investors; and
(ii) is not covered under the SEBI (Mutual Funds) Regulations,
1996, SEBI (Collective Investment Schemes) Regulations, 1999 or
any other regulations of the SEBI to regulate fund management
activities.
Categories of AIF

(i) Category I Alternative Investment Fund are those which invest

in start-up or early stage ventures or social ventures or SMEs or
infrastructure or other sectors or areas which the government
or regulators consider as socially or economically desirable.
Alternative Investment Funds which are generally perceived to
have a positive spillover effect on the economy and for which
SEBI or Government of India or other regulators in India might
consider providing incentives or concessions
(ii) Category II Alternative Investment Fund are those which does
not fall in Category I and III and which does not undertake leverage
or borrowing other than to meet day-to-day operational
requirements. Alternative Investment Funds such as private equity
funds or debt funds for which no specific incentives or concessions
are given by the government or any other Regulator shall be
included under this category.
(iii) Category III Alternative Investment Fund which employs diverse
or complex trading strategies and may employ leverage including
through investment in listed or unlisted derivatives. No specific
incentives or concessions are given by the government or any other
Regulator.
REGISTRATION OF AIF

All AIFs are required to be mandatorily registered under any of the III categories as
mentioned above with SEBI. The AIF Regulations permit AIF to launch multiple
schemes under one AIF subject to filing of the placement memorandum with SEBI
and the Certificate of Registration shall be valid until the AIF is wound up or the
certificate is cancelled by SEBI. An AIF which has been granted registration under a
particular category cannot change its category subsequent to registration, except
with the approval of SEBI.
Online Filing System for
Alternative Investment Funds

All applicants desirous of seeking registration as an AIF are now

required to submit their applications online only,
http://siportal.sebi.gov.in.
INVESTMENT STRATEGY

All AIFs must state its investment strategy, investment purpose

and its investment methodology in its placement memorandum
to the investors. In case the AIF decides to alter the fund
strategy, it shall be made only with the consent of atleast 2/3rd
of the unit holders by value of their investment in the AIF
INVESTMENT IN AN AIF

The AIF, in all categories, may raise funds from any investor whether Indian,
foreign or non-resident Indians only by way of issue of units.
 Each scheme of the AIF shall have corpus of atleast twenty crore rupees
and the AIF shall not accept from an investor, an investment of value less
than one crore rupees.
In case the investors are employees or directors of the AIF Fund or
employees or directors of the Manager, the minimum value of
investment shall be twenty five lakh rupees.
 The Manager or Sponsor shall have a continuing interest in the AIF Fund
of not less than two and half percent of the corpus or five crore rupees,
whichever is lower, in the form of investment in the AIF in Category I
and Category II AIFs.
 In case of Category III AIF, the continuing interest shall be not less than
five percent of the corpus or ten crore , whichever is lower.
 No scheme of the AIF shall have more than 1000 investors. Provided
that the provisions of the Companies Act, 2013 shall apply to the
Alternative Investment Fund, if it is formed as a company.
 The AIF shall collect funds only by way of private placement.
PLACEMENT MEMORANDUM

AIF shall raise funds through private placement by issue of information

memorandum or placement memorandum. This document shall contain all
material information about the AIF and the Manager, background of key
investment team of the Manager, targeted investors, fees and all other
expenses proposed to be charged, tenure of the Alternative Investment
Fund or scheme, conditions or limits on redemption, investment strategy.
Manner of winding up such other information as may be necessary for the
investor to take an informed decision on whether to invest in the
Alternative Investment Fund.
SCHEMES
Filing of placement
Launch of the scheme memorandum with SEBI

Incorporation of comments in 30 days prior to the launch

placement memorandum of the scheme

SEBI’s
comments/
observations
TENURE

Category I & II
• Minimum tenure of 3 years
• Close ended fund
• The tenure of close ended fund may be extended for a further
period of 2 years only with the approval of two-third of the
unit holders by value of their investment.
Category III
Either open ended or close ended fund.
The tenure of close ended fund may be extended for a further
period of 2 years only with the approval of two-third of the unit
holders by value of their investment.
In the above of consent of unitholder, the AIF shall fully
liquidate with one year following expiration of the fund tenure
or extended tenure.
LISTING

The SEBI (AIF) Regulations, 2012, allow the listing of the units of closed-
ended AIFs on a stock exchange i.e. all AIFs, except an open ended-Category
III AIF, can be listed on a stock exchange.
Units of close ended Alternative Investment Fund may be listed on stock
exchange subject to a minimum tradable lot of one crore rupees.
GENERAL INVESTMENT CONDITIONS
Investments by all categories of Alternative Investment Funds shall be
subject to the following conditions:-
(a) Alternative Investment Fund may invest in securities of companies
incorporated outside India subject to such conditions or guidelines that
may be stipulated or issued by the Reserve Bank of India and the SEBI
from time to time;
(b) Category I and II Alternative Investment Funds shall invest not more
than twenty five percent of the investable funds in one Investee
Company.
(c) Category III Alternative Investment Fund shall invest not more than ten
percent of the investable funds in one Investee Company.
(d) Alternative Investment Fund shall not invest except with the approval
of seventy five percent of investors by value of their investment in the
Alternative Investment Fund in-
(i) associates;
(ii) units of Alternative Investment Funds managed or sponsored by its
Manager.
(e) Un-invested portion of the investable funds may be invested in liquid
mutual funds or bank deposits or other liquid assets of higher quality such
as Treasury bills, CBLOs, Commercial Papers, Certificates of Deposits, etc.
(f) Alternative Investment Fund may act as Nominated Investor
to SME IPOs.
(g) Investment by Category I and Category II Alternative
Investment Funds in the shares of entities listed on institutional
trading platform.
Chapter 11 Non Convertible Redeemable Preference Shares
(NCRP)

Who can issue NCRP

1) Private 2) Public Company 3) Banks

 Regulatory Framework governing NCRP

SEBI (Issue & RBI guidelines to

The Companies Act SEBI (LODR)
Listing of NCRP) be followed by
2013 Regulations 2015
Regulations 2013 Banks & NBFCs.

Sec 43, Sec 47, Sec 55

 Applicability of SEBI (Issue & Listing of Non Convertible
Redeemable Preference Shares) Regulations 2013

2) Listing on RSE of NCRP 3) Issue and Listing of

1)1) Public Issue of NCRP issued through public Perpetual Non
issue or private Cumulative NCRP or Debt
placement by Bank or NBFC under
2)
RBI guidelines.
 Conditions for making public issue of NCRP:-

1. The issuer or person in control or

its promoter or director should
2. The issuer shall :-
not have:
a) make an application for listing to 1 or
more RSE.
b. been declared as b) obtain in principle approval from RSE for
willful defaulter or listing.
a. been debarred by c) obtain credit rating from 1 or more rating
defaulted in
SEBI from accessing agencies registered with SEBI.
repayment of Principal
the securities market. d) Minimum rating should be AA-
or dividend on
preference shares e) Minimum Tenure of NCRP 3 years.
earlier issued for more f) Make arrangements with Depositories for
than 6 months. demat of NCRP.
 Conditions for making public issue of NCRP:-

4. No part of proceeds of
3. The issuer shall create
NCRP shall be utilised for
Capital Redemption
giving Loans or acquiring
Reserve in accordance
securities in its group
with the Companies Act
companies except its
2013.
subsidiary.

5. Issuer shall appoint 1

or more Merchant
Banker & designate
one as its Lead
Merchant Banker.
 Disclosure in the Offer Document in case of issue of
NCRP:-

1) Disclosures mentioned in sec 26 of 2) Disclosures mentioned in schedule

the Companies Act 2013 I of SEBI (Issue & Listing of NCRP)
Regulations & such other
disclosures prescribed by SEBI.
 Filing of Offer Document

Copy of draft &

DSE shall publish it final offer DD certificate shall
on its website for document shall be submitted to
public comments be submitted to SEBI before filing
for 7 working SEBI & ROC offer document
days. both. with ROC.

Issuer, Merchant
Issuer shall not make Bankers & all RSE
Due Diligence
NCRP’s public issue unless where listing
certificate shall be
draft offer document is application has been
issued by Lead
submitted to Designated made shall publish
Merchant Banker.
Stock Exchange (DSE). on their websites the
draft offer document.
 Mode of Disclosure of Offer Document

1) On all the websites of RSE 2) Public may download in

where listing application PDF/HTML format
was made
 Advertisement of Public Issue

1) Shall be made prior to public issue 2) Credit rating shall be prominently

in atleast 1 English National Daily published
& 1 Hindi National Daily having
wide circulation in place where
companies RO is situated
 Abridged Prospectus

1. containing salient features of 2. along with application form

issue shall be distributed
 Other Points
4) Min Subscription if not
2) Price shall be received, then amount 6) Mis-statement in
discovered by shall be refunded within offer document
Book Building 8 working days from the
is prohibited.
Mechanism. last date of offer failing
which interest @ 15% pa
will be attracted.
1) Subscription shall be
received through
electronic mode & its 3) Redemption shall 5) Underwriting
money through ASBA be done as per shall be executed
(Application the terms of offer as mentioned in
supported by Blocked Document. offer Document.
Amount).
Flow Chart of Public Issue of NCRP as per SEBI (Issue & listing of
NCRP) Regulations 2021

(1) Make an application for listing to one or more RSE & obtain in principle approval.

(2) Obtain credit rating from 1 or more rating agencies.

(3) Make arrangements with depository for issuing NCRP in demat form.
(4) Appoint 1 or more Merchant Banker & designate any 1 as lead MB.

(5) File draft & final offer documents with RSE, SEBI & ROC & publish on websites.

(6) Make advertisement of Public Issue.

(7) Fix the issue price, receive minimum subscription failing which refund within 8
working days from the last date of offer otherwise interest @ 15% pa will be attracted.
 Mandatory Listing of NCRP issued through public issue

should be done within 6 working days from the closure of public issue.
 Conditions of issuing & listing of NCRP through Private Placement

If application for Disclosures to be No part of issue

Minimum application
listing made to more made as per SEBI proceeds shall be used
size should be atleast
than 1 RSE, then Regulations. for giving loan or
₹ 10 lacs per investor.
select the designated acquiring securities in
RSE. its group companies
except subsidiaries.
It complies with the
Companies Act 2013 & its
Rules related to issue of It has obtained credit
CRR shall be created
NCRP. rating from a rating Issue is proposed as per the provisions
agency registered with in demat form. of the Companies Act
SEBI. In case of more than
2013.
1 rating disclose all ratings
in offer document.
 Disclosure related to NCR P issued through private
placement

Disclosure shall be made on

websites of all RSE where listing of offer document & annual
application was made & on report of company.
companies website also.
 Listing of NCRP through Private Placement

Issuer should comply with the

Should be done within 15 days
mandatory continuous listing
of allotment.
criteria of SEBI Regulations.
 Obligations of Issuer & Intermediary in issue of NCRP

Merchant Banker Issue of NCRP

All the intermediaries should not be a
shall check whether
shall exercise their scheme to defraud
contents of offer
due diligence. anyone.
document are correct
or not.

The issuer shall

Issuer shall disclose all Rating agency shall review treat all applicants
material facts in the offer & revise if necessary the in equal & fair
document & it should not rating given to issuer manner.
be false or misleading. atleast once a year.
 Issue and listing of NCRP by Banks shall be done by
complying:-

The Companies Act 2013

RBI's directions
& its Rules
SEBI Regulations
Chapter 10 Inter Corporate Loans & Deposits

Refer section 186 & section 73 to 76A

 Commercial paper (CP)

&
It is an unsecured promissory
note issued by corporates to is a money market instruments.
cater their WC requirements
 Eligibility Conditions for issuing CP:-

Net tangible worth of

It's borrowal account is
company as per latest
classified by bank/FI as
audited B/S should be at
It has a sanctioned WC a standard asset.
least 4 crores.
limit from Bank/FI.
 Merits of CP

2) Since it is easily
1.1) More funds are 3) No restriction on no. of
transferrable so it
available at lower cost. times CP can be issued.
provides liquidity.
 Demerits of CP

1) It is an unsecured 2) Liquidity is not that 3) Duration of CP cannot

instrument. high. be extended.
 Credit Rating

is compulsory to be obtained by
Minimum rating of A2 should be
issuer from a rating agency
obtained.
registered with SEBI.
 Structure of CP

Supply Side (Issuer) Demand Side (Investor)

Individuals, Non Residents,

Finance Companies & Other FII, Insurance Company
Corporates. Pension Fund Company &
other investors.
 Maturity

Minimum 7 days Maximum 1 year.

Denomination

5 lacs & its multiples.

Mode of Issue

Physical & Demat both

 Issue & Paying Agent

1) Is a scheduled bank that 2) It shall verify Board 3) Will collect money

acts as an intermediary Resolution of issuer from investors on
in issue of CP. for issuing CP. behalf of issuer.
Question:- A commercial paper was issued below FV & redeemed @ FV
for 180 days. FV was 5,00,000 & issue proceeds 4,80,000. Compute pre
tax cost on annualised basis.

Answer:-
Issue proceeds 4,80,000
Redeemed @ 5,00,000
 Interest cost = ₹ 20,000

20,000 360
 Interest cost % = 4,80,000
× 100 ×
180
(annualised basis)
= 8.33% Ans

Redemption Price − Issue Price 360

× × 100
Issue Price Tenure
 Chapter 12 “Securitisation”

It involves the following parties:-

It is a process of converting
i. Originator:- is the Bank/FI who has given Loan backed by
illiquid assets into tradeable
asset/property to borrower.
i.e marketable securities
ii. Obligor/obligator:- is the borrower who has defaulted.
iii. Special Purpose Vehicle/Special Purpose Distinct Entity:- is the
securitisation/asset reconstruction company which shall purchase the
bad loan i.e Non Performing Asset from Bank by raising funds from
It is governed by:-
public by issuing them Securitised Debt Instruments & from QIBs by
a) Securitization & Reconstruction of
issuing them Security Receipts.
Financial Assets & Enforcement of
iv. Investors:- are the public and QIBs that have given money to SPV by
Securities Interest Act 2002
subscribing its Securitised Debt Instruments or Security Receipts. These
investors have undivided ownership in the pool of assets acquired by
b) SEBI (Issue & Listing of Securitised
SPV.
Debt Instruments & Security
v. Rating Agencies:- registered with SEBI to assign credit rating to SPVs.
Receipts Regulations.
vi. Other Ancilliary Service Providers:- to provide additional credit
enhancement facility, forex facility to SPVs.
 The Securitisation Process
Other Ancilliary
Obligator
Service
(Borrower)
Providers
provided Loan credit enhancement
backed by Principal and forex facility.
asset (Financial & Interest
Asset) issues Securitised Debt Inst/
sells Financial Asset SPV Security Receipts
Originator (Securitisation Investors
BK/FI Company/ARC)
Consideration money by Subscribing
Securities
assigns credit
rating.

Rating
Agencies
 Steps involved in Securitisation

(Write everything of pus pages) +

1) Acquisition of financial assets by SPV

3) SPV by raising funds from investors
from the originator. Here financial
pay the Originator.
asset is Loan backed by property.

2) SPV with the help of investment

banker issues securitised Debt
Interest/Security Receipts to
Investors.
 Few examples of assets that can be securitised

1) Mortgaged 2) Mortgaged
3) Automobile 4) Commercial 5) Bank Loan to
Residential Commercial
Loan Debt Business.
Property Property
 SEBI (Issue & Listing of Securitised Debt Instruments [SDI] & Security
Receipts [SR]) Regulations:-

Applicability

3) Listing of SR issued to
1) Public issue of SDI 2) Listing of SDI on RSE
QIBs.
 Eligibility Criteria for making Public Issue of SDI

2) It should have trustees registered with

SEBI.
1) It should be a However following can be appointed as 3) It complies with
company registered trustees without obtaining separate the provisions of
as SPV i.e registration from SEBI:- these Regulations
Securitisation/Asset a) Debenture Trustee registered with SEBI & SEBI Act.
Reconstruction b) National Housing Bank
Company. c) National Bank for Agricultural & Rural
Development
d) Scheduled Commercial Bank
e) PFI
f) Any person registered with RBI
g) Any other person specified by SEBI.
 Other Applicants seeking registration for becoming Trustee

&
have in its employment atleast 2
should have Net worth Minimum 2
person having experience of 5 years
crores
between them.
 Launching of the Scheme

In case of multiple The terms of the

scheme, separate & scheme may include
distinct accounts shall clean call up option.
be maintained.

SPV & its trustees shall Any excess expense

ensure realisation of debts than what is
SPV shall issue SDI by
& receivables for timely mentioned in the
launching the schemes.
redemption & payment of scheme shall be
interest to investors. borne by trustees.
 Obligation to redeem SDI

Trustees all make sure The expected period of

It is the obligation of SPV &
that SPV takes prudent maturity or its extension or
its trustees to ensure timely
measures to realise the shortening if any should be
redemption & payment of
debts due from mentioned in the offer
interest to investors.
obligators. document.
 Servicer

SPV may appoint

originator or any other
Functions of Servicer Trustee shall ensure
person to act as
servicer of the scheme.

To administer To manage
To co-ordinate the pool of incidental
with obligor assets & Cash matters.
flows

& has proper

Servicer maintains
Operational
proper accounts
system.
 Holding of Originator

Originator cannot hold or subscribe more than 20% of the units of SDI issued by SPV.
 Winding up of Scheme

or or
1) If investors pass 3) If the maturity period
2. If FDI are redeemed
Special resolution of scheme arrives.
 Public offer of SDI

2) Submission of offer document

1. Draft offer document shall be 6) Min-subscription
4) Credit Rating
submitted to SEBI atleast 15 days if not received or if
shall be obtained from
prior to opening of issue. listing app rejected then
atleast 2 rating agencies
2. SPV shall change the terms of refund entire money.
registered with SEBI.
scheme if SEBI asks to do so.
3. Final offer document shall be
submitted to SEBI and RSEs.

1) Offer to Public 3) Dematerialisation

Any offer of SDI made to 50 SPV shall make demat 5) Offer Period
or more persons shall be arrangements with Shall not exceed 30 days.
deemed to be public issue. Depository for listing of SDIs.
 Public offer of SDI

8) Allotment & Refund

7) Oversubscription 1. Allotment shall be made within 5 days of
if any cannot be retained & must be closure of offer period.
refunded back.
2. Refund to unsuccessful allotees shall be made
within 8 days of closure of offer period failing
which interests @ 15% pa will be attracted.
 Public offer of SDI

9) Rights of Investor
1. To holds SDIs as beneficial owners as per terms of trust deed.
2. In case of failure of SPV to redeem SDIs call meeting of investors provided the investor is holding 10%
or more of SDIs.
3. In such meeting they may resolve to
a) wind up the scheme
b) remove trustees
c) appoint new trustees.
4. Trustee & SPV shall ensure that resolutions passed in investor’s meeting are carried through.
5. Any reasonable exp in calling meeting by investors shall reimbursed.
6. No variation in scheme can be carried out which is adverse to investor’s interest.
7. Other variation in scheme requires atleast 21 days notice & passing of SR.
8. Section 114 to 117 of the Companies Act 2013 shall apply.
 Listing of SDI

Listing Application
Before making public issue Listing Agreement
of SDI listing application SPV should enter listing
has to be made to 1 or agreement with RSE.
more RSE.

Public Offer
Public issue of SDI should have Continuous Listing &
Mandatory Listing
been advertised in Newspapers Trading
Listing of SDI is mandatory.
for atleast 2 days. of SDI is mandatory.
 Eligibility Criteria & Conditions for Issuance & listing of Security Receipts:-

Cannot be offered to Credit rating from Issue must be

made in demat Disclosures as per SEBI
more than 200 persons atleast 1 rating Regulations to be
in FY. agency shall be form.
given.
obtained.

It must be issued on Valuation of security

Private Placement. receipts not more
Issue must be done by than 3 months old Minimum allotment
complying applicable laws. should be done by to QIBs should be ₹
independent valuer. 10 lacs.
 Chapter 9 “Foreign Funding”
Indian companies may raise funds from International Capital Market by the
help of:-

Issue of Euro equity Euro Debt

These are the shares denominated in US $ These are the dates raised in US $ by non-
terms & issued by non-American & European American & non-European Countries from
Countries and listed in American & European America & European Financial Institution or their
Stock Exchanges. It can be Global Depository Capital Market. It can be
Receipts (GDR) & American Depository External Commercial Borrowings (ECB)
Receipts (ADR). Foreign Currency Convertible Bonds (FCCB)
Foreign Currency Exchangeable Bonds (FCEB)
 Regulatory Framework governing Euro Issue

SEBI (LODR) Regulations FCCB Regulations. FDI Policy.

2015 RBI Regulations

The Companies Act 2013

Depository Receipts
Ministry of Finance, GOI Regulations. FCEB Regulations.
 Issue of GDR/ADR

1. These are the shares issued by Indian Company listed in European & American Stock Market.

2. Foreign investors may invest in Indian Companies & get GDR/ADR to track in their Foreign
Stock Market (Europe & America).

3. Indian Companies issue shares to domestic custodian (DC) who on receiving the shares shall
instruct the foreign depository (FD) to issue GDR/ADR & credit them in demat A/c of the
foreign Investors. This type of GDR/ADR where Indian Companies make arrangement with DC
& FD is called Sponsored GDR/ADR.
 4. issue will credit GDR/ADR in
shares instruct demat A/c
Indian Company DC FD Foreign Investors

5. Types of GDR/ADR

Sponsored
(Refer point 3 & 4 above)
Unsponsored
1) No arrangement exists between
Non Capital raising Indian Company & Foreign
Capital raising Shares offered by Indian Company are Depository.
Fresh issue of shares not the fresh issue but taken from its 2) Existing Shareholders of Indian
done by Indian existing shareholders & so issue Company directly sells their shares to
Company. proceeds shall also go to its existing foreign depository for issuing
shareholders who surrendered their GDR/ADR to foreign investors.
shares.
 5. Types of GDR/ADR

Unlisted/OTCE
Listed When GDR/ADRs are not listed in
When GDR/ADR are listed either in European or American Stock Market
European or American Stock but sold to Foreign Investors by
Market. Foreign Depositories over their
counter.
 Depository Receipts Scheme 2014:-

Eligibility Criteria for Issue of GDR/ADR:-

The issue cannot exceed

the limit of Foreign GDR/ADR may issued by
All necessary approvals
holding as per FEMA way of public issue or
must be taken.
1999. private placement.

Eligible Issuers:-
1) Any Indian company whether Listed or It cannot be issued at
Depository receipts may
Unlisted, Public or Private. a price lower than its
be converted into
2) Any other issuer of Permissible prevailing price in
underlying shares.
Securities. domestic market.
3) Any holder of Permissible Securities.
 Rights & Duties of Foreign Depository

They can issue GDR/ADR for the They shall also be entitled to voting
underlying equity shares received by rights on such underlying shares & it
them. shall be treated as public shareholding.
 Obligations of Domestic Custodian

3) To give timely
1) To comply all 4) To submit
information to
relevant laws & 2) To maintain all necessary
SEBI, MCA, MOF,
regulations related relevant records. documents to
RBI whenever
to Euro Issue. SEBI.
asked.
 Pricing

Same as preferential Allotment in ICDR Regulations 2018.

 Compliances u/s 41 of the Companies Act 2013 read with the Companies
(Issue of Depositories) Rules 2014:-

Shareholders approval Company should appoint a Merchant

Company may issue
must be taken by Banker or practicing CA/CS/CMA to
Depository Receipts either
passing SR in GM. check whether all compliances related to
through Public Issue or
issue of Depository Receipts have been
Private Placements.
done or not.

Company should make necessary

Company must take BOD’s arrangements with foreign
approval by passing BR at depositories who shall issue Company shall also
BM. Depository Receipts & the comply with RBI
underlying shares would be held guidelines.
with the Domestic Custodian Bank.
 Returns to be Submitted

Company shall also submit quarterly

Company shall submit Form - DR to RBI
return Form - DR Quarterly to RBI within
within 30 days of closure of issue of
15 days from the end of each calendar
FCCB/GDR/ADR.
quarter until the entire proceeds of
FCCB/GDR/ADR are repatriated to India or
used as per RBI’s guidelines.
 Approvals required for FCCB/GDR/ADR:-

6) Approval shall be taken

2) Shareholders approval
4) RBI’s approval from financial
is required u/s 62 of
is required. institutions who have
the Companies Act
given Loan to Company
2013 by passing SR in
& if contract requires
GM.
such approval.

1) BOD’s approval or its 3) Approval of Ministry of 5) Approval is required from

Committee’s approval is Finance, Government of all the Indian Stock
required by passing BR India is required both in Exchanges where the
at BM. principle and Final. underlying shares of Indian
Company are listed.
 Appointment of Intermediaries

Company- Manager Foreign Depository Underwriters Auditors

Lead Manager
Printers Listing Agents
Legal Advisors
Domestic Custodian Bank
 Principal Documentation

Subscription Agreement
Depository agreement
1. It is a contract between Indian Company &
1. It is a contract between Indian Company &
Lead Manager and Other Managers.
foreign depository.
2. In it they agreed to subscribe severally & not
2. As per the agreement foreign depository
jointly portion of the issue.
shall issue depository receipts.
3. The agreement may also provide that company
3. Holders of GDR/ADR/FCCB are not the parties
shall not come out with subsequent issue for a
in this contract.
certain period of time.
 Principal Documentation

Agency Agreement
1. Entered between Indian
Company & financial
Custodian Agreement institutions
1. Entered between Domestic 2. in which they agreed to Trust Deed
Custodian Bank & Indian convert USD into INR i.e the 1. Entered between Indian
Company process of GDR/ADR/FCCB Company & Trustees
2. Domestic Custodian Bank 2. Only in case of FCCB
agrees to hold the underlying 3. which contains the terms of
shares of Indian Company on repayment of principal &
behalf of the Indian Company. interest.
 Offering Circular

Contents of offering Circular are:-

1. Background of company like
It's a document containing all Copy of Offering Circular
Incorporation date, production
vital information about the shall be submitted to
capacity, future plans etc.
company so that prospective ROC,SEBI & Stock Exchanges
2. Past financial Performance.
investors can take informed where companies shares are
3. Issue size of GDR/ADR/FCCB.
investment decision. listed.
4. Deployment of issue proceeds.
5. Status of Approvals.
6. Details of subsidiaries & JV.
7. Investment Consideration.
8. Dividend Record.
9. Capital Structure.
10. Tax Implications.
 Pre Marketing/Road Shows

Meetings are arranged by

The contents of pre marketing Road
the syndicate members
Shows are:–
between Company &
1. Companies Background
analysts & prospective
2. History
investors.
3. Future plans
4. Objects of issue
This helps to know the depth 5. Capital Structure
It is a tool to analyse the of investor’s interest in the 6. Dividend record
prospects of the proposed proposed issue, their opinion 7. Status of Approvals.
issue. of pricing & issue size & also
helps to know the
geographical location of
investors.
 Pre & Post Launch Activities

Selection of Making Book Building

Pre marketing
Syndicate Listing to determine Allotment
& Roadshows
Members i.e Application final issue price
Underwriters.

Deciding the Quarterly

Approval of Board Due Diligence by Offering Closing of statement to
or its sub- Merchant extent, timing of issue
Circular RBI
committee Bankers issue size
 Foreign Currency Convertible Bonds

Fixed rate of coupon is Investors have the option to convert Maximum 25% × Issue
paid. these bonds into fixed number of proceeds may be used for
equity shares at the end of tenure. general corporate purpose.

These are the bonds issued

by Indian Company to the Both interest & principal amount
foreign investors shall be repaid in Foreign These are hybrid instruments.
denominated in currency currency generally USD.
other than INR.
 Benefits of FCCB to Issuer

3) Funds can be raised quickly

1) Interest rate is lower than 2) It prevents from immediate generally within 1 month as
other debt instruments. equity dilution. compared to the other
instruments.
 Benefits of FCCB to Investors

Option to convert Benefits of both equity Capital appreciation

Assured rate of interest.
into equity. & debt. & lower tax benefits.
 FCCB Scheme Rules

Issue expenses cannot exceed

The tenure cannot be less than No warrants can be attached 4% of issue size & in case of
5 years. with FCCB. private placement it cannot
exceed 2% of issue size.
 Foreign Currency Exchangeable Bonds (FCEB)

Issued by Indian
The principal & interest to be paid in By converting the warrants
Company.
foreign currency. attached with the bonds.

Exchangeable into equity shares

It is a bond expressed in Subscribed by persons resident of offered company which
foreign Currency. outside India. belong to the same group of
issuer.
Example:-
Reliance Jio Infocom Ltd
(Issuer)

issues FCEB RIL

attached (Offered Co)
with
warrants

Investor
 International Finance Corporation

Functions of IFC:-
a) Provides wide range of investment
By 2030 it wants to achieve 2 It has expanded in
strategies & advisory services to
objectives:- more than 100
entrepreneurs to build their business.
a) End extreme poverty, countries.
b) Provide innovative financial products in
b) Promote shared peace
the form of Loan on its own account (A
prosperity in every country.
Loan), syndicate Loan (B Loan), equity
financing, quasi equity finance.
c) Also does partnership projects with
It is a global government .
financial institution It was founded in d) Provides mix of financial & advisory
& a sister concern of 1956. services depending on the type of
World Bank. project.
 Asian Development Bank

It has 68 member countries Functions are:-

out of which 49 are from a. To initiate policy dialogue with its
Asia. member countries.
b. Fosters economic development.
c. Gives loan.
d. Provides technical assistance.
It is a financial institution Its objective is to make Asia e. Gives grants.
established in 1960 to prosperous, economically
develop the poorest region developed & eradicate
of the world. extreme poverty.
 International Monetary Fund

It was founded in 1944 after 3 Missions:-

great trade depression of a) It keeps a track on global economy.
1930. b) It leads the member countries in
Balance of Payment difficulties.
c) gives practical help to members.
Apart from above it also lends to
It fosters global monetary co- member countries & help in their
operation global economic Capacity Development by building their
It is an organization of infrastructure also.
growth, global financial
189 countries.
stability, reduction in global
poverty.
 External Commercial Borrowings

ECB may be raised in any

freely convertible foreign
currency or INR. Eligible Borrower
1. Port Trust
2. Units in SEZ
3. SIDBI
4. EXIM
These are the commercial loans 5. Registered entities engaged in micro
taken by Eligible Residents from finance activities viz NPO company,
the Recognised Non Residents. registered trust, society, co-operatives &
NGO may take ECB only in INR.
 External Commercial Borrowings

Eligible Lender
1) Lender should belong to FATF or IOSCO All in cost ceiling cannot
compliant member country exceed 450 basis points
2) Multilateral & Regional Financial institution (4.5%) above the benchmark.
of which India is a member
3) Individual if he is a foreign equity holder
4) Foreign Branch/subsidiary of Indian Banks.
 End Use (negative list)
ECB cannot be used in:-
Other Cost
Minimum Average Maturity 1. Real estate activities
Prepayment/Penal
Period 2. Investment in capital market
charges cannot exceed
1. Cannot exceed 3 years. 3. Equity investment
2%
2. But it shall be 1 year for 4. WC except if raised from Foreign
Manufacturing Companies Equity holders
raising upto USD 50 million 5. General Corporate purpose except
or its equivalent. if raised from Foreign Equity
3. Cannot exceed 5 years if WC holders
Loan is taken from foreign 6. Repayment of existing Rupee
equity holders. Loan except if raised from Foreign
Equity holders
7. Onlending to other entities for
above purposes.
 2 routes of ECB

Automatic
Approval
Upto 750 million USD or its equivalent
Those not falling in automatic route
can be raised by eligible borrowers from
requires RBI's prior approval.
eligible lenders without RBI’s approval.
Parting of ECB

Write about end use

 Procedure/Reporting Requirements

Loan Registration Any change in terms &

Number (LRN) has conditions of ECB shall be
to be opted from informed to RBI within 7
RBI. days of change.

Submit form ECB in duplicate

Submit monthly return to AD
containing terms & conditions
category 1 Bank of ECB
of ECB to AD category 1 bank
transactions.
who shall forward 1 copy to
RBI.
 Conversion of ECB into equity:-

Pricing shall be as per SEBI

Other lenders approval is required
guidelines.
should be taken.

It is allowed after RBI’s Equity holding of foreign

approval. investors should be within
the sectoral cap of FEMA
1999.
 ECB by Oil Marketing Companies

They can use ECB from any lender for WC

They can raise upto 10 billion USD under
with minimum average maturity period
automatic route.
3 years.
 ECB Facility for Startups:-

Eligibility Equity
End use Amount
Start up recognised by Can be converted
For its business USD 3 million.
Government. into equity.
purpose.

Permission
AD category 1 Banks will
Currency
grant permission.
Lender Freely Convertible FC Form
Same as earlier. or INR. Loan or Debenture.
 APPLICABILITY

These regulations shall apply to a listed entity which has

listed any of the following designated securities on
recognised stock exchange(s):
 Specified
securities listed
on main board or
SME exchange or
Any other Innovators NCDs,
securities Growth NCRPs,
as may be Platform. Perpetual
specified Debt
by SEBI Instrument

Applicability

Security
receipts Indian
units issued depository
by mutual
funds Securitised
receipts
debt
instruments
 OBLIGATIONS OF LISTED ENTITIES
(ACRONYM : CC DD FF SS G)

Obligations of Listed entity which

Common obligations Obligations of Listed entity has listed its Non- Convertible Debt
(Applicable for all listed which has listed its Specified Securities or Non- Convertible
entities) Securities Redeemable Preference Shares or
both
 OBLIGATIONS OF LISTED ENTITIES

Obligations of Listed entity

which has listed its
Specified Securities and Obligations of Listed entity Obligations of Listed entity
either Non-Convertible Debt which has listed its Indian which has listed its securitized
Securities or Non- depository receipts debt instruments
Convertible Redeemable
Preference Shares or both
 OBLIGATIONS OF LISTED ENTITIES

Obligations of Listed Obligations of Listed entity

entity which has listed its which has listed its units
Security Receipts. issued by mutual funds.
 COMMON OBLIGATIONS OF LISTED
ENTITIES
General obligations applicable to all listed companies
(Acronym : CC DD FF SS G)
 Compliance officer and his/her obligations: A listed company shall appoint a
qualified Company Secretary as the Compliance officer who shall be responsible
for:
 Ensuring conformity with the regulatory provisions applicable to the listed entity
in letter and spirit
 Co-ordination and reporting to board, recognised stock exchange(s) and
depositories
 Ensuring correct procedures are followed and reports are filed
 Monitoring email address of grievance redressal division
Share-transfer agent: The listed entity shall appoint a share transfer
agent or mange the share transfer facility in house
Co-operation with intermediaries registered with the SEBI:
Wherever applicable the listed entity shall co-operate with and submit
correct and adequate information to the intermediaries registered with
the SEBI such as credit rating agencies, registrar to an issue and share
transfer agent etc.
Preservation of documents: The listed entity shall have a policy for
preservation of documents, approved by its board of directors, classifying
them in at least two categories as follows-
 Documents whose preservation shall be permanent in nature
 Documents with preservation period of not less than eight years after
completion of the relevant transactions.
However, the listed entity may keep documents in electronic mode.
 Filing of information: The listed entity shall file the reports, statements,
documents, filings and any other information with the recognised stock
exchange(s).
 Scheme of Arrangement: The listed entity shall ensure that any scheme of
arrangement /amalgamation/ merger /reconstruction /reduction of capital etc.
to be presented to any Court or Tribunal does not in any way violate, override
or limit the provisions of securities laws or requirements of the stock
exchange(s).
 Payment of dividend or interest or redemption or repayment: The listed
entity shall use any of the electronic mode of payment facility approved by the
Reserve Bank of India.
Grievance Redressal Mechanism: The listed entity shall ensure that
adequate steps are taken for expeditious redressal of investor
complaints. The listed entity shall ensure that it is registered on the
SCORES platform.
Fees and other charges to be paid to the recognized stock
exchange(s): The listed entity shall pay all such fees or charges, as
applicable, to the recognised stock exchange(s).
 COMPLIANCES UNDER SEBI (LODR)
REGULATIONS

The Listed entity shall comply with the following compliances under the SEBI
(LODR) Regulations:-
 One Time Compliances
 Quarterly Compliances
 Half yearly Compliances
 Yearly Compliances
 Event based Compliances
 One-time Compliances
Regulation Particulars
6(1) A listed entity shall appoint a Company Secretary as the Compliance
Officer.
7(1) The listed entity shall appoint a share transfer agent or manage the
share transfer facility in house.
However, in the case of in-house share transfer facility, as and when
the total number of holders of securities of the listed entity exceeds
one lakh, the listed entity shall either register with the SEBI as a
Category II share transfer agent or appoint Registrar to an issue and
share transfer agent registered with the SEBI.
 One-time Compliances
Regulation Particulars

7(1) However, in the case of in-house share transfer facility, as and when
the total number of holders of securities of the listed entity exceeds
one lakh, the listed entity shall either register with the SEBI as a
Category II share transfer agent or appoint Registrar to an issue and
share transfer agent registered with the SEBI.
9 The listed entity shall have a policy for preservation of documents,
approved by its Board of Directors.
 Quarterly Compliances
Regulation Title Particulars Time Limit

13(3) Investor complaints The listed entity shall file Within 21 days
statement with the recognised stock from end of
exchange, a statement giving quarter.
the number of investor
complaints pending at the
beginning of the quarter,
those received during the
quarter, disposed of during
the quarter and those
remaining unresolved at the
end of the quarter.
 Quarterly Compliances
Regulation Title Particulars Time Limit
27(2) Quarterly The listed entity shall submit a Within 21 days from the
Compliance report quarterly compliance report on end of each quarter.
corporate governance in the format
as specified by SEBI from time to
time to the recognized stock
exchange(s).
31(1)(b) Shareholding The listed entity shall submit to the within 21 days from the
pattern stock exchange(s) a statement end of each quarter.
showing holding of securities and
shareholding pattern separately for
each class of securities, in the format
specified by SEBI from time to time.
 Quarterly Compliances
Regulation Title Particulars Time Limit
32(1) Statement of The listed entity shall submit to the Quarterly Basis till such time
deviation(s) stock exchange a statement of the issue proceeds have been
or deviation or variation (for public fully utilized or the purpose
Variation(s) issue, rights issue, preferential issue for which these proceeds
etc.) were raised has been
achieved.
32(6) Monitoring Where the listed entity has appointed within 45 days from the end
Agency a monitoring agency to monitor of each quarter.
Report utilisation of proceeds of a public or
rights issue, the listed entity shall
submit to the stock exchange(s) any
comments or report received from
the monitoring agency.
 Quarterly Compliances
Regulation Title Particulars Time Limit

33(3) Financial results The listed entity shall submit quarterly Within 45 days of end of
and year-to-date standalone financial each quarter, other than
results to the stock exchange. the last quarter.
In case the listed entity has subsidiaries,
the listed entity shall also submit
quarterly/ year- to date consolidated
financial results.

47 Advertisements Financial results, along-with the Within 48 hours of

in Newspapers modified opinion(s) or reservation(s), if conclusion of the meeting
any, expressed by the auditor. of board of directors at
which the financial
results were approved.
 Half Yearly Compliances
Regulation Title Particulars Time Limit

23(9) Related Party The listed entity shall submit to within 30 days from the date of
disclosures the stock exchange, disclosures of publication of its standalone
related party on consolidated and consolidated financial
basis. results for the half year.
33(3) Statement of The listed entity shall also submit half-yearly basis
Assets and as part of its standalone or
Liabilities/ consolidated financial results for
Cashflow the half year a statement of assets
and liabilities and a statement of
cash flows by way of a note.
 Yearly Compliances
Regulation Title Particulars Time Limit
7(3) Compliance The listed entity shall submit a compliance Within 30 from the end
Certificate certificate to the exchange, duly signed by both of the financial year.
the compliance officer of the listed entity and
the authorised representative of the share
transfer agent certifying that all activities in
relation to share transfer facility are
maintained either in house or by Registrar to
an issue and share transfer agent registered
with the SEBI.
14 Annual Listing The listed entity shall pay all such fees or within 30 days of the
Fees charges, as applicable, to the recognised stock end of financial year
exchange(s), in the manner specified by SEBI or
the recognised Stock Exchange (s)
 Yearly Compliances
Regulation Title Particulars Time Limit
33(3) Annual Financial The listed entity shall submit Within 60 days from the end
results annual audited standalone of the financial year
financial results with audit
report.

34 Annual Report The listed entity shall submit the Not later than the day of
annual report along with the commencement of dispatch
Notice of the Annual General to its shareholders.
Meeting to the stock exchange.
 Yearly Compliances
Regulation Title Particulars Time Limit

34(1)(b) Changes to annual In case any changes to the within 48 hours after the
report annual report, the revised copy annual general meeting
along with the details of and
explanation for the changes
shall be sent.

36 Annual reports to The listed entity shall send Not less than 21 days
securities holders annual report to the holders of before the annual general
securities. meeting.
 Yearly Compliances
Regulation Title Particulars Time Limit

40(9) Certificate The listed entity shall ensure that the within 30 days from
share transfer agent and/or the in- the end of the
house share transfer facility, as the financial year.
case may be, produces a certificate
from a practicing company secretary
certifying that all certificates have
been issued within thirty days of the
date of lodgment for transfer,
subdivision, consolidation, renewal,
exchange or endorsement of calls/
allotment monies.
 Event Based Compliances
Regulation Title Particulars Time Limit
7(5) Share-transfer The listed entity shall Within 7 days of
agent intimate the appointment Agreement with
of Share Transfer Agent, RTA.
to the stock exchange(s).
28(1) In-principle The listed entity shall Prior to issuance
approval obtain In-principle of Security.
approval from recognised
stock exchange
 Event Based Compliances
Regulation Title Particulars Time Limit
29(1)(a) read Intimations The listed entity shall give prior At least 5 days in advance
along with intimations of Board Meeting for (excluding the date of the
proviso to 29 financial result viz. quarterly, half intimation and the date of
(2) yearly or annual, to the stock the meeting)
exchange(s).
29(1) (b), (c), Intimations The listed entity shall give prior At least 2 working days in
(d), (e) & (f) intimations of Board Meeting for advance (excluding the
read along Buyback, Voluntary delisting, Fund date of the intimation and
with 29 (2) raising by way of FPO, Rights Issue, date of the meeting)
ADR, GDR, QIP, FCCB, Preferential
issue, debt issue, declaration/
recommendation of dividend,
declaration of Bonus securities etc.,
 Event Based Compliances
Regulation Title Particulars Time Limit

29(3) Intimations Board Meeting for alteration in At least 11 working

nature of Securities, alteration in days in advance.
the date on which interest on
debentures/ bonds/redemption
amount, etc.
30(6) Disclosure of The listed entity shall disclose all Not later than 24
events events, as specified in Part A of hours from the
Schedule III of SEBI (LODR) occurrence of the
Regulations, to the stock event or
exchange(s). information.
 Event Based Compliances
Regulation Title Particulars Time Limit

31(1)(a) Holding of The listed entity shall submit to One day prior to listing of
Specified the stock exchange(s) a securities.
securities statement showing holding of
securities and shareholding
pattern separately for each
class of securities prior to
listing of securities.
31(1)(c) Shareholding a statement showing holding Within 10 days of any
pattern of securities and shareholding capital restructuring
pattern. exceeding 2% of the total
paid-up share capital.
 Event Based Compliances
Regulation Title Particulars Time Limit
31A (8) Disclosure of material The listed entity shall disclose within 24 hours
events in case for to the stock exchange the from the occurrence
reclassification of any deemed material events i.e., of the event.
person as receipt of request for re-
promoter/public classification by the listed entity
from the promoter(s) seeking
re-classification, Minutes of the
board meeting considering such
request which would include
the views of the board on the
request, etc
 Event Based Compliances
Regulation Title Particulars Time Limit

37(1) Scheme of The listed entity shall file draft Prior approval before
arrangement Scheme of Arrangement to the filing with Court or
stock exchange(s) Tribunal.

39(2) Issue of The listed entity shall issue within 30 days from
Certificate certificates or subdivision, split, the date of such
consolidation. lodgment.
 Event Based Compliances
Regulation Title Particulars Time Limit

39(3) Information relating The listed entity shall submit Within 2 days of
loss of securities information with respect to getting in-formation.
loss of share certificates and
issue of the duplicate
certificates to the stock
exchange.
40(3) Registering the The listed entity shall register within 15 days from
transfer of securities transfers of its securities in the date of such
the name of the transferee(s). receipt of request
for transfer.
 Event Based Compliances

Regulation Title Particulars Time Limit

Transmission request The listed entity shall In case securities held in

proceed the transmission dematerialised mode, within
request. 7 days after receipt of the
documents
In case of physical mode,
within 21 days after receipt of
the documents.
 Event Based Compliances
Regulation Title Particulars Time Limit

42(2) Record Date / The listed entity shall intimate the record date In case of Right Issue,
Book Closure or date of closure of transfer books to all the at least 3 working
stock exchange(s) specifying the purpose of days in advance.
the record date. The listed entity shall intimate Other than Right
the following events: Issue, at least 7
(a) declaration of dividend working days in
(b) issue of right or bonus shares advance (excluding
(c) issue of shares for conversion of the date of intimation
debentures or any other convertible security. and record date).
 Event Based Compliances
Regulation Title Particulars Time Limit

43A Dividend distribution Dividend Distribution Policy shall be disclosed on

policy by the top 1000 listed entities the website of the
based on market listed entity and a
capitalization. web-link shall also
be provided in their
annual reports.
44(3) Voting results The listed entity shall submit Within 2 working
to the stock exchange details days of conclusion of
regarding voting results. its General Meeting.
 Event Based Compliances

Regulation Title Particulars Time Limit

46 Maintenance of The listed entity shall maintain a Within 2 working

website functional website containing the days from the date
basic information about the listed of change in
entity and update any change in content.
the content of its website.
 CORPORATE GOVERNANCE UNDER SEBI (LODR)
REGULATIONS, 2015

Corporate governance provisions which are specified in Regulations 17

to 27 and clause (b) to (i) and t of regulation 46(2).
 Exceptions for Listed Entity which has listed
its Specified Securities

As per Regulation 15(2) of the SEBI (LODR) Regulations, 2015 the

compliance with the corporate governance provisions as specified in
Regulations 17 to 27 and clauses (b) to (i) and t of Regulation 46(2) and
para C, D and E of Schedule V shall not apply, in respect of following –
1. A listed entity having:-
paid up equity share capital not exceeding rupees 10 crore and
net worth not exceeding rupees 25 crore, as on the last day of the previous
financial year.
Provided that-
Where the provisions of regulations 17 to 27, clauses (b) to (i) and (t)
of sub-regulation (2) of regulation 46 become applicable to a listed
entity at a later date, it shall ensure compliance with the same within
six months from such date.
Further, once the above regulations become applicable to a listed
entity, they shall continue to remain applicable till for a period of three
consecutive financial years.
 Question:
A Company ABC Limited, which has its Equity Shares listed on stock
exchanges, has a paid up capital of Rs. 9 Crore and net worth of Rs. 26
Crore.

Answer:
In such a case, the exemption will not be available to ABC Limited as it
is required to comply with both conditions as stated in para 1 above.
2. A listed entity which has listed its specified securities on the SME
Exchange.
3.The provisions as specified in regulation 17 shall not be applicable
during the insolvency resolution process period.
4.Regulations 18, 19, 20 and 21 shall not be applicable during the
insolvency resolution process period .
KEY PROVISIONS PERTAINING TO CORPORATE GOVERNANCE

Composition of Board of Directors (Regulation 17)

Board of Directors shall have optimum combination of executive and

non-executive directors with at least one-woman director and not less
than fifty per cent. of the board of directors shall comprise of non-
executive directors.
The Board of directors of the top 1000 listed entities shall have at least
one independent woman director
Question:
ABC Limited is a listed entity and having on Board one-woman
Director as Executive Director. The Company is within the top 1000
listed entities. Whether the Company still requires to appoint
another woman Director?

Answer:
In the given case, the Company will be required to appoint one
Independent woman Director as the Company is having Executive
woman Director and not independent.
 The Composition of board of directors of the listed entity
shall be as follows:

Chairman Composition
In case chairperson is a non-executive At least one-third of the board of
director and not related to promoter directors shall comprise of
group. independent directors.
In case listed entity does not have a at least half of the board of
regular non-executive chairperson. directors shall comprise of
independent directors.
 Question:
Mr. A is non-executive director of ABC Limited. X, Y and Z are
promoters of ABC Limited. Mr. A is a chairperson of the Company and
he is also related to X. Suggest the requirement of Independent
directors for ABC Limited.

Answer:
In the given case, since Mr. A is non-executive chairperson and is
related to promoter, then ABC Limited will be required to appoint
atleast half of the directors as independent director.
 Maximum age of non-executive directors

No listed entity shall appoint a person or continue the directorship

of any person as a non- executive director who has attained the age
of 75 years unless a special resolution is passed.
 Minimum Directors Requirement
The top 2000 listed entities (with effect from April 1, 2020) shall
comprise of not less than six directors.

Quorum of board meeting

The quorum for every top 2000 listed entities shall be one-third of its
total strength or three directors, whichever is higher, including at least
one independent director.
In case of listed entity, one independent director should be present at
the Meeting to form a quorum.
 Key Compliance Requirements for Board

Periodically review compliance Performance evaluation of

reports pertaining to all laws independent directors
applicable to the listed entity.

Satisfy itself that plans are in Lay down a code of conduct

place for orderly succession for all members of board of
Recommend all fees or
for appointment to the board compensation, if any, paid directors and senior
of directors to non-executive directors, management
including independent
directors.
 Maximum Number of Directorships /
Committee Membership & Chairpersonship

A person shall not be a director in A director shall not be a member

more than seven listed entities. in more than ten committees or
However a person shall not serve act as chairperson of more than
as an independent director in five committees across all listed
more than seven listed entities. entities.

Any person who is serving as a

whole time director / managing
director in any listed entity shall
serve as an independent director in
not more than three listed entities.
 A director shall not be a member in more than ten committees or act as
chairperson of more than five committees across all listed entities

(a) The limit of the committees

(b) For the purpose of
on which a director may serve in
determination of limit,
all public limited companies,
chairpersonship and membership
whether listed or not, shall be
of the audit committee and the
included and all other companies stakeholders’ relationship
including private limited committee alone shall be
companies, foreign companies considered.
and companies under section 8 of
the companies act, 2013 shall be
excluded;
Question:
Mr. A is a Director of ABC Listed company. He holds following membership /
chairmanship in following companies –
1. Chairman of Audit Committee of ABC Listed company
2. Chairman of Nomination & Remuneration Committee of ABC Listed
company
3. Chairman of Stakeholders’ Relationship Committee of ABC Listed company
4. Chairman of Audit Committee of XYZ Limited company
5. Chairman of Nomination & Remuneration Committee of XYZ Limited
company
6. Chairman of Stakeholders’ Relationship Committee of XYZ Limited
company
Please advise the limit of membership / chairpersonship.
Answer:
Mr. A, in the given case, is chairman of above mentioned committees.
Only Audit Committee and Stakeholders Relationship Committee will
be counted for the purpose and both ABC Listed company and XYZ
Limited, being public limited company will be considered.
In view of the above, his total chairperson is 4 which is within the limit
of 5 committee chairpersonship as permitted.
Board Committees

Audit Committee
(Regulation 18)

Risk Nomination and

Management Remuneration
Committee Committees Committee
(Regulation 21) (Regulation 19)

Stakeholders
Relationship
Committee
(Regulation 20)
BASIS AUDIT COMMITTEE NOMINATION & STAKEHOLDERS RISK MANAGEMENT
(REG 18) REMUNERATION RELATIONSHIP COMMITTEE (REG 21)
COMMITTEE (REG COMMITTEE
19) (REG 20)
COMPOSITION • The committee • The committee • The committee • Minimum three
shall comprise of shall comprise shall comprise members with
at least three of at least three of at least three majority of them
directors. directors. directors. being members of the
• Two-thirds of the • All directors of •The committee board of directors,
members of audit the committee shall have at including at least one
committee shall be shall be non- least one independent director.
independent executive independent
directors. directors. director.
BASIS AUDIT NOMINATION & STAKEHOLDERS RISK
COMMITTEE REMUNERATION RELATIONSHIP MANAGEMENT
(REG 18) COMMITTEE (REG 19) COMMITTEE (REG 20) COMMITTEE
(REG 21)
COMPOSITION • In case of a • At least fifty percent •In case of a listed •In case of a
listed entity of the directors shall entity having listed entity
having be independent outstanding SR equity having
outstanding SR directors. shares, at least two outstanding SR
equity shares, • In case of a listed thirds of the equity shares, at
the audit entity having Stakeholders least two
committee outstanding SR equity Relationship thirds of the
shall only shares, two thirds of Committee shall Risk
comprise of the nomination and comprise of Management
independent remuneration independent Committee shall
directors. committee shall directors. comprise
comprise independent
of directors.
independent
directors.
BASIS AUDIT COMMITTEE NOMINATION & STAKEHOLDERS RISK
(REG 18) REMUNERATION RELATIONSHIP MANAGEMENT
COMMITTEE (REG COMMITTEE (REG 20) COMMITTEE
19) (REG 21)
CHAIRPERSON The chairperson The chairperson The chairperson shall be The Chairperson
shall be an shall be an an executive director of the Risk
independent independent who shall be management
director who shall director who may present at the annual committee shall
be present at be present at general meetings to be a member of
Annual general the annual general answer queries of the the board
meeting to answer meeting, to security holders. of directors and
shareholder answer senior
queries. the shareholders’ executives of
queries. the listed entity
may be
members of the
committee.
BASIS AUDIT NOMINATION & STAKEHOLDERS RISK
COMMITTEE REMUNERATIO RELATIONSHIP MANAGEMENT
(REG 18) N COMMITTEE COMMITTEE (REG 20) COMMITTEE
(REG 19) (REG 21)
MEETINGS The committee The committee The committee shall The committee
shall meet at shall meet at least once in a shall meet at
least four times meet at least year. least twice in a
in a year and not once in a year. year.
more than one
hundred
and twenty days
shall elapse
between two
meetings.
BASIS AUDIT COMMITTEE NOMINATION & STAKEHOLDERS RISK MANAGEMENT
(REG 18) REMUNERATION RELATIONSHIP COMMITTEE (REG 21)
COMMITTEE (REG 19) COMMITTEE
(REG 20)
QUORUM Two members or one Two members or one The quorum for a
third of the members third of the members meeting of the Risk
of the audit of the committee, Management
committee, whichever is greater, Committee shall be
whichever is greater, including at least one either two members
with at least two Independent director or one third of the
Independent in attendance. members of the
directors. Committee,
whichever is higher,
including at least one
member of the board
of directors in
attendance.
BASIS AUDIT NOMINATION & STAKEHOLDERS RISK MANAGEMENT
COMMITTEE REMUNERATION RELATIONSHIP COMMITTEE (REG 21)
(REG 18) COMMITTEE (REG 19) COMMITTEE
(REG 20)
QUORUM The meetings of the risk
management committee
shall be conducted in
such a manner that on a
continuous basis not
more than one hundred
and eighty days shall
elapse between any two
consecutive meetings.
BASIS AUDIT COMMITTEE NOMINATION & STAKEHOLDERS RISK
(REG 18) REMUNERATION RELATIONSHIP MANAGEMENT
COMMITTEE (REG 19) COMMITTEE (REG 20) COMMITTEE
(REG 21)
ROLE OF • Recommend name • Recommend • To solve grievances • Monitoring
COMMITTEE and remuneration remunerationof of stakeholders. and reviewing
of auditors. executive directors of the risk.
• Review financial and senior • Cyber security.
statements. management.
• Review Audit • Recommend
Report. parameters to
• Check that evaluate
independent audit performance
was done. of executive
• Approve related director and
party transactions. senior
management.
ABC Limited is a listed company having all committees constituted in
compliance with listing regulations. Its Audit committee having 5
directors, out of which 4 directors are independent. At a meeting of
the Audit Committee, 2 directors were present (one non-executive
and one independent). Is the meeting valid?
In terms of the listing regulations, two independent directors
should be present at the meeting of the Audit Committee to
constitute a valid quorum. Therefore, the aforesaid Meeting is
invalid as only one Independent Director was present.
Note:
•The Company Secretary shall act as the secretary to the audit
committee.
•The provisions of Risk Management Committee shall be
applicable to top 1000 listed entities.
 VIGIL MECHANISM

The vigil mechanism shall

The listed entity shall formulate
provide for adequate
a vigil mechanism / whistle
safeguards against victimization
blower policy for directors and
of director(s) or employee(s) or
employees to report genuine
any other person who avail the
concerns.
mechanism.
 When will a transaction with a related party be material?

With effect from July 01, 2019 a

A transaction with a related party shall be transaction involving payments made to a
considered material if the transaction(s) to related party with respect to brand usage
be entered into individually or taken or royalty shall be considered material if
together with previous transactions during the transaction(s) to be entered into
a financial individually or taken together with
year, exceeds 10% of the annual previous transactions during a financial
consolidated turnover of the listed entity year, exceed five percent of the annual
as per the last audited financial statements consolidated turnover of the listed entity
of the listed entity as per the last audited financial statements
of the listed entity.
A company ABC Limited, listed entity, entered into a transaction with
related party namely XYZ Limited for an amount of Rs. 26 Crore. The
turnover of ABC Limited is Rs. 240 Cr on standalone basis and after
considering consolidation of subsidiaries & associates is Rs. 290 Cr.
Please advise whether the transaction is related party transaction or
not.
A material related party transaction is transaction which either
individually or taken together with previous transactions during a
financial year, exceeds 10% of the annual consolidated turnover of the
listed entity as per the last audited financial statements of the listed
entity. In case ABC Limited has not entered into any transaction during
the financial year 2019-20, which crosses the overall limit of Rs. 29 Cr
including the existing Rs. 26 Cr transaction then it is not material related
party transaction.
 Corporate Governance requirements related to
Subsidiary

“Material Subsidiary” shall mean a subsidiary, whose income or

net worth exceeds ten percent of the consolidated income or net
worth respectively, of the listed entity and its subsidiaries in the
immediately preceding accounting year. Explanation.- The listed
entity shall formulate a policy for determining ‘material’
subsidiary.
• At least one independent director on the board of directors of the
listed entity shall be a director on the board of directors of an
unlisted material subsidiary, whether incorporated in India or not.
• The audit committee of the listed entity shall review the financial
statements, in particular, the investments made by the unlisted
subsidiary.
•The minutes of the meetings of the board of directors of the unlisted
subsidiary shall be placed at the meeting of the board of directors of the
listed entity.
•The management of the unlisted subsidiary shall periodically bring to
the notice of the board of directors of the listed entity, a statement of all
significant transactions and arrangements entered into by the unlisted
subsidiary.
ABC Limited is having three subsidiaries A Ltd, B Ltd and C Ltd. The consolidated
income of ABC Limited is Rs. 300 Cr and net worth is Rs. 600 Cr.
The income and net worth of A Ltd, B Ltd and C Ltd. are as follows –

INCOME NET WORTH

A LTD 10 CR 65 CR
B LTD 45 CR 14 CR
C LTD 10 CR 18 CR
Please examine if there is any material subsidiary of ABC Limited.
In the given case,
10 % of consolidated income and net worth of ABC Limited would be 30 Cr
and 60 Cr respectively.
Hence, A Ltd since crossed threshold in terms of Net worth, would be a
material subsidiary.
B Ltd since crossed threshold in terms of income, would be a material
subsidiary.
C Ltd since does not cross either of the threshold, would not be a material
subsidiary.
 Secretarial Audit and Secretarial Compliance Report

•Every listed entity and its material unlisted subsidiaries incorporated in India
shall undertake secretarial audit and shall annex a secretarial audit report
given by a company secretary in practice, in such form as specified (MR 3),
with the annual report of the listed entity.
•Every listed entity shall submit a secretarial compliance report in such form
as specified, to stock exchanges, within sixty days from end of each financial
year.
 SECTION 188 - APPLICABILITY

Section 188 gets attracted when any company enters any of the following
specified transactions with any of the related parties –
a) Sale or purchase or supply of goods or materials.
b) Selling or otherwise disposing or buying property of any kind.
c) Leasing of property of any kind.
d) Availing or rendering of any service.
e) Appointment of agent for sale, purchase of goods, material, property or
service.
f) Appointment in office or place of profit in the company or subsidiary or
appointing associate of underwriter.
 RELATED PARTY AS PER SEC 2(76)

A) Director and his relative.

B) Key management personnel and his relative.
C) Firm in which director or manager or his relative is a partner.
D) Private company in which director or manager or their relative is either
a director or a member.
E) Public company in which director or manager is a director and holds
either alone or along with relatives more than 2% paid up share capital.
F) Business corporate where Board of Director is accustomed to act as per
advice/ instruction/ direction of director/ manager of company.
G) Any person as per whose advice/ instruction/ direction Board of
Directors of company is accustomed to act.
H) Holding, subsidiary, associate, subsidiary of holding
Company can enter any of the above specified transactions with any of the
above related parties by passing Board Resolution or Board Meeting
1st proviso – Provided that prior approval of members in general meeting by
passing ordinary resolution is required if following ceiling limits are crossed –
a) Sale or purchase or supply of goods or materials either itself or through
agent is greater than 10% of turnover.
b) Selling or buying property greater than 10% of net worth.
c) Leasing of property greater than 10% of turnover.
d) Availing or rendering of any service greater than 10% of turnover.
e) Appointment in office or place of profit greater than 250000 per month.
f) Underwriter’s commission is greater than 1% of net worth.
2nd proviso – Provided further that those members are either related parties or
relatives of promoters, cannot vote in the resolution or in general meeting in the 1st
proviso.
3rd proviso – Provided also that 2nd proviso shall not apply in case 90% or more
members of company are related parties.
EXEMPTIONS –
a) 2nd proviso shall not apply on private company and IFSC public company.
b) Both 1st and 2nd proviso shall not apply on
(i) Government company doing transaction with another government company.
(ii) Unlisted government company which has taken prior approval from Ministry/
Department in charge of that company.
(iii) Holding company doing transactions with its wholly owned subsidiaries.
Sec 188(1) shall not apply if related party transactions satisfies both
conditions –
a) Its in the ordinary course of business and;
b) At arms length price (i.e., Market Price)
 SECTION 188 (2)

Every contract/ arrangement entered with the related party shall

be disclosed in Board Report with justification in Form No AOC 2.
What if related party transaction done without passing business resolution at
business meeting or ordinary resolution in general meeting when such resolution
was required to be passed?
a) As per section 188(3) such transactions can be ratified by passing business
resolution at business meeting or ordinary resolution in general meeting as the
case may be within 3 months of such transactions failing which the transaction
is voidable at the option of board of directors and the director with whose
related party the transaction was done and the director who authorized such
transaction shall be liable to indemnify the company for any loss.
b) As per section 188(4) company can proceed against the defaulting directors to
recover any loss suffered by company.
c) As per section 188(5) penalty on defaulting directors shall be 25 lacs for listed
company and 5 lacs for unlisted company.
 OMNIBUS APPROVAL BY AUDIT COMMITTEE IN CASE OF
RELATED PARTY TRANSACTIONS AS PER THE COMPANIES
(MEETING OF BOARD AND ITS POWERS) RULES
1. Every related party transaction requires approval of Audit Committee if it exists in
company.
2. Audit Committee may give omnibus approval (blanket approval) to related party
transactions subject to following –
a) Maximum value of transaction in aggregate that can be entered in a financial year.
b) Maximum value per transaction.
c) Disclosures required to be made to Audit Committee while seeking omnibus
approval.
d) Review by Audit Committee of related party transaction from time to time even
after granting omnibus approval.
e) Nature of transactions that cannot be entered under omnibus approval.
FACTORS THAT AUDIT COMMITTEE CONSIDERS
BEFORE GRANTING OMNIBUS APPROVAL

Repetitive nature of Justifications for

transaction and omnibus approval.
1. Validity of Omnibus Approval shall not exceed 1 financial year.
2. Omnibus Approval shall mention –
a) Nature of transaction
b) Name of related party.
c) Amount and duration.
d) Indicative base price per contract.
 OBLIGATIONS IN RESPECT OF INDEPENDENT
DIRECTORS
• No person shall be appointed or continue as an alternate director for an
independent director of a listed entity with effect from October 1, 2018.
• The maximum tenure of independent directors shall be in accordance with the
Companies Act, 2013 and rules made thereunder:
•The independent directors of the listed entity shall hold at least one meeting in a
financial year, without the presence of non-independent directors and members of
the management and all the independent directors shall strive to be present at
such meeting.
•An independent director who resigns or is removed from the board of directors of
the listed entity shall be replaced by a new independent director by listed entity at
the earliest but not later than the immediate next meeting of the board of directors
or three months from the date of such vacancy, whichever is later.
•The listed entity shall familiarise the independent directors through
various programmes about the listed entity, including the following:
(a) nature of the industry in which the listed entity operates;
(b) business model of the listed entity;
(c) roles, rights, responsibilities of independent directors; and
(d) any other relevant information.
•Every independent director shall, at the first meeting of the board in which
he participates as a director and thereafter at the first meeting of the
board in every financial year or whenever there is any change in the
circumstances which may affect his status as an independent director,
submit a declaration that he meets the criteria of independence.
•The top 500 listed entities shall undertake Directors and Officers
Insurance (D and O insurance)
 Obligation in Respect of Employees including senior
Management, key Managerial persons, Directors and
Promoters

•Every director shall inform the listed entity about the committee positions
he or she occupies in other listed entities and notify changes as and when
they take place.
•All members of the board of directors and senior management personnel
shall affirm compliance with the code of conduct of board of directors and
senior management on an annual basis.
•Senior management shall make disclosures to the board of directors
relating to all material, financial and commercial transactions, where they
have personal interest that may have a potential conflict with the interest of
the listed entity at large.
Explanation: For the purpose of this sub-regulation, conflict of interest
relates to dealing in the shares of listed entity, commercial dealings with
bodies, which have shareholding of management and their relatives etc.
 PRIOR INTIMATIONS [REGULATION 29]

At least 5 clear days in At least 2 working days in advance At least 11 working days in
advance advance
Financial results viz. • Proposal for buyback of securities; • Any alteration in the form or
quarterly, half yearly, or • Proposal for voluntary delisting nature of any of its listed
annual, as the case may • Fund raising by way of FPO, rights securities or in the rights or
be. issue, ADR/GDR/FCB, QIP, debt issue, privileges of the holders
preferential issue or any other thereof.
method and for determination of • Any alteration in the date on
issue price: which, the interest on
• Declaration/ recommendation of debentures or bonds.
dividend.
• Declaration of bonus securities
 DISCLOSURE OF EVENTS OR INFORMATION
[REGULATION 30]

Outcome of Meetings of the board of directors (to be disclosed to

the Exchange within 30 minutes of the closure of the meeting)

• Dividends.
• Any cancellation of dividend.
• Reissue of forfeited shares.
• The decision on buyback of
• Alterations of capital.
securities.
• Financial results.
• Fund raising.
• Voluntary delisting.
• Increase in capital by issue of bonus
shares.
 MEETINGS OF SHAREHOLDERS AND VOTING
[REGULATION 44]

The top 100 listed entities by market capitalization, determined as on

March 31st of every financial year, shall hold their annual general
meetings within a period of five months from the date of closing of the
financial year.
Note: Regulations applicable on Top 2000 Listed Entities
• The board of directors shall comprise of not less than six
directors.
• The quorum for every meeting of the board of directors with
effect from April 1, 2020 shall be one-third of its total
strength or three directors, whichever is higher, including at
least one independent director.
 COMPLIANCES UNDER SEBI (LODR) REGULATIONS FOR THE
LISTED ENTITY WHICH HAS LISTED ITS NON-CONVERTIBLE DEBT
SECURITIES OR NON- CONVERTIBLE REDEEMABLE PREFERENCE
SHARES OR BOTH

Title Intimation to Stock Time Limit

Exchanges
Intimation to stock Prior intimation to the Atleast 11 working days
exchanges stock exchange(s) before
the due date for which the
interest on debentures and
bonds shall be payable.
 Title Intimation to Stock Exchanges Time Limit

Intimation of Board At which the recommendation At least 2 working days in

Meetings or declaration of issue of non- advance.
convertible debt securities.

Half yearly financial Within 45 days from the

results end of each of the half
year.
Title Intimation to Stock Time Limit
Exchanges
Copy of financial results On the same day on
to Debenture Trustee which the information is
submitted to the stock
exchange.

Annual Financial Results Within 60 days from the

end of the financial year
 POLICIES COVERED UNDER SEBI (LODR)
REGULATIONS
TITLE OF POLICY REQUIREMENTS
Preservation of documents policy To be classified into two categories:-
1. Documents whose preservation shall be permanent in
nature.
2. Documents with preservation period of not less than eight
Years after completion of the relevant transactions.
Policy on determining "material The listed entity shall formulate a policy for determining
subsidiary" ‘material’ subsidiary.
Code of Conduct The board of directors shall lay down a code of conduct for all
members of board of directors and senior management of the
listed entity.
 TITLE OF POLICY REQUIREMENTS
Risk Management Policy The board of directors shall be responsible for framing,
implementing and monitoring the risk management
plan for the listed entity
Vigil Mechanism The listed entity shall formulate a vigil
mechanism/whistle blower policy for directors and
employees to report genuine concerns
Materiality of related party transactions
and on dealing with related party
transactions
Policy on determination of materiality
of events/ information

Dividend distribution policy The top 1000 listed entities shall formulate a dividend
distribution policy.
Board Diversity Policy
 LIABILITY OF A LISTED ENTITY FOR
CONTRAVENTION

1. Imposition of fines.
2. Suspension of trading.
3. Freezing of promoter/ promoter group holding of designated
securities.
4. Any other action as may be specified by the SEBI from time
to time.
ROLE OF COMPANY SECRETARY
For Company Secretary in Employment

A listed entity shall appoint a Qualified Company Secretary as

the Compliance Officer. The compliance officer of the listed
entity shall be responsible for –
•ensuring conformity with the regulatory provisions applicable
to the listed entity in letter and spirit.
• co-ordination with and reporting to SEBI.
• ensuring that the correct procedures have been followed.
• monitoring email address of grievance
 SMALL AND MEDIUM ENTERPRISE (SME)

An entity may its securities on SME exchange if post issue PUSC is upto ₹ 25 crores.

a) The provisions as specified in regulation 17 shall not be applicable during the

insolvency resolution process

b) Regulations 18, 19, 20 and 21 shall not be applicable during the insolvency
resolution process period
Regulation 31: Holding of specified securities and shareholding pattern

The listed entities which have listed their specified securities on SME
Exchange shall submit to the stock exchange(s) a statement showing
holding of securities and shareholding pattern separately for each class of
securities, on a half yearly basis (as against quarterly basis applicable for
entites listed on main board) within twenty one days from the end of each
half year.
Regulation 32: Statement of deviation(s) or variation(s)

Half yearly basis.

Regulation 33: Financial results

The listed entity shall submit financial results to the stock exchange
within forty-five days of end of each half year as compared to quarterly
submission prescribed for companies listed on Main Board of the
Exchanges.
The requirement of submitting ‘year-to-date’ financial results shall not
be applicable.
 Regulation 34: Annual Report

All the provisions applicable to an entity listed on Main Board will be

applicable for a company listed on SME Exchange except the following:
● The listed entities which have listed their specified securities on SME
Exchange, may include in the annual report, the business
responsibility reports on a voluntary basis.
 Regulation 47: Advertisements in
Newspapers

The requirements of this regulation shall not be applicable in case of

listed entities which have listed their specified securities on SME
Exchange.
 COMPLIANCE CALENDAR FOR LISTED ENTITIES FOR SME 𝟐

QUARTERLY YEARLY COMPLIANCE

Sr. No. Regulation Reference Timelines

1. Statement Grievance Redressal With in 21 days from the end of quarter
Mechanism
2. Reconciliation of share capital audit With in 30 days from the end of the
report quarter
HALF YEARLY COMPLIANCE

Sr. No. Regulation Reference Timelines

1. Shareholding Pattern With in 21 days from the end of
half year
2. Statement of deviation or With in 21 days from the end of
variation the half year
3. Financial Results With in 45 days from the end of
the half year
ANNUAL COMPLIANCE
Sr. No. Regulation Reference Timelines
1. Share Transfer Agent With in 30 days from the end of financial
year
2. Annual Report Not later than the day of commencement of
dispatch to it shareholders
3. Transfer or transmission or transposition of With in 30 days from the end of Financial
securities Year
4. Transfer or transmission or transposition of With in 30 days from the beginning of the
securities Financial Year
5. Annual Disclosure requirements for large With in 45 days of the end of Financial Year
entities
EVENT BASED COMPLIANCE
Sr. No. Regulation Reference Date by which to be filed
1. Intimation of appointment of Share Within 7 days of Agreement with RTA
Transfer Agent
2. In principle approval Prior to issuance of Security
3. Prior Intimations of Board Meeting for At least 5 clear days in advance
financial Result
4. Prior Intimations of Board Meeting for At least 2 clear working days in advance
Buyback, voluntary delisting etc. (excluding the date of the intimation
and date of the meeting).
5. Prior Intimations of Board Meeting for At least 11 clear working days in
alteration in nature of securities Advance.
Sr. No. Regulation Reference Date by which to be filed
6. Disclosure of events specified in Part Not later than twenty four hours
A of Schedule III (Material events) from occurrence of event.
7. Disclosure of events specified Within 30 minutes of conclusion of
Board Meeting.
8. Shareholding Pattern prior to listing One day prior to listing of securities.
of Securities
9. Shareholding Pattern in case of Within 10 days of any change in
capital restructuring capital structure exceeding 2%.
10. Disclosure of class of shareholders Prior approval
and conditions for reclassification
Sr. No. Regulation Reference Date by which to be filed
11. Draft Scheme of arrangement & Scheme Prior approval before filing with Court.
of arrangement
12. Record date or Date of closure of At least 7 clear working days in advance
transfer books (excluding the date of intimation and
the record date).
13. Record date for declaring dividend and / At least 5 clear working days in advance
or cash bonus (excluding the date of intimation and
the record date).
14. Voting results by shareholders Within 2 working days of conclusion of
AGM.
15. Change in name of listed entity Prior approval (before filing request for
name change with ROC).
NON-CONVERTIBLE DEBT SECURITIES OR NON-CONVERTIBLE REDEEMABLE
PREFERENCE SHARES (CHAPTER V)

 REGULATION 50: INTIMATION TO STOCK EXCHANGE(S)

− Prior intimation
 At least 11 working days before the date on and from which interest and/or
redemption amount shall be payable
− Intimation
 to the stock exchange(s), its intention to raise funds;
 through new NCDs or NCRPs it proposes to list either through a
public issue or on private placement basis;
 Intimation to be given at least 2 working days in advance, (while
calculating 2 days date of intimation and date of board meeting
shall be excluded).
 Regulation 51: Disclosure of information having bearing on
performance/operation of listed entity and/or price sensitive information

 To promptly inform within 24 hours the stock exchange(s) of all information having
bearing on:
− the performance/operation of the listed entity;
− price sensitive information; or
− any action that shall affect payment of interest or dividend of non-convertible
preference shares; or
− redemption of non-convertible debt securities or redeemable preference shares.
Disclosure of Information Having Bearing on Performance/Operation of Listed
Entity And/Or Price Sensitive Information

1) expected default in timely payment of interests/preference dividend or

redemption or repayment amount or both in respect of the NCDS or NCRPs;
2) any attachment or prohibitory orders;
3) any action which shall result in the redemption, conversion, cancellation;
4) any action that shall affect adversely payment of interest on non-convertible
debt securities or payment of dividend on NCRPs;
5) any change in the form or nature of any of its NCDS or NCRPs;
6) any changes in the general character or nature of business;
7) any events such as strikes and lock outs;
8) details of any letter or comments made by debenture trustees;
9) delay / default in payment of interest or dividend / principal amount
/redemption;
10)failure to create charge on the assets within the stipulated time
period;
11)any major change in composition of its board of directors;
12)any revision in the rating;
 REGULATION 52: FINANCIAL RESULTS

 To prepare and submit un-audited or audited financial results on a half

yearly basis in the format as specified by SEBI within forty five days
from the end of the half year to the recognised stock exchange(s).
 The annual audited financial results shall be submitted along with the
annual audit report and Statement on Impact of Audit Qualifications
 The listed entity, while submitting half yearly / annual financial results, shall disclose the following
line items along with the financial results:
● credit rating and change in credit rating (if any);
● asset cover available;
● debt-equity ratio;
● previous due date for the payment of interest/ dividend NCRPs/ repayment of principal of
NCRPS / NCDs and whether the same has been paid or not; and,
● next due date for the payment of interest/ dividend;
● debt service coverage ratio;
● interest service coverage ratio;
● outstanding redeemable preference shares;
● capital redemption reserve/debenture redemption reserve;
● net worth;
● net profit after tax;
● earnings per share:
 REGULATION 53: ANNUAL REPORT

(a) Audited Financial Statements;

(b) Cash Flow statement;
(c) Auditors and Directors Report;
(d) The name of the debenture trustees with full contact details;
(e) Related Party Disclosures.
 REGULATION 54: ASSET COVER

 To maintain hundred 100% asset cover sufficient to discharge the

principal amount at all times for the NCDs issued.
 To disclose to the stock exchange in quarterly, half-yearly, year-to-date
and annual financial statements.
 REGULATION 55: CREDIT RATING

 Each rating obtained by the listed entity with respect to NCDs

shall be reviewed at least once a year by a credit rating agency
registered by SEBI.
 Regulation 56: Documents and Intimation to Debenture Trustees

 The listed entity shall forward the following to the debenture trustee promptly:
 A copy of the annual report at the same time as it is issued along with a copy of
certificate from the listed entity’s auditors in respect of utilisation of funds during
the implementation period of the project for which the funds have been raised;
 A copy of all notices, resolutions and circulars relating to-
i. new issue of NCDs at the same time as they are sent to shareholders/holders of
NCDs;
 Intimations regarding :
i. any revision in the rating;
ii. any default in timely payment of interest or redemption or both in
respect of the NCDs;
iii. failure to create charge on the assets;
iv. all covenants of the issue
 a half-yearly certificate regarding maintenance of hundred percent
asset cover
 Regulation 57: Other Submissions to stock exchange

 To submit a certificate within two days of the interest or principal or

both becoming due that it has made timely payment of interests or
principal obligations or both in respect of the NCDs.
 Regulation 58: Documents and information to holders of non-
convertible debt securities and non-convertible preference shares

 To send the following documents:

a) Soft copies of full annual reports to all the holders of NCRPS;
b) Hard copy of statement containing the salient features of all the documents, as specified in
Section 136 of Companies Act, 2013
c) Hard copies of full annual reports to those holders of NCDs and NCRPS, who request for the same.
d) Half yearly communication, to holders of NCDs and NCRPS.
 To send the notice of all meetings of holders of NCDS and NCRPs specifically stating that the provisions
for appointment of proxy as mentioned in Section 105 of the Companies Act, 2013.
 To send proxy forms to holders of NCDs and NCRPs
 REGULATION 59: STRUCTURE OF NCDs AND NCRPs

 Not to make material modification without prior approval of the stock exchange(s) where
the NCDS or NCRPs, as applicable, are listed, to:
a) the structure of the debenture in terms of coupon, conversion, redemption, or
otherwise.

 The approval of the stock exchange shall be made only after:

(a) approval of the board of directors and the debenture trustee in case of NCDs; and
(b) after complying with the provisions of Companies Act, 2013 including approval of the
consent of requisite majority of holders of that class of securities. (3/4th of issued
PSC/NCD)
 REGULATION 60: RECORD DATE

 To give notice in advance of at least seven working days

 REGULATION 61: TERMS OF NCDs AND NCRPs

 To ensure timely payment of interest or dividend

 Not to declare or distribute any dividend wherein it has defaulted in
payment of interest on debt securities or redemption
 Not to forfeit unclaimed interest/dividend and such unclaimed
interest/dividend shall be transferred to the ‘Investor Education and
Protection Fund’ set up as per Section 125 of the Companies Act, 2013.
 REGULATION 62: WEBSITE

 To maintain a functional website containing the following information about the

listed entity:-
(a) details of its business;
(b) financial information including complete copy of the annual report including
balance sheet, profit and loss account, directors report etc;
(c) contact information of the designated officials of the listed entity who are
responsible for assisting and handling investor grievances;
(d) email address for grievance redressal and other relevant details;
(e) name of the debenture trustees with full contact details;
 CREDIT RATING AGENCIES

SEBI directed credit rating agencies (CRAs) to downgrade an instrument to

‘non-investment grade with issuer not cooperating (INC) status’, if all
outstanding ratings of the issuer remain non-cooperative for more than six
months.

If non-cooperation by the issuer continues for a further six months from the
date of downgrade to non-investment grade, no CRA should assign any
new ratings to such issuer, until the company resumes cooperation or the
rating is withdrawn, SEBI further said.
The rating agency is allowed to withdraw if it has rated an instrument for three years
continuously or for 50 per cent of the tenure of the instrument, whichever is longer.

Additionally, the CRA must have received a no-objection certificate from 75 per cent of the
bondholders. The CRA must also have received an undertaking from the issuer that another
rating is available on that instrument.

Further, at the time of withdrawal, the CRA should assign a rating to such instrument and issue a
press release

If the company stops cooperating with the CRA and does not provide information, the CRA must
continue to publish a rating accompanied with the statement, ‘issuer did not cooperate.
 RECOGNITION TO COMPANY SECRETARY UNDER THE SEBI (LODR)
REGULATIONS, 2015

SEBI has recognized the significant role played by a Company Secretary as a Governance Professional under
the SEBI Listing Regulations, which are discussed below:
1. Regulation 6 provides that a listed entity shall appoint a qualified company secretary as the
compliance officer.
2. Regulation 7 (3) requires that the listed entity shall submit a compliance certificate to the exchange,
duly signed by both the compliance officer of the listed entity and the authorised representative of the
share transfer agent, wherever applicable, within 30 days of end of the financial year, certifying that
all activities in relation to both physical and electronic share transfer facility are maintained either in
house or by Registrar to an issue and share transfer agent registered with SEBI.
3. Regulation 16 (1) (d) provides that “Senior Management” shall specifically include Company Secretary.
4. Regulation 24A mandates that every listed entity and its material unlisted subsidiaries incorporated in
India shall undertake Secretarial Audit by a Company Secretary in Practice.
5. Regulation 40 (9) requires that the share transfer agent and/ or the in-house share transfer facility, as
the case may be, produces a certificate from a practising Company Secretary within 30 days of the end
of the financial year, certifying that all certificates have been issued within thirty days of the date of
lodgement for transfer, sub-division, consolidation.
6. Schedule V, Clause E requires compliance certificate from either the auditors or practising Company
Secretaries regarding compliance of conditions of corporate governance to be annexed with the
directors’ report.
7. As per Schedule V, Part C , Clause 10, a certificate from a Company Secretary in practice that none of
the directors on the board of the company have been debarred or disqualified from being appointed or
continuing as Directors of Companies by SEBI/ Ministry of Corporate Affairs or any such Statutory
Authority.
 INTRODUCTION

The Listing Regulations was therefore notified with the twin objectives of:
● having a single listing agreement; and
● ensure greater regulatory enforceability.
MEANING OF LISTED ENTITY

According to Section 2 (52) of the Companies Act, 2013, listed company means a
company which has any of its securities listed on any recognised stock exchange.

According to SEBI Listing Regulations, 2015, “listed entity” means an entity which has
listed, on a recognized stock exchange(s), the designated securities issued by it.
As per the SEBI Listing Regulations, 2015, “designated securities” means any of the
following securities –
 Specified Securities: Specified securities means ‘equity shares’ and ‘convertible
securities’.
 Non-Convertible Debt Securities:
 Non-Convertible Redeemable Preference Shares:
 Perpetual Debt Instrument:
 Perpetual Non-Cumulative Preference Shares:
 Indian Depository Receipts:
 Securitized Debt Instruments:
 Units issued by mutual funds;
 Any other securities as may be specified by SEBI.
APPLICABILITY OF THE REGULATIONS

Securitised
Indian debt Security
depository instruments receipts
NCDs, NCRPs, receipts
Perpetual Debt
Instrument, Units issued by
Perpetual NCRPs mutual funds

Specified securities
listed on main board Any other securities
or SME Exchange or Applicability as may be specified
institutional trading by SEBI
platform.
 As per Regulation 15(2) of the Listing Regulations, the compliance with the corporate
governance provisions as specified in Regulations 17 to 27 and clauses (b) to (i) and t of
Regulation 46(2) shall not apply, in respect of following-

1. A listed entity having:-

 paid up equity share capital not exceeding rupees 10 crore and
 net worth not exceeding rupees 25 crore, as on the last day of the
previous financial year.
A Company ABC Limited, which has its Equity Shares listed on stock
exchanges, has a paid up capital of Rs. 9 Crore and net worth of Rs. 26
Crore.
In such a case, the exemption will not be available to ABC Limited as it is
required to comply with both conditions as stated in para 1 above.

2. Notwithstanding any provisions under Regulation 15(2) stated above,

the provisions of Companies Act, 2013 shall continue to apply, wherever
applicable.
PRINCIPLES UNDER THE (LISTING OBLIGATIONS AND DISCLOSURE
REQUIREMENTS) REGULATIONS, 2015

The principles under Chapter II have been divided into three groups as under:
a. On Disclosure and transparency
b. On Corporate Governance and protection of the minority shareholders
c. On responsibilities of the Board of Directors
 Principles Governing Disclosures [Regulation 4 (1)]

a) Information shall be prepared and disclosed in accordance with

applicable standards of accounting.
b) The listed entity shall implement the prescribed accounting
standards in letter and spirit in the preparation of financial
statements.
c) The listed entity shall refrain from misrepresentation
d) Provide adequate and timely information to recognised stock
exchange(s) and investors.
e) The listed entity shall ensure that disseminations are adequate, timely.
f) Channels for disseminating information shall provide for equal, timely
and cost efficient
g) The listed entity shall abide by all the provisions of the applicable laws
h) Follow its obligations in letter and spirit
i) Filings, reports, statements, documents and information which are
event based or are filed periodically shall contain relevant information.
 Principles governing Corporate Governance and protection of Minority
Shareholders [Regulation 4 (2)]

a) The rights of shareholders:

(i) right to participate in, and to be sufficiently informed of, decisions concerning
fundamental corporate changes.
(ii) opportunity to participate effectively and vote in general shareholder
meetings.
(iii) being informed of the rules, including voting procedures.
(iv) opportunity to ask questions to the board of directors.
(v) adequate mechanism to address the grievances of the shareholders.
(vi) protection of minority shareholders from abusive actions
b) Timely information:
i. sufficient and timely information concerning the date, location
and agenda of general meetings.
ii. Capital structures and arrangements that enable certain
shareholders to obtain a degree of control disproportionate to
their equity ownership.
iii. rights attached to all series and classes of shares.
c) Equitable treatment:
i. All shareholders of the same series of a class shall be treated
equally.
ii. Election of members of board of directors.
iii. Exercise of voting rights by foreign shareholders shall be
facilitated.
iv. Avoid insider trading
d) Role of stakeholders in corporate governance:
i. The listed entity shall respect the rights of stakeholders that
are established by law.
ii. Stakeholders shall have the opportunity to obtain effective
redress for violation of their rights.
iii. Stakeholders shall have access to relevant, sufficient and
reliable information.
iv. The listed entity shall devise an effective vigil mechanism.
e) Disclosure and transparency:
i. Information shall be prepared and disclosed in accordance with
the prescribed standards of accounting.
ii. Channels for disseminating information shall provide for equal,
timely and cost efficient
iii. Minutes of the meeting shall be maintained explicitly
 Principles related to Responsibilities of the board of directors

i. Disclosure of information:
1) Members of board of directors and key managerial personnel shall disclose
to the board of directors whether they, directly, indirectly, or on behalf of
third parties, have a material interest in any transaction or matter directly
affecting the listed entity.
2) The board of directors and senior management shall conduct themselves so
as to meet the expectations of operational transparency while at the same
time maintaining confidentiality of information.
ii. Key functions of the board of directors:
1) Reviewing and guiding corporate strategy, major plans of action, business
plans.
2) Monitoring the effectiveness of the listed entity’s governance practices .
3) overseeing succession planning.
4) Ensuring a transparent nomination process to the board of directors.
5) Ensuring the integrity of the listed entity’s accounting and financial
reporting systems.
6) Overseeing the process of disclosure
7) Monitoring and reviewing board of director’s evaluation framework.
iii. Other responsibilities:
1) shall provide strategic guidance to the listed entity.
2) shall set a corporate culture and the values.
3) shall act with due diligence and care.
4) maintain high ethical standards.
5) independent judgement on corporate affairs.
6) sufficient number of non-executive members of the board of directors.
7) shall facilitate the independent directors to perform their role
effectively.
COMMON OBLIGATIONS FOR A LISTED ENTITY

The Common Obligations includes:-

 General Appointment & Appointment of Co-operation with
obligation of obligations of Share Transfer intermediaries
compliance Compliance Officer Agent registered with SEBI

Preservation of E-Filing of Scheme of

documents Payment of
information Arrangement dividend or interest
or redemption or
repayment
Grievance Fees and other
Redressal charges to be paid to
Mechanism the recognized stock
exchange(s)
1) General obligation of compliance
The listed entity shall ensure that key managerial personnel, directors,
promoters or any other person dealing with, complies with responsibilities or
obligations, if any, assigned to them.

2) Compliance officer and his/her obligations

A listed company shall appoint a qualified Company Secretary as the
Compliance officer who shall be responsible for:
 Ensuring conformity with the regulatory provisions in letter and spirit.
 Co-ordination and reporting to Board
 Ensuring correct procedures are followed and reports are filed
 Monitoring email address of grievance redressal division
Que: Who can be appointed as a Compliance officer in a listed
entity and whether it is mandatory to appoint him?

Ans: It is mandatory to appoint a qualified company secretary as

the Compliance Officer in a listed entity
3) Share-transfer Agent
The listed entity shall appoint a share transfer agent or mange the share
transfer facility in house.
Que: Is it necessary to appoint a share transfer agent by listed entity?

Ans: The listed entity shall appoint a share transfer agent or manage the share
transfer facility in-house. However, in the case of in-house share transfer facility,
as and when the total number of holders of securities of the listed entity exceeds
one lakh, the listed entity shall either register with the Board as a category II share
transfer agent or appoint Registrar to an issue and share transfer agent registered
with the SEBI.
4) Co-operation with Intermediaries registered with the SEBI
Such as credit rating agencies, registrar to an issue and share transfer agent etc.

5) Preservation of documents
The listed entity shall have a policy for preservation of documents, approved by
its board of directors, classifying them in at least two categories as follows-
a) documents whose preservation shall be permanent in nature
b) documents with preservation period of not less than eight years after
completion of the relevant transactions
However, the listed entity may keep documents in electronic mode.
6) Filing of information
with the recognised stock exchange(s) on the electronic platform as specified by
the SEBI.

7) Scheme of Arrangement
The listed entity shall ensure that any scheme of arrangement /amalgamation
/merger /reconstruction / reduction of capital etc. to be presented to any Court
or Tribunal does not in any way violate, override or limit the provisions of
securities laws.
8) Payment of dividend or interest or redemption or repayment
The listed entity shall use any of the electronic mode of payment facility
approved by the Reserve Bank of India.

9) Grievance Redressal Mechanism

The listed entity shall ensure that it is registered on the SCORES platform.

10) Fees and other charges to be paid to the recognized stock exchange(s)
The listed entity shall pay all such fees or charges, as applicable, to the
recognised stock exchange(s).
Non-applicability of following Regulations to Units of Mutual Funds
Listed on Recognised Stock Exchanges
● Regulation 6- Compliance Officer and his/her Obligations
● Regulation 7- Share Transfer Agent
● Regulation 8- Co-operation with intermediaries registered with
SEBI
● Regulation 11- Scheme of Arrangement
POLICIES COVERED UNDER SEBI (LODR) REGULATIONS, 2015
Title of Policy Requirements
Preservation of documents To be classified into two categories:- 1. documents whose
Policy preservation shall be permanent in nature 2. documents with
preservation period of not less than eight years after completion
of the relevant transactions
Policy on determining The listed entity shall formulate a policy for determining
“material subsidiary” ‘material’ subsidiary.
Risk Management Policy The board of directors shall be responsible for framing,
implementing and monitoring the risk management plan for the
listed entity
Code of Conduct  The board of directors shall lay down a code of conduct
for all members of board of directors and senior
management of the listed entity.
 The code of conduct shall suitably incorporate the duties
of independent directors
Vigil Mechanism The listed entity shall formulate a vigil mechanism for
directors and employees to report genuine concerns
Materiality of related party The listed entity shall formulate a policy on materiality of
transactions and on dealing related party transactions and on dealing with related party
with related party transactions, including clear threshold limits duly approved
transactions by the board of directors and such policy shall be reviewed by
the board of directors at least once every three years and
updated accordingly
Criteria for granting The audit committee shall lay down the criteria for granting
omnibus approval for the omnibus approval
Related Party Transactions
Policy on determination of The listed entity shall make disclosure of events specified
materiality
Dividend Distribution Policy The top five hundred listed entities based on market
capitalization shall formulate a dividend distribution policy
which shall be disclosed in their annual reports and on their
websites.
Board Diversity Policy The Board shall devise a policy on diversity of board of
directors
DISCLOSURE OF EVENTS OR INFORMATION (REGULATION 30)
Every listed entity shall make disclosures of any events or information which in the opinion of the BOD is
material.

The listed entity shall frame a policy for determination of materiality, duly approved by its board of directors,
which shall be disclosed on its website.

The responsibility is cast on the Board of Directors of listed entities, to authorised one or more Key Managerial
Personnel to determine materiality of an event.

The listed entity shall first disclose to stock exchange of all events or information as soon as reasonably
possible and not later than twenty four hours from the occurrence of event or information.
 AMENDMENTS
1. SEBI (Listing Obligations and Disclosure Requirements)

Separation of role of Chairperson and MD/CEO. It is provided that this

provision may not be retained as a mandatory requirement and instead be
made applicable to the listed entities on a voluntary basis.
2. Simplification of procedure and standardization of formats of
documents for issuance of duplicate securities certificates
The requirements are as specified below:
1. Submission by the security holder of copy of FIR.
2. Issuance of advertisement regarding loss of securities in a widely circulated
newspaper. However, there shall be no requirement to comply with above
mentioned Para 1 and 2, if the value of securities as on the date of submission of
application, along with complete documentation as prescribed by the SEBI does
not exceed Rs.5 Lakhs.
3. Submission of Affidavit and Indemnity bond.
Dividend distribution policy:-
Top 1000 entities