Non-Convertible Redeemable Preference Shares – Corporate Funding and Listings in Stock Exchanges Important Questions

Question 1.
Discuss the various conditions required to be fulfilled for listing of Non-Convertible Redeemable Preference Shares.
Answer:
As per the provisions of Regulation 17 of the SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013, an issuer may list its non-convertible redeemable preference shares issued on private placement basis on a recognized stock exchange subject to the following conditions:
Compliance with Companies Act, 2013: The issuer has issued such non-convertible redeemable preference shares in compliance with the provisions of the Companies Act, 2013 rules prescribed there under and other applicable laws.

Credit Rating: Credit rating has been obtained in respect of such non-convertible redeemable preference shares from at least one credit rating agency registered with SEBI.

Minimum Application Size: Minimum application size for each investor is not less than 10 lakh rupees.

Creation of CRR: Issuer shall create a Capital Redemption Reserve (CRR) in accordance with the provisions of the Companies Act, 2013.

Demat Form: It must be in dematerialized form.

Disclosures: The disclosures as provided in Regulation 18 of the SEBI NCRPS regulations have been made.

In case application is made to more than one recognised stock ex-change:
The issuer shall choose one of them as the designated stock exchange.
The issue is in compliance with sub-regulations (3) and (4) of Regulation 4.

Question 2.
Explain the relevant applicable requirements as specified by SEBI for an issuer proposing to issue Non-Convertible Redeemable Preference Shares to the public through the online system of the slock exchange.
Answer:
The issuer may provide the facility for subscription of application in electronic mode. An issuer proposing to issue non-convertible redeem-able preference shares to the public through the on-line system of the designated stock exchange shall comply with the relevant applicable requirements as may be specified by SEBI.

All the investors applying in a public issue shall use only Application g Supported by Blocked Amount (ASBA) facility for making payment i.e. writing their bank account numbers and authorising the banks to make payment in case of allotment by signing the application forms.

An investor, intending to subscribe to a public issue, shall submit a completed bid-cum application form to Self-Certified Syndicate Banks (SCSBs), with whom the bank account to be blocked is maintained or any of the following intermediaries

  • Syndicate member (or sub-syndicate member).
  • Stock broker registered with a recognised stock exchange.
  • Depository participant (‘DP’).
  • Registrar to an issue and share transfer agent (‘RTA’).

Question 1.
Define the following important terms under Regulation 2 of SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013:
i. “Book building”.
ii. “Innovative perpetual debt instrument”.
iii. “Non-convertible redeemable preference share”.
iv. “Perpetual non-cumulative preference share”,
v. “Wilful defaulter”.
Answer:
Following are definition of important terms under Regulation 2 of SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013:
i “Book building”:
“Book building” means a process undertaken prior to filing of prospectus with the Registrar of Companies by means of circulation of a notice, circular, advertisement or other document by which the demand for the non-convertible redeemable preference shares pro-posed to be issued by an issuer is elicited and the price and quantity of such securities is assessed.

ii. “Innovative perpetual debt instrument”:
“Innovative perpetual debt instrument” means an innovative perpetual debt instrument issued by a bank in accordance with the guidelines framed by the Reserve Bank of India.

iii “Non-convertible redeemable preference share”:
“Non-convertible redeemable preference share” means a preference share which is redeemable in accordance with the provisions of the Companies Act, 2013 and does not include a preference share which is convertible into or exchangeable with equity shares of the issuer at a later date, with or without the option of the holder.

iv. “Perpetual non-cumulative preference share”:
“Perpetual non-cumulative preference share” means a perpetual non- cumulative preference share issued by a bank in accordance with the guidelines framed by the Reserve Bank of India.

v. “Wilful defaulter”:
“Wilful defaulter” means an issuer who is categorized as a wilful defaulter by any bank or financial institution or consortium thereof, in accordance with the guidelines on wilful defaulters issued by the Reserve Bank of India and includes an issuer whose director or promoter is categorized as such.

Question 2.
For Public Issue of NCRPS, write short note on following:
i. Disclosures in the Offer Document.
ii. Mode of Disclosure of Offer Document.
Answer:
For the purpose of Public Issue of NCRPS:
i. Disclosures in the Offer Document:
The offer document must contain all material disclosures which are necessary for the subscribers of the NCRPS to take an in-formed investment decision.

The offer document shall necessarily contain the following:

  • Disclosures specified in Section 26 of the Companies Act, 2013.
  • Disclosure specified in Schedule I of the SEBI (Issue and listing of NCRPS) Regulations.
  • Additional disclosures as may be specified by SEBI.

The amount of minimum subscription which the issuer seeks to raise and underwriting arrangements shall be disclosed in the offer document.

ii Mode of Disclosure of Offer Document:

  • The draft and final offer document shall be displayed on the websites of stock exchanges and shall be available for download in PDF/HTML formats.
  • The offer document shall be filed with the designated stock exchange, simultaneously with filing thereof with the Registrar of Companies for dissemination on its website prior to the opening
    of the issue.
  • If any person makes a request for a physical copy of the offer document then the same shall be provided to him by the issuer or lead merchant banker.

Corporate Funding and Listings in Stock Exchanges Notes

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