Share issue and allotment

Posting of allotment letters and letters of right

All letters of allotment and letters of right will be issued simultaneously. These will be serially numbered, printed and signed. [Clause 1]

Allotment within 30 days

Allotment should be made within 30 days. Otherwise, interest @ 15% is payable. [Clause 44]

Letter of offer of right issue

Letters of offer in respect of rights issue should be despatched on same day. These should be serially numbered. Form of renunciation should be printed along with letter of offer of right.

Right issue with right of renunciation

Rights issue will be with right of renunciations in all cases. Renunciation forms should be forwarded to stock exchange. Fractional coupons will be issued or payment of equivalent value of rights. At least four weeks to be given to members from date of opening of issue. /Letter of allotment of right issue should be sent within 6 weeks.

Issue of security as per SEBI guidelines

Shares will be issued as per SEBI guidelines. True and fair disclosures will be made in offer documents. [Clause 24(b)].

No shares with superior rights as to dividend or voting

A listed company shall not issue shares in any manner which may confer on any person superior rights as to voting or dividend vis-à-vis the rights on equity shares that are already listed [Clause 28A of Listing Agreement inserted w.e.f. 21-7-2009]

1% Security deposit in case of fresh issue

If fresh securities are offered, 1% amount will be kept as security with stock exchange, before opening of subscription list. The amount will be refunded after issue is over and there are no complaints subject to submission of NOC from SEBI. Otherwise, it can be forfeited. Even if deposit is forfeited, company is still liable for compliance of statutory and listing requirements. Mutual funds are exempted from 1% deposit. [Clause 42].

No lien on shares

Company will not have any lien on fully paid up shares, except in respect of partly paid shares to the extent of moneys called or payable. [Clause 34(a)].

Dealing with unclaimed shares

Often shares issued in public offer remain unclaimed. In such case, the unclaimed shares shall be credited to demat suspense account opened with depository participant. Corporate benefits like bonus shares, split etc. shall be credited to such account. Voting rights shall be frozen till rightful owner claims the shares. Details shall be disclosed in annual report. Allottee’s account shall be credited when he/she approaches the issuer [clause 5A inserted w.e.f. 24-4-2009]

Share certificates, transfer and transmission

Receipt of shares to be given

Receipt should be issued for all securities deposited with the company for registration / transfer / sub-division / renewal / consolidation etc. [Clause 2] [Meaningless when securities are in demat form].

Issue of share certificate within one month

Share certificates will be issued within one month of date of lodgment for transfer, sub-division etc. [Clause 3(c) [ Companies Act permits a period of 2 months]. [If issued in demat form, the account should be credited within 12 days].

Lost certificates

New certificates will be issued in place of lost certificate within 6 weeks of notification of loss and receipt of indemnity [Clause 3(e)]

Issue of certificate in market lot

Share certificates, letter of allotment will be issued in marketable lot. Splitting or consolidation will be in marketable unit, unless stock exchange agrees otherwise or parties request. [Clause 4] [Not applicable to demat securities].

No charge for transfer, division etc.

Company will not charge for registration of transfer of shares and debentures, sub-division, issue of new certificates or registration of power of attorney, probate, letter of administration etc. [Clause 8]

Verification of signature of transferor

Company will verify the signature on transfer deed if required by shareholder or member of stock exchange [Clause 10] [Not applicable to demat shares]

Endorsement on transfer deed

Company will make endorsement on transfer deed that power of attorney / probate / letter of administration / death certificate has been lodged with the company [Clause 7]

Free registration of transfer

Company will register transfer of securities except when (a) In exceptional circumstances as per provisions in Articles (b) Statutory prohibition or prohibitory order (c) Notice by transferor objecting the transfer followed by court order in reasonable time . [Clause 12]. [Section 111A provisions are much more strict].

Minor defect in signature

If there is no material defect in transfer deed, but only minor difference in signature, intimation will be sent to transferor. If no objection is received within 15 days, the transfer will be given effect. [Clause 12A(1)].

Attestation of signature of transferor by authorised person

If signature of transferor is attested by authorised person, the transfer will not be rejected on the ground that signature is not tallying, unless fraud or forgery is suspected. [Clause 12A(2)] [There is a provision in share transfer form that in case of signature difference, the signature of transferor can be attested by * Magistrate * Notary Public * manager of transferor’s bank * member of a stock exchange].

Compensation if transfer not registered within one month

If the transfer is not registered within one month or if valid objection to transfer is not communicated within one month, the company shall compensate the aggrieved party for the opportunity losses caused during period of delay. In addition, company will provide benefits (i.e. bonus shares, rights shares, dividend) which accrued to the investor during the intervening period. [Clause 12A(1a) of Listing Agreement]. Compensation to be paid will be determined through arbitration mechanism of stock exchange. – SEBI circular dated 7-5-2002.

Inform stock exchange about court orders

Company will inform stock exchange if it receives any prohibitory order or court attachment restraining it from transfer of any shares/debentures giving details of shares/debentures affected. [Clause 13]

Delegation of powers of small transfers

Power of transfer of small number of securities will be delegated to a small committee / senior executives / registrar & transfer agents of the company. They shall look into this work at least once in fortnight.

Due diligence survey of transfer agents

The company will undertake due diligence survey to ascertain whether Registrars, share transfer agents or in house share transfer facility is sufficiently equipped with adequate infrastructure facilities and manpower.

Half yearly Certificate that all transfers are registered within one month

The company will ensure that the Registrars and Share Transfer Agents (RTA) and/or the in-house share transfer facility will produce a certificate from a practicing Company Secretary certifying that all certificates have been issued within one month of the lodgment for transfer, sub-division, consolidation, renewal, exchange or endorsement of calls / allotment moneys. Such certificate should be submitted within one month of end of each half year. Copy of the certificate should be sent to stock exchange within 24 hours of receipt of the certificate by the company. [Clause 46]

Intimate stock exchange about loss of share certificate

Company will inform stock exchange within 48 hours of its getting information regarding loss of share certificates and issue of duplicate certificates. The information will be on floppy disks and printed details.

MOU with RTA

Copies of MOU (Memorandum of Understanding) entered into by company with RTA (Registrars and Share Transfer Agents) setting out mutual responsibilities will be kept available for public inspection at the registered office of the company. Its copy should also be submitted to stock exchange for its records.

Closure of share transfer registers

Closure of transfer register

Company will close its register of transfer books at least once in a year at the time of annual general meeting. Closing date will not be inconvenient to stock exchange for purpose of settlement of transactions. [Clause 15] Transfer books will be closed for purposes of declaration of dividend, issue of bonus shares or issue of shares for conversion of debentures. At least seven days notice shall be given for record date for all corporate actions like dividend, bonus etc. [amendment w.e.f. 24-4-2009]. For issue of rights shares, notice of seven days shall be given to stock exchange for closure of its transfer books and copies of notices should be sent to other recognised stock exchanges [proviso to clause 16]. Time gap between book closure and record date will be minimum 30 days. [Clause 16]. All transfers received upto date of closure /record date will be recorded. [Clause 17].

Record date when transfer register not closed

When transfer register is not closed, it will fix a record date (e.g. for issue of bonus shares, making list of members for payment of dividend or interim dividend, rights issue etc.)

Abolition of No-delivery period in case of shares in demat mode

Stock exchanges have a ‘no-delivery period’ prior to book closure or record date. In case of shares in demat form, the ‘no delivery period’ has been abolished – SEBI circular No. MRD/DPO/SE/CIR-07/2009 dated 21-7-2009.

Declaration and Payment of dividend, rights and bonus issues and buy back

Intimate stock exchange after adoption of accounts

Immediately after Board meeting, company will inform stock exchange about dividend declared, total turnover, gross profit/loss, net profits, capital profit, accumulated profit, capital profits, source of dividend, provisions for taxes and depreciation etc. by letter or telegram. Such declaration will be made only after close of market hours. It can also be made at least half an hour before market opens. [Clause 22]

Prior intimation if buy back, dividend etc.  proposed

If at the Board meeting, proposal for dividend, buy back securities, issue of convertible debentures or passing over of dividend is to be considered, company should give seven days prior notice about the Board meeting to stock exchange. In case of rights issue or determining issue price in case of further public offer through fixed price route, notice of two days is sufficient [Clause 19]

Decision to be intimated after closure of stock market

Decision about dividends, rights or bonus shares or buy back of securities shall be informed to stock exchange immediately after the Board meeting, but after close of market hours of stock exchange, to avoid excessive volatility of stock prices. [Clause 20]

Dividend to be declared per share

Dividend should be declared on per share basis (and not on percentage basis) [clause 20A inserted w.e.f. 24-4-2009]

Dividend to be payable at par at various places

Dividend will be payable at par at such places as may be agreed with stock exchange. Date of payment of dividend will be informed 21 days in advance. [Clause 21]

Rights issue to be made unless general meeting decides otherwise

All shares and securities, rights, privileges and benefits will be offered first to equity shareholders for subscription on pro rata basis, unless shareholders in the general meeting decide otherwise. [Clause 23]. [Thus, if debentures are to be issued to other than members, resolution in general meeting is required. In case of issue of shares to other than members, resolution is any way required u/s 81].

Listing and de-listing with stock exchange

New securities also to be listed

New shares and securities issued by company will be listed on stock exchange. [Clause 24(a)]

In principle approval before fresh issue

Before making fresh issue, company will obtain ‘in principle’ approval from stock exchange for permitting listing of new securities. This will avoid delay in listing fresh securities issued. - - If company is listed on stock exchange having nationwide trading terminals, it is sufficient if ‘in principle’ approval is obtained only from such stock exchange(s) [i.e. ‘in principle’ prior approval from other stock exchange is not required if approval from stock exchange(s) having nationwide trading terminals is obtained] – SEBI circular No. MRD/POLICY/CIR-35/2003/29/09 dated 29-9-2003.

Compliance with stock exchange rules

Company will abide by rules, byelaws and regulations of stock exchange and will comply with them as may be in force from time to time as promulgated by stock exchange. [Clause 39] [Thus, stock exchange can unilaterally change the terms of listing agreement].

Listing fees

Company will pay listing fees to stock exchange at the time of listing and also annual fees and will abide by rules and bye-laws of stock exchange. Listing fee is payable by 30th April of the year. Non-payment of fees is deemed to be a breach of agreement between company and stock exchange concerned. [Clause 38]. Listing fee of 3 years together with initial listing fee will be paid up front and later once in every three years. [Clause 38 and 38A]

Disclosure about suspension of trading

If security is de-listed or trading is suspended, it should be disclosed in director’s report along with reasons / justification.

De-listing of security

Permission for delisting of securities on stock exchange other than regional stock exchange at the request of company will be given subject to passing of special resolution and giving exit opportunity to shareholders. Stock exchange can de-list securities on their own as per guidelines issued by SEBI. Company can apply for reinstatement of listing within one year. Application after one year will be treated as fresh listing. [Clause 47]. [Concept of regional stock exchange has been abolished w.e.f. 17-2-2003. Now, de-listing has to be done as per SEBI Regulations. Hence, this clause will have to be suitably revised].

Information to stock exchange about major events of company

Copies of annual accounts etc. to be sent

Six copies of annual accounts, notice of meeting, directors report, etc. will be submitted to stock exchange. [Clause 31(a)] Copies of all notices of meetings convened u/s 391 or 394, together with annexures shall be sent to stock exchange [clause 31(c)].

Prior Intimation about Board meeting in certain cases

Date of meeting of Board at which recommendation of dividend or declaration of dividend or rights or bonus issue or issue of convertible debentures or passing over of dividend is proposed will be intimated in advance. Declaration of dividend must be at least 5 days before commencement of closure of books. [Clause 19]. - -  At least two days prior intimation about meeting where dividend declaration is to be considered should be given to stock exchange. [Clause 19 amended w.e.f. 24-4-2009. Earlier, notice period was seven days]

Intimation about proposed bonus issue

If company intends to propose a bonus issue and agenda papers of Board meeting contain the papers of the proposal, simultaneously, notice should be given to stock exchange. However, if agenda papers do not contain any proposal of bonus issue, advance intimation is not required. [Clause 19]

Intimation about rights issue

If company proposes to make rights issue to existing shareholders, intimation of board meeting where proposal is being considered, should be given to stock exchange at least two days in advance [proviso to clause 19(a) of Listing Agreement].

Intimation about calls, share issue etc.

If Board decides about share issue, calls, redemption, cancellation, forfeiture, reduction in capital etc. company will immediately intimate stock exchange either by letter or by telegram.

Disclosure of Scheme of arrangement/ merger/ amalgamation

Intimate if major change

Inform stock exchange about proposed change in general character or nature of its business, change in Board, MD, auditors etc. and any other information as may be required. [Clauses 29 and 30]

Intimate shareholding pattern

Inform shareholding pattern, i.e. distribution of each kind of securities (i.e. pattern of shareholding e.g. shares held by financial institutions, banks, promoters, foreign companies etc.) listed will be informed to stock exchange every year after AGM. The disclosure is to be given for each class of security separately [Clause 35]

Major events to be informed

Major events e.g. strike, lock outs, power cuts etc. will be informed promptly to stock exchange [Clause 36]. Any other information required by stock exchange will be supplied at the request of stock exchange [Clause 36A]. - - Take-over offer or substantial acquisition of securities will be intimated to stock exchange.

Stock exchange can publish information supplied by company

Stock exchange can inform its members or press, any information supplied by company as per listing agreement, except those which is detrimental to interest of company. Company will have to make special submission to stock exchange (for not supplying information to its members and press]. [Clause 37]. - - All information supplied by company will be published on web site of stock exchange instantly. (NSE and BSE are maintaining common filing platform www.corpfiling.co.in).

Disclosure about company to public and members

Abridged balance sheet can be sent to members

Company can send abridged balance sheet to shareholders, as provided in section 219(1)(iv) of Companies Act. If shareholder makes written request, complete and full balance sheet should be sent to shareholder [Clause 32 amended w.e.f. 26-4-2007] [Of course, full balance sheet can be sent, if company wants].

Cash flow, consolidated statement and related party transaction disclosures in annual accounts

Company will give a cash flow statement along with balance sheet. The cash flow statement will be prepared as per ICAI accounting standard AS-3, under indirect method as given in AS-3. - - Consolidated financial statements shall be published in the annual report in addition to the individual financial statements. These will have to be audited by statutory auditors and filed with stock exchange - - Disclosures as per ‘Related Party Disclosures’ Accounting standard shall be made in Annual Report. - - It also has to make disclosure about loans/advances and investments in its own shares by subsidiaries, associates etc. Both parent and subsidiary company has to make the disclosure [Clause 32]

Loans and advances to subsidiaries and associate companies

Company, in its annual accounts shall disclose loans and advances and investments in its own shares by the listed companies, their subsidiaries, associates etc. Balance sheet of parent company and subsidiary should give details in balance sheet as prescribed. [clause 32 of listing agreement being amended – SEBI circular No. SMD/POLICY/CIR-2 dated 10-1-2003. - - AS-18, AS-21 and section 299 (Companies Act) are relevant for definitions.

Financial results to be disclosed after market hours

The financial results will be announced after market hours on date of board meeting or meeting of sub-committee.

Information about deployment of funds mobilized

In case of companies making fresh issue of securities, a quarterly statement of projected utilisation of funds and projected profits and actual utilisation and profits will be submitted to stock exchange. It should be provided along with quarterly un-audited / audited financial results. This will also be published in newspapers. Material differences will be explained. The statement will also be provided in the Director’s report [Now giving projected profits in offer documents has been prohibited] [Clause 43] As per Companies (Auditor’s Report) Order 2003 (CARO), Auditor, in his audit report, is required to indicate whether management has disclosed end use of money raised by public issues and whether the same has been verified.

Statement of deviations in use of issue proceeds

Company will furnish to stock exchange on quarterly basis, a statement indicating material deviations, if any, in the use of proceeds of a public or rights issue from objects stated in the offer document. Where monitoring agency has been appointed by company, the report of monitoring agency in respect of deviations shall be intimated to stock exchange. The deviations will be submitted along with quarterly/annual financial statements. The information will be placed before audit committee of company [clause 43A of Listing Agreement].

Accounts as per accounting standards

Company shall comply with Accounting Standards issued by ICAI from time to time. [clause 50] [These are mandatory under Companies Act also].

Disclosures if change in name

If a listed company changes its name suggesting any new line of business (including software business), it shall disclose the turnover and income etc. from such activities separately in the quarterly / annual results required to be published.

Full information to credit rating agency

Company will cooperate with Credit Rating Agency in giving correct and adequate information for periodical review of securities during life time of the rated securities. Continued listing, suspension, removal of securities from listing will be at discretion of stock exchange. [Clause 48].

Disclosure about relationships between directors

Disclosure about relationship between directors inter-se shall be made in the Annual Report, notice of appointment of director, prospectus and letter of offer for issuance and related filings made to stock exchange, where the company is listed [clause 49(IV)(G)(ia) of Listing Agreement inserted w.e.f. 8-4-2008].

Corporate Filing and Dissemination System (CDFS).

Company will file on CDFS Corporate filing and Dissemination System, information, statements and reports as may be specified by stock exchanges owning and maintaining CFDS. The URL is www.corpfiling.co.in. [clause 52]. If information is filed on CDFS, filing same information on EDIFAR is not required clause 51(4) introduced w.e.f. 27-12-2007]  (EDIFAR discontinued - Company was required to provide information and reports on EDIFAR (Electronic Data Information Filing and Retrieval] website [clause 51] EDIFAR has been discontinued in view of CFDS maintained by BSE and NSE – SEBI circular No. CFD/DCR/3/2010 dated 16-4-2010)

Quarterly reports and limited review by auditors

Quarterly financial results

The disclosure should contain details of shares pledged by promoters and promoter group companies

Reporting in last quarter on provisional accounts

In case of last quarter, if listed entity publishes unaudited results within 45 days (instead of audited results within two months), limited review report is required for last quarter also. If unaudited results are published for last quarter, audited balance sheet should be submitted to stock exchange as soon as it is approved by Board of company [clause 41(I)(i)]. If variation in net profits or net loss after tax between quarterly results as published and after limited review is in excess of 10% or Rs 10 lakhs, whichever is higher, reason shall be informed to stock exchange. Form of review report has been specified in Annexures V to VIII of clause 41 of Listing Agreement.

Report in last quarter of financial year on basis of audited accounts

In the last quarter of financial year, if company wants to give audited results, the audited accounts shall be published within 60 days (The limit was 3 months upto 5-4-2010). However, company will have to inform stock exchange within one month of end of quarter that it will publish audited results within 60 days (earlier three months).

Approval of quarterly report

The quarterly reports should be approved either by a committee of Board (other than audit committee) or by the Board.

Half yearly disclosure of assets and liabilities

Companies shall disclose asset-liability position within 45 days from end of half year, as a note to half yearly financial results, by way of a note, in form as specified in Annexure IX.  [clause 41(i)(ea) and 41(V)(h) of Listing Agreement inserted w.e.f. 5-4-2010]. However, when company opts to submit un-audited financial statements for last quarter of financial year, the statement of assets and liabilities at end of financial year shall be submitted only after audited financial results are approved by Board of Directors of the company [clause 41(i)(eaa) and 41(V)(h) of Listing Agreement inserted w.e.f. 5-4-2010]

Consolidated financial results

In addition to stand alone financial results, listed entity may also submit consolidated financial statements within two months from end of the quarter. However, in that case, only consolidated financial results should be published.  In addition, turnover, profit before tax and profit after tax on stand alone basis shall also be published. Company shall indicate to stock exchange in first quarter of financial year that it will publish only consolidated results. The option will not be changed in the financial year. Corresponding figures of previous year shall also be given. The standalone results should be available on company’s website and website of stock exchange and its reference should be given in the advertisement publishing consolidated results [clause 41(VI)(b) of Listing Agreement].

Consolidated financial results in compliance with IFRS on optional basis

Companies having subsidiaries can submit their consolidated financial results either in accordance with accounting stands prescribed u/s 211(3C) of Companies Act or as per IFRS. Reconciliation statement shall be given if previous year’s figures are as per accounting standards and not as per IFRS. Standalone results shall be in accordance with Indian GAAP [clause 41(i)(g) of Listing Agreement inserted w.e.f. 5-4-2010].

Comment on qualifications by auditors

If there are audit qualifications, these should be disclosed in audited financial results published. Company should also state why there is audit qualification, why company failed to publish accounts without qualification and when company will remove the qualifications and publish accounts without qualifications.

Reporting of financial results to stock exchange

Quarterly financial results shall be submitted to stock exchange within 15 minutes of conclusion of meeting of Board or committee in which they were approved – [clause 41(I)((f)].

Limited review of quarterly report

If the results are amended subsequent to limited review by auditors, explanation for variations shall be submitted to stock exchange. The explanation shall be approved by Board of Directors.

Auditors who have undergone peer review eligible

- Only auditors who have subjected themselves to ‘Peer review Board’ shall be eligible to give limited review or statutory audit report [clause 41(I)((h) inserted on 5-4-2010 but will be applicable to financial statements only after appointment of auditors for accounting period commencing from 1-4-2010]

Quarterly report on accrual principle with segment reporting

The quarterly results should be prepared on basis of recognition and measurement principles laid down in AS-25 (Interim Financial Reporting) issued by ICAI. Segment-wise quarterly reporting of revenue, results and capital employed should be done in prescribed form. Changes in accounting policies and extra-ordinary items shall be disclosed as per AS-5 (AS-5 net Profit or Loss for the period, prior period items and changes in accounting policies).

Disclosures

If company has not started commercial production, company shall give status of project, instead of quarterly results. Material changes in accounting policies should be disclosed. If accounts of previous year were qualified by auditors, it shall be disclosed if it has material impact in current quarterly results. .

Rolling basis in case of seasonal variations

In case of companies subject to seasonal variations of revenue, information about 12 months period may be given on a rolling basis

Financial results in case of companies having subsidiaries

In case of companies having subsidiaries, the Company may submit quarterly and year to date consolidated financial results in addition of quarterly and year to date stand alone financial results to stock exchange [clause 49(I)(e)(i)]. The company can either publish stand alone or consolidated results in newspapers. Stand alone results should be available on website of company and stock exchange Option once exercised cannot be changed during the year. If stand-alone financial results are published, company shall also publish consolidated figures of turnover, net profit after tax and earning per share [clause 41(VI)].

Consolidated yearly financial results

Audited consolidated financial statements on annual basis shall be submitted to stock exchange along with stand alone financial results [clause 41(I)(e)(ii)]

Consistent accounting policies

Quarterly and half yearly results should be prepared on the same accounting policies as followed for previous year. If there is change, results of previous year should be re-cast to make them comparable with current year results.

Publication of quarterly statements

The quarterly statement will also be published within 48 hours in an English newspaper and in regional paper in regional language where registered office is situated.

Quarterly report to be approved by Board  or committee

Unaudited quarterly financial results will be approved by Board of Directors or a committee thereof, other than audit committee. The committee of directors should be consisting of least one third directors with MD and at least one independent director. The report shall be signed by Chairman, Managing Director or Wholetime Director. However, Annual audited financial results shall be approved by Board of Directors of the company.

Date of Board meeting to be intimated and advertised in advance

Date of meeting of Board or Committee where quarterly unaudited/audited results are to be approved by Board/Committee will be informed to stock exchange at least two days in advance, excluding date of intimation and date of meeting. Simultaneously, a public notice shall be issued in at least one English daily newspaper circulating in substantially whole of India and in one regional newspaper, where the registered office is situated.

Variation from audited results to be explained

Unaudited results should not materially differ from audited accounts of the company. If the variation in net profit or net loss after tax is in excess of 10% or Rs 10 lakhs, whichever is higher, an explanation shall be submitted to stock exchange.

Disclosure of audit qualifications

Company shall disclose the audit qualifications along with audited financial results published under clause 41, in addition to the explanatory statement as to how audit qualification in respect of the audited accounts of previous year have been addressed in the financial results. - - Stock exchange should ask companies to explain about audit objections. If companies fail to remove audit qualifications, stock exchange should report the matter to SEBI within 7 days. – SEBI circular No. SMD/POLICY/CIR-2 dated 10-1-2003.

Quarterly Compliance report about Corporate Governance to stock exchange

The company is required to submit a quarterly compliance report to the stock exchanges within 15 days from the close of quarter, in respect of corporate governance [clause 49(IX)(ii) of Listing Agreement]

Service to shareholders

Proxy forms to be supplied

Proxy forms will be sent to all shareholders, with instruction that a shareholder may vote either for or against the resolution. [Clause 34(f)].

Appointment of compliance officer

The company will apply a senior officer to act as 'Compliance Officer', who will be responsible for monitoring the share transfer process and report to Company's Board in each meeting. The compliance officer will directly liaise with SEBI, stock exchanges, ROC, investors etc., with respect of implementation of * rules, regulations, directions etc. of SEBI, stock exchanges & ROC * Investor services * Investor complaints * related matters. Only 'Company Secretary' shall be appointed as 'Compliance Officer'. [Clause 46] [His responsibilities under other provisions are - * Filing statement/information on NIC EDIFAR website form as per clause 51 * Implement code of conduct for insider trading under SEBI (Prohibition of Insider Trading) Regulations]

Spread of shareholding

Minimum public shareholding

As per clause 40A of Listing Agreement (as amended on 13-4-2006), all listed public companies should have 25% public shareholding. ‘Public shareholding’ means shares excluding shares held by promoters, promoter group and shares held by custodians against IDR/GDR issued overseas). Following are the exceptions to the aforesaid requirement –  (a) Where in the past company had offered at least 10% of its shares to public in terms of rule 19(2)(b) of Securities Contracts (Regulations) Rules, 1957, they can continue, provided public shareholding of at least 10% is maintained (b) Where number of outstanding listed shares are two crores or more and market capitalisation of such company is Rs 1,000 crores or more, irrespective of percentage of shares with public at the time of initial listing. However, they must have at least 10% public shareholding. (Market capitalisation means average market capitalisation for the previous financial year) (c) Government companies, infrastructure companies and sick companies under BIFR. They need not have minimum 10% public shareholding.

No preferential allotment or buy back if public shareholding falls below minimum required

Company will not make preferential allotment or offer buy back, if non-promoter shareholding reduces below the limit of public shareholding applicable at the time of initial listing. Non promoter shareholding will have to be disclosed as part of half yearly disclosures. BIFR companies are exempt from these provisions.

Intimation about distribution of shareholding

Distribution of shareholding in prescribed form shall be informed to stock exchange on quarterly basis in prescribed form. The break up required is in respect of promoters shares, non-promoters shares, and shares held by custodians against which GDR/ADR has been issued. [Clause 35]. The disclosure should contain details of shares pledged by promoters and promoter group companies [form amended on 3-2-2009]. Stock exchange will provide this information on web. Company will also put up his information on its web site.

Existing companies to bring public shareholding to required minimum level

If the existing public holding is less then 10%/25% (as applicable), the company shall bring the public shareholding to the required level within 2 years from 1-5-2006. This period can be extended by one year by ‘specified stock exchange’ for genuine reasons.

Public shareholding going down due to supervening extraordinary events

In some case, public shareholding may go down below 10%/25% due to extraordinary circumstances, like – (a) Issue or transfer of shares in compliance with directions of regulatory authority or court or tribunal (b) Issue or transfer of shares in compliance with Takeover Regulations (c) Reorganisation of capital by a scheme of arrangement (d) Restructuring due to Corporate Debt Restructuring System (CDR) laid down by RBI (e) any other reason beyond control of company.  In such case, stock exchange can extend period for compliance with requirement of minimum public shareholding by ‘further’ one year (in addition to two years?), which can be further increased by one year by specified stock exchange.

Mode of increase in public shareholding

The public shareholding can be increased by any of following methods – (a) Issuance of shares to public through prospectus (b) Offer of shares held by promoters to public through prospectus (c) Sale of shares by promoters through secondary market i.e. on stock exchange or (d) Any other method which does not affect interest of minority shareholders. If company wants to adopt method specified in (c) or (d) above, prior approval of stock exchange will be required.

Effect of non-compliance by a company

If a company fails to comply with the requirements, the shares are liable to be de-listed and the company will be liable to penal action under SCRA and SEBI Act.

Reporting compliance by stock exchange to SEBI

The stock exchanges are required to submit a quarterly report to SEBI within 45 days of end of the quarter in form given in Annexure III of SEBI circular dated 13-4-2006.

Provisions of rule 19(2)(b)

As per rule 19(2)(b) of Securities Contracts (Regulation) Rules, 1957, a company can offer minimum 10% public shareholding if following conditions are satisfied – (a) minimum 20 lakh securities (excluding reservations, firm allotment and promoters’ contribution) was offered to public (b) Size of offer to public i.e. offer price multiplied by number of securities was minimum Rs 100 crores and (c) Issue was made only through book building and at least 60% of issue was allotted to QIB (Qualified Institutional Buyer). Only these companies can have 10% public shareholding. Other companies must have at least 25% public shareholding – view confirmed in Padmini Engineering v. Bombay Stock Exchange (2008) 85 SCL 123 (SAT).

Other compliances

Compliance with take over regulations

If a person acquires or agrees to acquire 5% or more voting rights, or if he acquires or agrees to acquire more than 15% of voting rights, the acquirer and company will abide by provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. [clause 40A(v) – SEBI press release dated 2.5.2001]. Acquirer shall comply with SEBI takeover code. [clause 40B]. [This is really redundant as the SEBI regulations are applicable even in absence of any condition in listing agreement. Moreover, how company can compel an acquirer to comply with the takeover code ?].

Corporate Governance

Listed companies are required to follow the guidelines. [Clause 49]. - - The details are discussed above. Company is required to submit quarterly reporting prescribed form  to Stock Exchange about compliance of requirements of Corporate Governance.